Today, the Province put the Land Owner Transparency Act (British Columbia) (the "LOTA") into action and launched a new registry intended to make land ownership "transparent" in BC.
As part of its 30-point housing affordability plan, the Province enacted the LOTA to combat money-laundering in the real estate industry and end so-called "hidden" land ownership. The LOTA requires disclosure of the ultimate ownership of land in BC by individuals (which may be held indirectly through corporations, partnerships and trusts) and identifies them in a new registry. The new registry, which is separate from the Land Title Registry, is known as the Land Owner Transparency Registry (the "LOTR") and is administered by the Land Title and Survey Authority of British Columbia (the "LTSA"). The LOTR is the first registry of its kind in Canada and one of very few worldwide.
Although the LOTR is commonly referred to as a "beneficial ownership" registry, it is not actually focused on "beneficial owners" in the typical legal sense. Rather, it looks through beneficial ownership structures to the individuals that control or have an ownership interest in those structures. So, for example, if a nominee company holds the property for a second company as beneficial owner through a bare trust arrangement, the focus is not on the corporate beneficial owner but instead upon the individuals that have a direct or indirect interest in that company.
Significantly, unlike the Land Title Registry, which is backed by a statutory guarantee of indefeasible title (subject to limited exceptions), the LOTR does not guarantee the information contained in it.
Disclosure Obligations Starting November 30, 2020
Starting today, every application to register an "interest in land" under the Land Title Act (British Columbia) must be accompanied by a "transparency declaration" confirming whether the transferee is a "reporting body" under the LOTA. Any transferee that is a reporting body must also confirm the type of reporting body it is and file a "transparency report" setting out information regarding the transferee and individual "interest holders". Without a transparency declaration (and, if applicable, a transparency report) the Land Title Office will not complete the registration of an interest in land. It is important to note that, while only reporting bodies must file transparency reports, all transferees of an interest in land must complete a transparency declaration.
But what exactly is an "interest in land" and a "reporting body", who are the "interest holders" and what must be recorded in a "transparency report"?
BC landowners will need to be familiar with the following terms in order to understand their disclosure obligations under the LOTA:
- An "interest in land" means:
- fee simple ownership;
- a life estate;
- a lease for a term of more than 10 years; or
- a right to occupy or acquire fee simple ownership of land under an agreement for sale upon payments of the purchase price over time,
in respect of any lands in BC (other than certain First Nations lands).
- A "reporting body" means any of the following:
- a "relevant corporation", being a corporation or limited liability company (including incorporated associations and societies);
- a trustee of a "relevant trust", being an express trust, a bare trust or a similar legal relationship created in another jurisdiction; or
- a partner of a "relevant partnership", being a general partnership, limited partnership, limited liability partnership, professional partnership or foreign partnership within the meaning of the Partnership Act (British Columbia) or a similar legal relationship created under another jurisdiction,
except for certain excluded entities such as public companies, REITs, testamentary and charitable trusts, statutory entities, insurance companies, strata corporations, savings institutions and corporations and trusts that are owned by, or under the control or for the benefit of, government bodies, First Nations and pension funds. Schedules 1 and 2 to the LOTA set out the various entities that are excluded from the definition of reporting body and, therefore, exempt from the obligation to file a transparency report. Additional exclusions were added to these schedules on September 20, 2020 by Order in Council.
- An "interest holder" means any individual who:
- is a "corporate interest holder" under the LOTA, being any individual who, alone or jointly or concert with one or more other individual(s):
(i) has a registered and/or beneficial interest in at least 10% of a relevant corporation's equity or voting rights; or
(ii) has the right to elect, appoint or remove the majority of a relevant corporation's directors,
whether directly or indirectly through "control" of an intermediary or chain of intermediaries or through any combination of direct and indirect control (the meaning of indirect control through an intermediary or chain of intermediaries is addressed in the LOTA regulations); or
(iii) has the ability to exercise direct significant influence over an individual that has the right to elect, appoint or remove the majority of the relevant corporation's directors within the meaning of (ii) above.
