B.C. Introduces Land Owner Transparency Register
January 8, 2021
On November 30, 2020, the Land Owner Transparency Act (“LOTA”) came into force in B.C. This legislation will impact almost everyone who acquires or currently holds an interest in land through a corporation, partnership, or trust.
In particular, LOTA:
- requires disclosure by individuals who hold, directly or indirectly, beneficial interests in land in British Columbia through a trust, corporation, or partnership; and
- creates a publicly accessible database disclosing information about the beneficial owners of interests in land, in addition to the registered owners of such interests.
This article provides a brief summary of:
- the rationale for LOTA,
- the persons impacted by it,
- the process for submitting the necessary information,
- the persons with access to the registry information, and
- the consequences for non-compliance with LOTA.
What is the Rationale?
LOTA was enacted by the B.C. Government as part of its efforts to combat money laundering in the province.
In September 2018, the Minister of Finance appointed an Expert Panel on Money Laundering to review money laundering in the real estate sector. This appointment came on the heels of two independent reports that revealed that B.C.’s real estate market is vulnerable to criminal activity and market manipulation.
The Panel issued its final report on March 31, 2019, in which it concluded that:
Disclosure of beneficial ownership is the single most important measure that can be taken to combat money laundering but is regrettably under-used both internationally and in Canada.
On May 16, 2019, LOTA received Royal Assent. However, it did not come into force until November 30, 2020.
Who will be Impacted?
LOTA requires that all “reporting bodies” with an “interest in land” disclose certain information about their “interest holders”. Therefore, to understand exactly who will be impacted, each of these terms requires further explanation.
Reporting Body
A reporting body is defined as being a “relevant corporation”, a trustee of a “relevant trust”, or a partner of a “relevant partnership”.
A relevant corporation is any corporation or limited liability company, unless excluded in Schedule 1 of LOTA. Virtually all private companies are captured by this definition as Schedule 1 only excludes government entities, public companies, private schools, strata corporations, financial institutions, insurance companies, and trust companies.
A relevant trust is any express trust (including bare trusts) or similar legal relationships in other jurisdictions, unless excluded in Schedule 2 of LOTA. Schedule 2 excludes charitable trusts, testamentary trusts, pension plan trusts, and mutual fund trusts.
A relevant partnership is any general, limited, limited liability, professional, or foreign partnership within the meaning of the Partnership Act. Therefore, virtually all partnerships are caught by this definition.
Interest in Land
This term is defined as an estate in fee simple (i.e. full ownership of a piece of real estate), a life estate in land, as well as a lease that has a term of more than 10 years.
The term also includes the right under an agreement for sale to occupy land, or require the transfer of an estate in fee simple.
Interest Holder
If a reporting body holds an interest in land, we must then determine who the interest holders are. This will vary depending on the type of reporting body involved.
For a relevant corporation, an interest holder is an individual that:
- directly or indirectly owns, or indirectly controls
- 10% or more of all shares of the relevant corporation (whether voting shares or not), or
- 10% or more of the voting shares of the relevant corporation; or
- has a right or ability that if exercised, would result in the election, appointment or removal of the majority of the directors of the relevant corporation.
For a relevant trust, an interest holder is any “beneficial owner”. A beneficial owner, in turn, is defined as an individual who:
- has a beneficial interest in the land that is not contingent on the death of another individual;
- has the power to revoke the relevant trust and receive the interest in land; or
- is an interest holder in respect of a relevant corporation that
- has a beneficial interest in the land, or
- has the power to revoke the relevant trust and receive the interest in the land.
For a relevant partnership, an interest holder is an individual that:
- is a partner; or
- is an interest holder in respect of a relevant corporation that is a partner.
How Does the Process Work?
Acquiring an Interest in Land
Each time you register an interest in land, you must file a transparency declaration stating whether or not you are a reporting body.
If you are not a reporting body, nothing further needs to be done.
However, if you are a reporting body, you will also need to file a transparency report, which contains information about the reporting body’s interest holders, such as their full name, citizenship status, last known address, date of birth, SIN, and a description of how the individual is an interest holder.
Existing Interests in Land
Where a reporting body already holds an interest in land, it will be required to file a transparency report by November 30, 2021.
Changes to Interest Holders
Where there are changes to the individuals who are interest holders, the reporting body has two months to file a new transparency report.
Who Has Access to Registry Information?
Publicly Available Information
Starting on April 30, 2021, a searchable registry database will be available to the public. However, this database will not contain all information disclosed in the transparency report. Rather, the database will be restricted to disclosing the “primary identification information” contained in those reports.
The scope of this primary identification information is set out in sections 7-9 of LOTA. For instance, section 8 sets out the primary identification information for individuals as follows:
(2) In a transparency report, primary identification information in respect of an individual consists of the following:
(a) the individual’s full name;
(b) whether or not the individual is a Canadian citizen or permanent resident of Canada;
(c) if the individual is not a Canadian citizen or permanent resident of Canada, every country or state of which the individual is a citizen;
(d) if the individual’s principal residence is in Canada, the city and province in which that principal residence is located;
(e) if the individual’s principal residence is outside Canada, the city and country in which that principal residence is located;
(f) prescribed information, if any.
In cases where the information pertains to a minor, a person lacking capacity, or would put the person’s safety at risk, such information will be omitted from the public database.
Information Available to Government Entities
Certain government authorities will have full access to all information contained in the transparency reports. Those with full access include: (a) the British Columbia Securities Commission; (b) the BC Financial Services Authority; (c) the Financial Transactions and Reports Analysis Centre of Canada; and (d) the Law Society of British Columbia;
What are the Consequences for Non-Compliance?
If a party improperly submits or fails to submit the requisite documents when acquiring real property, the Land Title Office will refuse to register the transfer.
In addition, LOTA contains a number of provisions relating to fines or administrative penalties for non-compliance, many of which have the potential to be quite steep. For instance, section 92(3) provides that:
An individual who commits an offence under this section [failure to file reports in certain cases] is liable to a fine of not more than the greater of
(a) $25 000, and
(b) 15% of the assessed value of the property to which the transparency declaration or transparency report relates.
If you have questions about whether the LOTA applies to you or what you need to do to comply, we invite you to contact us.