The new Land Owner Transparency Act (“LOTA“) requirements came into force on November 30, 2020.
What is LOTA and why was it enacted?
By enacting LOTA, the provincial government is seeking to end “hidden” ownership of real estate and to eliminate tax evasion and fraud. LOTA creates new disclosure requirements for land owners in British Columbia – any person or entity that owns an “interest in land” or that will acquire an “interest in land” will need to make a disclosure filing called a transparency declaration, identifying whether the registered owner of the interest in land is a “reporting body“. If the registered owner is a reporting body, it will be required to file a transparency report in addition to the transparency declaration, which will include certain information about the registered owner and the “interest holders,” which are the individuals that are the indirect or beneficial owners of the interest in land.
Disclosures made under LOTA are maintained in the Land Owner Transparency Register (the “Register“), and certain information stored in the Register will eventually be accessible to the public.
Who administers LOTA?
The Land Title and Survey Authority of British Columbia (the “LTSA“) is the government body that administers LOTA and the Register.
At present, only legal professionals are able to submit filings in the Register, however the LTSA has noted that it hopes to make certain filing functions available to the general public in the future.
Who and what does LOTA target?
LOTA targets two “layers” of ownership. The first layer is what LOTA refers to as the “reporting body”. A reporting body is, generally, an entity that holds or that acquires a registered “interest in land” on behalf of one or more indirect or beneficial owners, and that is not otherwise exempt. The second layer is the “interest holders,” which are the corresponding individuals that are the indirect or beneficial owners of the “interest in land.” The interest holders are the “hidden” individuals that have some indirect or beneficial interest in the land and that would not otherwise appear on title to or be identified on the registered interest in land. Further information about qualifying interests in land, reporting bodies, and interest holders are set out below.
What qualifies as an “Interest in Land?”
Under LOTA, an “interest in land” means:
- an estate in fee simple (this is standard, outright ownership of property),
- a life estate in land (this is the right of an individual to occupy property for the individual’s lifetime),
- a right to occupy land under a lease that has a term of more than 10 years (considering only the remaining term of the lease as at the date of registration, disregarding past terms, the amount of the current term prior to registration, or any renewal or extension periods),
- a right under an agreement for sale to occupy land or require the transfer of an estate in fee simple, or
- any other estate, right or interest prescribed by regulation (note there are no prescribed regulations on this yet).
What is a “Reporting Body?”
A reporting body is an entity (or entities), whether a corporation, a trustee of a trust, or a partner of a partnership, that is not otherwise excluded under LOTA, that owns or will be acquiring an interest in land.
Types of reporting bodies
Each registered owner of an interest in land is categorized into one of three distinct groups – a “relevant corporation,” a trustee of a “relevant trust,” or a partner of a “relevant partnership.”
A “relevant corporation” is a corporation or limited liability company. There are a number of exclusions, including, among others, public bodies, schools, publicly-listed corporations, strata corporations, savings institutions and insurance companies.
A “relevant trust” is any express trust, including a bare trust, and similar relationships in other jurisdictions, but subject to certain exclusions, such as charitable trusts, testamentary trusts, alter ego trusts, pension plan trusts, and bankruptcy trusts.
A “relevant partnership” is a general partnership, limited partnership, limited liability partnership, professional partnership or foreign partnership within the meaning of the Partnership Act.
As above, there are some notable excluded corporations and trusts. For a full list of excluded corporations and trusts, please see Schedules 1 and 2 of LOTA.
What is an “Interest Holder?”
In general, the interest holders are the individuals (as opposed to entities) that hold a beneficial or indirect ownership interest in an interest in land. For example, if Jane is the registered owner on title to a property, but Jane holds the property in trust for Bill, only Jane will appear on title, but Bill, as the beneficial owner of the property, is an interest holder in accordance with LOTA. Similarly, if ABC Ltd. is a company that owners property, and Jane and Bill each own half of the voting shares of ABC Ltd., only ABC Ltd. will appear on title, but Jane and Bill, as controlling shareholders of ABC Ltd., are each interest holders.
Further to the above examples, LOTA sets out three different categories of interest holders to classify different forms of ownership – corporate interest holders, beneficial owners, and partnership interest holders:
Corporate interest holders
Corporate interest holders are individuals that have:
- registered or beneficial ownership of, or indirect control over, at least 10% of the shares or voting rights in the relevant corporation; or
- the right, or indirect control of the right, to elect, appoint or remove a majority of the directors of the corporation, or the ability to exercise direct and significant influence over an individual who has any such rights.