- is a "beneficial owner" under the LOTA, being any individual who has:
(i) a beneficial interest (other than an interest contingent on the death of another individual) in respect of an interest in land registered in the name of the trustee of a relevant trust; or
(ii) the power to revoke the relevant trust and receive the interest in land,
in each case, either directly or as a corporate interest holder in respect of a relevant corporation with such rights; or
- is a "partnership interest holder" under the LOTA, being any individual who is:
(i) a partner in a relevant partnership where at least one of the partners holds a registered interest in land that is partnership property of the relevant partnership; or
(ii) a corporate interest holder in a relevant corporation that is a partner in the relevant partnership described in paragraph (i) above,
in each case, either directly or through a chain of one or more relevant partnerships.
- a "settlor" is a (corporate or individual) settlor of a relevant trust except for any settlor that is also a trustee of the relevant trust or an individual beneficial owner in respect of the interest in land registered in the name of the trustee of the relevant trust.
Contents of Transparency Reports
Each transparency report must set out certain "primary identification information" (which will be made public). This information includes:
- for individuals (including interest holders, individual settlors and any individual trustee of a relevant trust): their full name, citizenship and principal residence;
- for corporations (including relevant corporations and those that are not a relevant corporation such as a corporation that is a partner of a relevant partnership or a trustee or settlor of a relevant trust): their name, registered and, if applicable, head office address, jurisdiction of incorporation and, if applicable, the jurisdiction from which the corporation was most recently continued or transferred; and
- for relevant partnerships: their business name (if any), type of partnership, registered and, if applicable, head office address, address of principal business premises and jurisdiction of governance.
In addition to primary identification information, transparency reports must also include certain additional information that is of a more sensitive nature (which will not be made public but will be available to certain federal and provincial taxation, financial services, securities, law enforcement and anti-money laundering authorities). This information includes:
- for each relevant corporation that is a reporting body and each relevant partnership (a partner of which is a reporting body): tax and corporate/identification registration numbers;
- for each individual interest holder: the individual's date of birth, last known address, social insurance number or individual tax number (if applicable) and Canadian residency status, the date the individual became or ceased to be an interest holder, a description as to how the individual is an interest holder and whether a declaration of incapacity has been made by a court or other authority in respect of the individual.
Reporting bodies must take reasonable steps to obtain and confirm the accuracy of the information disclosed regarding interest holders and settlors and, if the reporting body is unable to obtain or confirm any such information, it must declare that fact and describe the efforts made. Interest holders and settlors also have a positive obligation to respond to any request for information from a reporting body.
If a reporting body determines that it has no corporate interest holders or partnership interest holders, it must declare that fact in the transparency report and, for any trustee of a relevant trust for which there are no individual beneficial owners, the reporting body must include a description of the class of beneficiaries of that relevant trust.
Disclosure by Existing Landowners by November 30, 2021
A relevant corporation, trustee of a relevant trust or partner of a relevant partnership with an existing interest in land prior to November 30, 2020 will have until November 30, 2021 to file a transparency report, unless there is a transfer of registered title to the interest in land before such time or the registered owner otherwise ceases to be a reporting body before November 30, 2021, in which case the registered owner will have no obligation to file a transparency report. This gives current landowners, particularly those with significant landholdings, needed time to assess their ownership structure and file their transparency reports.
If a registered owner of an interest in land becomes a reporting body in respect of that interest at any time on or after November 30, 2020, it will not have until November 30, 2021 to file a transparency report; instead, it will have to file a transparency report within two months of becoming a reporting body. For example, if a public company owned land prior to November 30, 2020, it would be exempt, but if that company were to become privately held after November 30, 2020, it would become a relevant corporation and would have two months to file a transparency report.
Ongoing Disclosure Obligations
In order to ensure that the LOTR remains current, the Province has imposed measures requiring that the information be updated by reporting bodies and the LOTA "administrator" from time to time.
