The Land Owner Transparency Act (LOTA) is unique to Canada. It is a legislation that goes in line with British Columbia’s aim of identifying real estate investors hiding behind numbered companies to avoid paying taxes. In a press release, Finance Minister Carole James stated, “Ending this type of hidden ownership in real estate will help us fight tax evasion, tax fraud and money laundering.” British Columbia’s Land Title System currently only records legal ownership in regard to real property. The lack of transparency surrounding beneficial ownership allows the sheltering of funds, both legally and illegally obtained.
Beyond additional compliance, another product of the law is a publicly accessible registry of corporate interest holders, beneficial owners and partners of land known as the Land Owner Transparency Registry. More detailed information on beneficial owners will also be accessible to relevant regulators such as tax authorities and law enforcement agencies.
The law is far-reaching, affecting anyone who currently holds or may acquire interest in land in British Columbia. This spans to all individuals who hold, directly and indirectly, beneficial interests in land through corporate and partnership structures, including leased land for terms spanning more than 10 years and less common interests such as life estates. While the determination of legal ownership is relatively simple, the province government aims to find out who the beneficial owners of properties are as this is a common means of minimising tax bills.
There are limited exceptions to the compliance rules, including interests in land like mortgages and easements. Indigenous lands are also exempted from the law. These include treaty lands, reserve lands and lands of self-governing First Nations.
The three main circumstances that give rise to a required disclosure in respect to the LOTA are: (1) in acquisition of an interest in land; (2) for all existing property owners with beneficial ownership; and (3) for any subsequent changes in the beneficial owners from a previous filing. Filings are also permitted to correct errors in previous filings. The obligation of reporting beneficial owners of properties essentially lies on the reporting bodies, which are generally private companies, trustees and partnerships. In regard to the LOTA, the definition of “beneficial owner” is specifically restrained to individuals, contrasting the use of the term in commercial real estate ownership structuring where it refers to entities such as a corporation, partnership or a REIT.