If the above interests or rights are held jointly by two or more individuals (for example, shares that are held jointly), each individual is considered to be a corporate interest holder. Similarly, if two or more individuals have certain interests, rights or abilities that, if combined, meet the criteria above and are subject to an agreement that requires such interests, rights or abilities to be exercised jointly or together, then each such individual is a corporate interest holder.
The Regulations also provide additional details surrounding the meaning of “indirect control” with respect to both shares and electing, appointing or removing directors of a relevant corporation, and to address circumstances where there is a “chain of intermediaries” (being, generally, a series of different entities, each controlling the entity below it) between the relevant corporation and the ultimate corporate interest holder(s).
In simplified terms, a person has control over a:
- corporation if they have the right to elect the majority of directors;
- partnership if they have 25% of the votes in management or 25% ownership either in profits or assets on windup; and
- trust if they can dictate how the trustee is to exercise rights related to shares owned in a relevant corporation or how a trustee is to exercise control over a relevant intermediary.
Where ownership structures are complex, please contact us for additional assistance.
Beneficial owners are individuals that have any of the following rights in an interest in land registered in the name of a trustee of a relevant trust:
- a beneficial interest, other than an interest contingent on the death of another individual;
- the power to revoke the relevant trust and receive the interest in land; or
- if an individual is a corporate interest holder of a relevant corporation that has any of the above rights, that individual is also considered to be a beneficial owner.
Partnership interest holders
Individuals are presumed to be partnership interest holders if they are:
- a partner in the relevant partnership; or
- a corporate interest holder in a relevant corporation, and that corporation is a partner in the relevant partnership.
In addition, where there are complex ownership structures, and a relevant partnership is a partner in another relevant partnership, the first partnership is deemed to be a partner of the latter partnership, and the individual that is a partner in the first partnership is deemed to be a partner, and accordingly, a partnership interest holder, of the latter partnership for the purposes of LOTA.
Note that the definition of “partnership interest holder” includes a presumption. For certain partnership structures, including limited partnerships, the presumption will not apply if the individual, or the relevant corporation in which the individual is a corporate interest holder, has no interest, right or ability in respect of the interest in land.
For certain limited partnerships, the presumption may be rebuttable. According to section 55(2) of the Partnership Act, a limited partner’s interest in the partnership is not an interest in land, but is personal property. The courts in British Columbia have since stated that the idea that a limited partner has a proprietary interest in land owned by the limited partnership is irreconcilable with section 55(2) of the Partnership Act.
In considering section 55(2) of the Partnership Act and its subsequent interpretation by the courts to LOTA, it would appear that a limited partner may not have an interest, right or ability in respect of the interest in land. As a result, the limited partner would not be presumed to be a partner, and, upon further consideration of the definition of “partnership interest holder,” may not be required to be disclosed under LOTA’s disclosure obligations.
However, LOTA’s Regulations have further clarified the meaning of “control” where there are complex ownership structures and a chain of entities involved, each controlling another. A limited partner will be deemed to control the relevant partnership if the limited partner:
- is entitled to at least 25% of the profits of the partnership assets,
- is entitled on wind up to at least 25% of the assets of the partnership,
- has at least 25% of the votes in the partnership management, or
- has the right to appoint or remove the majority of the partnership’s management.
In such circumstances, the limited partner would be a partnership interest holder.
Please contact our team for further information or an analysis specific to your organization.
When is disclosure required?
There are four primary triggering events for disclosure under LOTA.
First, when an application is made to register an interest in land at the Land Title Office, in addition to the transfer form and the Property Transfer Tax Return (if applicable), the individual or entity acquiring the interest in land will be required to file a transparency declaration disclosing whether it is a reporting body as outlined above. If the interest is a qualifying interest and the person receiving the interest is a reporting body, then a transparency report must be additionally filed with the application.
Second, disclosure obligations will be triggered where a reporting body already owns an interest in land prior to LOTA coming into force on November 30, 2020. In this scenario, reporting bodies will have until November 30, 2022 to file a transparency report regardless of when they acquired their interest in the land.
Thirdly, if a registered owner of an interest in land is not a reporting body at the time the interest in land was registered and it subsequently becomes a reporting body after November 30, 2020, it must file a transparency report.