Change in Interest Holders
If a reporting body becomes aware, or reasonably ought to have become aware, that a previously filed transparency report no longer discloses the current interest holders or that a court or other authority has made a determination of incapacity with respect to an interest holder, it must file a new transparency report within two months unless the reporting body ceases to be the registered owner of the interest in land to which the transparency report relates.
Correcting Errors or Omissions
Reporting bodies or the LOTA administrator may file a new transparency report to address errors or omissions in a previously filed report. Other persons identified in the report may also apply to the LOTA administrator for corrections to be made to an existing transparency report.
Ceasing to be a Reporting Body
A registered owner that is identified as a reporting body in respect of an interest in land in a filed transparency report must file a notice with the LOTA administrator within two months if, at any time, it ceases to be reporting body in respect of that interest in land.
Accessing Information in the LOTR
Starting April 30, 2021, the LOTR will be searchable by the public and certain government authorities (including Canada Revenue Agency, FINTRAC, BC Securities Commission, BC Financial Institutions Commission, Law Society of British Columbia and law enforcement). The government authorities will have access to the full range of information while the public will have more limited access.
Through the LOTR, the public will have access to primary identification information about reporting bodies and their settlors and interest holders, if applicable, that are associated with particular lands.
Government officials and employees will have access to the additional (and not publicly available) information contained in transparency reports and otherwise reported to LOTR for a wide range of purposes, which include confirming and enforcing compliance with federal and provincial financial services, anti-money laundering, securities and tax laws and regulations, conducting investigations related to law enforcement proceedings, policing or criminal intelligence operations, formation of government fiscal or anti-money laundering policies, administration and enforcement by the relevant authorities and such other purposes as the Provincial Government may prescribe by regulation.
Protection of Vulnerable Individuals
Primary identification information about individual settlors and interest holders in a transparency report will not be published in the LOTR until 90 days after the transparency report is filed with the LTSA. This grace period will give individuals an opportunity to apply to the LTSA to have their information hidden from public view if they have concerns that public disclosure of the information could create a risk for their own health or safety or the health or safety of someone in their household. The LOTA administrator may also obscure from public view any information about individuals under 19 years old or for which a determination of incapacity has been made.
Consequences for Failure to Comply with the LOTA
Landowners may face steep penalties for failure to comply with the LOTA and file the requisite disclosure in a truthful manner. The LOTA allows for both administrative penalties and fines for non-compliance but a person may not be charged with both an administrative penalty and a fine for the same contravention.
Fines are imposed for certain violations under the LOTA that are deemed to be an offence (such as the failure to file a transparency report or the filing of a transparency report or transparency declaration with false or misleading information) and can be up to the greater of 15% of the assessed value of the relevant interest in land and $25,000 (for individuals) and $50,000 (for others). Fines of up to $50,000 (for individuals) and $100,000 (for others) may be imposed for other offences under the LOTA.
Administrative penalties can also be imposed for non-compliance with the LOTA but are capped at lower amounts than the fines. The LOTA contemplates the potential appointment of an enforcement officer by the Minister of Finance who would be responsible for administering administrative penalties. No such enforcement officer has been designated to date and, as such an appointment is not mandatory, the application of administrative penalties remains unclear.
Directors, officers, managers or agents of a corporation who authorize, permit or participate in the commission of an offence by the corporation may also be liable, regardless of whether or not the corporation is prosecuted or convicted for the offence. The LOTA also authorizes the enforcement officer (if and when appointed) to impose administrative penalties on directors, officers, managers or agents of a corporation that contravenes the LOTA or the LOTA regulations.
The launch of the LOTR has caused some to speculate that the Province's intent was not simply to tackle money laundering but, also, to prepare for the imposition of property transfer tax on beneficial transfers. While the Province may head in that direction eventually, the LOTR itself is not clearly set up for that purpose.
The LOTA is a detailed and relatively complex piece of legislation that warrants close review. This blog sets out a general overview of the key concepts, obligations and timelines. However, landowners should seek legal advice, particularly for more complex land ownership structures involving multiple layers of corporations, partnerships or trusts. We also recommend visiting the LTSA's website dedicated to the LOTA and LOTR which can be accessed here.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.