Canada: Proposed Legislation For Transparency – Land Owner Transparency Act

Last Updated: August 15 2018
Article by Karen Ngan

INTRODUCTION

A key aspect of the 2018 BC Provincial budget was the "Homes for BC: A 30-Point Plan for Housing Affordability in British Columbia", a comprehensive plan attempting to address many aspects of the housing crisis. On June 20, 2018 as part of that plan, the Ministry of Finance released a white paper on draft legislation titled, "Land Owner Transparency Act" (the "Act"). The Act will call for the registration of beneficial ownership of land in B.C. In an attempt to prevent tax evasion, fraud and money laundering, the provincial government is seeking to end hidden ownership of land by guaranteeing access to legal entities, such as offshore trusts. They hope to achieve this through the implementation of a new, publicly accessible, beneficial ownership registry (the "Registry"). The Registry will identify anyone who holds beneficial ownership in real property in the province. This legislation is aimed at corporations, offshore/domestic trusts and partnerships, and has the potential to impact anyone who holds or acquires an interest in land in B.C., including freehold and leasehold interests.

Transparency is the key element driving this legislation. A publicly available database, while potentially important for tenants, contractors, law enforcement and others who deal with land owners, will also encourage accurate reporting by registered land owners.

DECLARATION AND DISCLOSURE REQUIREMENTS

Essential to the Act is the responsibility of the "reporting body", a concept newly introduced in this legislation. The reporting body is defined as a relevant corporation, a trustee, a trust or a partner of a partnership, and is responsible for filing requirements at the time of an application to register an interest in land. The application will involve filing a transfer declaration and, if applicable, a disclosure report. A transfer declaration must be filed indicating whether the interest in land will be registered in the name of a reporting body. If the interest in land will be registered in the name of a reporting body, a disclosure report must subsequently be filed by the reporting body. Failure to file a transparency declaration and, if required, a disclosure report, will result in the land title office refusing to register the interest in land.

Disclosure requirements for reporting bodies arise in three different situations:

  1. on any application to register an interest in land in the name of the reporting body;
  2. any time there is a change of interest holders or beneficial owners, even if it does not result in a transfer of legal title to the land; and
  3. during an initial transition period all those holding an interest in land for a beneficial owner will be required to file a disclosure report.

Information proposed to be collected will vary depending on the type of entity involved, and is set out in the recently enacted Information Collection Regulation (the "Regulation"), effective September 17, 2018. For further details on the Regulation, and the information which must be collected thereunder, please click here.

Any pre-existing, registered owners of an interest in land in B.C. must, as the reporting body, file a disclosure report on or before a date to be prescribed by regulation. If a reporting body becomes aware that the disclosure report they filed no longer discloses the current interest holders, they must, within 2 months, file a new disclosure report. In addition, a reporting body will have the opportunity to complete or correct information provided in previously filed disclosure reports by filing a new disclosure report with the administrator, at other times the reporting body considers necessary.

Reporting bodies carry the burden of making "reasonable efforts" to not only obtain the required information, but also confirm its accuracy. This legislative regime recognizes that certain structures used to own land may be complex, and in cases where the reporting body is unable to confirm the identity of interest holders, requires the reporting body to outline the steps taken to attempt to identify the appropriate individuals and provide reasons why their identity could not be confirmed.

In addition, reporting bodies are responsible for making reasonable efforts to notify interest holders of their right to apply to request their information be omitted and for making reasonable efforts to provide each interest holder with an extract of the completed disclosure report.

THE REGISTRY

This aspect of the regulatory regime is likely to raise concerns, not only with privacy matters as it requires the disclosure of information which may not otherwise be publicly available, but also in relation to compliance issues. It remains to be seen how conceivable it is to identify all properties held in beneficial ownership arrangements and what efforts will in fact be deemed reasonable in the circumstances.

In an attempt to balance transparency with privacy, the proposed legislation includes various provisions regarding the restriction and omission of certain information from the registry. The administrator is obligated to omit or obscure any information of an individual who is under 19 years of age, or incapable of managing his or her financial affairs, as determined by a court or qualified professional. In addition, any individual who feels that they, or a member of their household, could reasonably be threatened with the public release of certain identification information, may apply to have some or all of that information omitted or obscured. A mandatory 30 day waiting period before making information publically available will be provided to allow time for individuals to make these applications. However, the administrator maintains the power to refuse to omit or obscure information, if they determine such a threat would not be reasonably expected.

In addition to provisions allowing the restriction and omission of certain information from the Registry, the Ministry hope to limit the use of Registry information through prohibitions regarding the solicitation or harassment of people via this publicly available information.

ADMINISTRATION AND ENFORCEMENT

The Land Title and Survey Authority will be granted authority to conduct inspections, allowing them to enter anywhere a reporting body carries on business, or where related records are kept, to determine compliance. Contraventions may be subject to administrative penalties of up to $50,000 for corporations or $25,000 for individuals, or, if deemed to be an offense, may be subject to a fine of up to $100,000 for corporations or $50,000 for individuals.

The Ministry is accepting feedback regarding the proposed legislation until August 19, 2018**. For more information, to submit feedback, or for a copy of the white paper and draft legislation, visit the Ministry of Finance's website.

Footnotes

** Updated August 9th, 2018: The Deputy Minister of Finance has extended the deadline for feedback until September 19th.

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.

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Karen Ngan
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