Lastly, if a reporting body discovers that a prior filing is inaccurate due to a change in the interest holders or if an individual who is an interest holder or settlor becomes incapable of managing their financial affairs, the reporting body must file a transparency report within two months of the reporting body becoming aware of the inaccuracy (or from the date the reporting body ought to have become aware of the inaccuracy), otherwise it may be subject to penalties. However, if the reporting body is no longer the registered owner of the interest in land, this is not required.
What disclosure is included in a transparency declaration and transparency report?
As noted, each entity acquiring a qualifying “interest in land” must file a transparency declaration that discloses whether the entity is a reporting body and identify the type of reporting body (ie. whether it is a corporation, trustee, or partner).
If the answer is yes, then the reporting body must file a transparency report disclosing certain information about the reporting body as well as its interest holders.
For relevant corporations, the transparency report must contain the name of the corporation, its registered address and head office address, its jurisdiction of incorporation or continuation, its incorporation number and its business number.
If a trustee of a relevant trust is obtaining an interest in land, the report must contain information regarding the trustee and settlor corresponding to certain information required for individual interest holders.
Finally, for relevant partnerships, the report must include the partnership’s business name, the type of partnership, the registered address or head office address, the address of principal business premises, the jurisdiction of organization, and the identification number and business number of the partnership.
With respect to the individual interest holders, the transparency report must include the full names of the interest holders and certain identifying details, including: date of birth, social insurance number, tax number, principal residence and last known address, residency and citizenship status, the date on which they became or ceased to be an interest holder, and the nature of the individual’s interest in the reporting body.
Who can certify a transparency report?
If the reporting body or the transferee of an interest in land is a corporation of a limited liability company, both the transparency report and the transparency declaration must be certified to be correct and complete by an individual who has “knowledge of the matters certified” and “actual authority to certify the declaration or report on behalf of the transferee or reporting body.” In most cases, either a director or officer of the corporation or limited liability company will be the appropriate person to certify the transparency declaration or report.
If the reporting body or the transferee of an interest in land is an individual, both the transparency declaration and the transparency report must be certified to be correct and complete by the transferee or reporting body (as applicable), or an agent of the transferee or reporting body who has knowledge of the matters certified.
Does the reporting body have to give notice to an interest holder or settlor before and/or after filing a transparency report?
Yes. Prior to filing a transparency report, the reporting body must take reasonable steps to give written notice, under section 24 of LOTA, to each interest holder and settlor (if applicable) required to be identified in the report, including:
- information about the interest holder or settlor that is required for the purposes of completing and filing a transparency report;
- that an individual has the right to request that some or all of the information in relation to the individual be omitted from or obscured in publicly accessible information; and
- that unless an individual makes a request referred to above within 90 days after the filing of a transparency report, the information in relation to the individual will be publicly accessible after the end of that 90-day period.
There is currently no guidance within LOTA as to what constitutes “reasonable steps”.
It is important that, where a reporting body will be acquiring a registered interest in land, notices are sent out well in advance of closing.
If a transparency report is required to be filed as a result of a change of interest holders, notice should be sent out around the time of the change, as a new transparency report will need to be filed within two months of the change.
Within seven days after submitting a transparency report, the reporting body must take reasonable steps to give to each interest holder and settlor, as applicable, an extract from the report showing the information contained in the report in respect of the interest holder or settlor, as set out in section 24(3) of LOTA.
I am an interest holder. Do I have to provide my information to the transferee or reporting body?
Interest holders have a duty under LOTA (s. 23) to provide information to the reporting body.
The reporting body may, by written request, require that a person who is or may be an interest holder or settlor, as applicable, provide the reporting body with information for the purposes of the reporting body completing and filing a transparency report. After a person receives such a request and takes reasonable steps to compile the requested information, that person must give to the reporting body a written statement setting out the information that the person was able to compile.
If you are concerned about providing information for health or safety reasons, you must still provide requested information to the reporting body, but additionally have a right under section 40 of LOTA to make an application to request that some of all of the primary identification information be omitted from or obscured in publicly accessible information.
An interest holder or settlor that fails to comply is liable under LOTA to a fine of not more than $50,000.
What happens if the reporting body is unable to obtain information required for a transparency report?
