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.

Beginning November 30, 2020, a transparency declaration and a transparency report must be filed upon the acquisition of an interest in land, including transfers of lands or a lease longer than 10 years. On the other hand, current interest holders in land will be subject to the same compliance requirements on November 30 of next year. The documents will be a requisite for registration of the interest in land with the land title office. Furthermore, enforcement officers will be accorded authority to inspect to determine compliance, which includes entering a place of business or records office to inspecting records in the possession of a lawyer subject to a claim of solicitor-client privilege. The more serious contraventions of the law can be subject to administrative penalties of up to C$50,000 for individuals and C$100,000 for non-individuals, and 15% of the assessed value of the property.

The Land Owner Transparency Act is intended to take account of all individuals with unregistered interests in real estate. Given the substantial amount of interests in land held by trustees, corporations and partners and the nuances of LOTA’s application, this will be a massive undertaking for both the provincial government and interest holders. It is advised of existing real estate owners and interest holders to review their real estate holdings and ownership structures in order to identify interest holders who will have to be disclosed and seek legal advice as early as possible to ensure compliance.

FLI regularly advises clients on corporate portfolio management and strategy, with a key focus on global roll-outs and investments. With over 17,000 lawyers worldwide in over 100+ jurisdictions, FLI benefits its clients by providing access to local industry and jurisdictional experts. If you would like to discuss how this may relate to your outside counsel requirements or to explore how FLI may render assistance to your firm both domestically or in cross-border matters, please feel free to get in touch with Daniel Casares-Lauritsen at dcasares@first-law.com