Under section 21 of LOTA, a reporting body must take reasonable steps to obtain and confirm the accuracy of certain identifying information required in respect of each interest holder and, if applicable, settlor. There is not yet any guidance regarding “reasonable steps.”
If a reporting body is unable to obtain or confirm the accuracy of some or all of the information required to be confirmed in respect of an interest holder or settlor, as applicable, the transparency report must contain the information that the reporting body was able to obtain or confirm in respect of the interest holder or settlor, and a summary of the steps taken to obtain or confirm the information that the reporting body was not able to obtain or confirm.
Our transparency report is no longer accurate. Now what?
A new transparency report can be filed by the reporting body in order to complete or correct information contained in a previously filed transparency report, so long as the reporting body is still a reporting body.
If the previous reporting body is no longer a reporting body, it may apply to the LOTA Administrator to request that corrections or changes be made to a filed transparency report, reported information or publicly accessible information.
If the information being updated or corrected relates to an interest holder or settlor, the applicant must take reasonable steps to give written notice of the requested correction or change to the interest holder or settlor prior to making the application.
An interest holder or a settlor (as applicable) is also entitled to apply to request corrections or changes to a filed transparency report, reported information or publicly accessible information. Prior to making a request the applicant must: (a) make a written request to the reporting body that provided the information, requesting that the reporting body correct or change the information by filing a new transparency report, and (b) the reporting body must not have filed a new transparency report that contains complete and accurate information about the person within three months after receiving such a request.
In addition, within 2 months after a reporting body becomes aware or reasonably ought to have become aware that either the previous transparency report filed by the reporting body no longer discloses the current interest holders, or a determination of incapacity has been made in respect of an interest holder, the reporting body must file a new transparency report.
What information will be publically available in the Register?
Primary identification information in respect of reporting bodies that are, at the time of the search, registered as owners of interests in land, and primary identification information in respect of individuals who are current interest holders or settlors at the time of the search will eventually be publicly available.
Individuals can apply to have certain personal information omitted from the publicly accessible Register due to health and safety concerns. In addition, if the interest holder is under the age of 19 or deemed mentally unfit to handle their financial affairs, their personal information will be excluded from the public Register.
However, certain bodies are entitled to search all information in the Register, including the LTSA, taxing authorities, law enforcement officers, and certain regulators, including securities commissions, FICOM, FINTRAC, and the Law Society.
When will the Register be searchable?
Although the disclosure requirements come into force on November 30, 2020, the Register will not be searchable either by the public or government entities until April 30, 2021.
What will inspection look like?
Under LOTA, the Minister will select and enforcement officer (the “Officer“) to ensure compliance with the requirements. The Officer may enter a reporting body’s place of business or place where records or kept in order to conduct compliance inspections. To enter the private residence of an individual, the Officer will need permission or a warrant. The Officer can collect information necessary including any personal information or records relevant to the inspection.
What are the penalties for non-compliance under LOTA and the Regulations?
If a transparency declaration and the transparency report (if applicable) are not filed with the application to register an interest in land, the LTSA can refuse to register the interest.
There also are penalties for failing to file a transparency report or providing false information. These penalties include a $50,000 fine for a corporation or other entity, a $25,000 fine for an individual, or a fine of 15% of the assessed value of the property that is the subject of the transparency declaration or report. However, for more serious offences, including an interest holder’s or settlor’s failure to provide information, misuse of information obtained by a reporting body, misuse of publicly accessible information, or providing false or misleading information in connection with an enforcement action, the offender may be liable for a fine of not more than $50,000 for individuals and $100,000 for persons other than individuals.
Where there are genuine issues in obtaining information, LOTA imposes a duty on reporting bodies to take “reasonable steps” to confirm information provided in a transparency declaration. If a reporting body is unable to obtain or confirm the accuracy of the information, the reporting body must still complete a transparency report and outline the steps the reporting body undertook to confirm the information. However, it is not clear what the threshold for “reasonable steps” will be.
We already prepared a transparency report for our company in accordance with the Business Corporations Act – is that sufficient? Is the information the same?
No. The BC company Transparency Register is a requirement for all private companies in British Columbia pursuant to the Business Corporations Act. LOTR is a separate registry, and the requirements for disclosure are similar, but there are some important differences. Meeting your obligations under the Business Corporations Act’s Transparency Register will not be sufficient to meet your obligations under LOTA.
For further information about the Business Corporations Act’s Transparency Register, please review our FAQ.