As of November 30, 2020, the Land Owner Transparency Act (the “LOTA”) came into effect. All private companies registered under the British Columbia Business Corporations Act (“BCA”) with an “interest in land”, are required to file documents to the Land Owner Transparency Register (“LOTR”). The LOTR consists of two separate documents, a Transparency Declaration and a Transparency Report.
Most private companies will be required to file a Transparency Declaration. When there is an application made to register an “interest in land,” the requirement to file a Transparency Declaration is triggered. The Transparency Declaration discloses whether the individual(s), to whom an interest in land is transferred (the “Transferee”), is a “Reporting Body”. If the Transferee is a Reporting Body, private companies will also be required to create and maintain a Transparency Report. The Transparency Report discloses all “interest holders” that, directly or indirectly, have the threshold of shareholdings, a beneficial interest, or the ability to exercise control or significant influence over the company.
The LOTA and LOTR are administered by the Land Title and Survey Authority of British Columbia (the “LTSA”). By enacting the LOTA, the Provincial Government of British Columbia is seeking to end hidden ownership of real estate in British Columbia.
This article provides a summary of the key rules and important dates that private BCA companies should review. Reference to “companies” in this article refers to private BCA companies.
Qualification for an Interest in Land
LOTA defines an “interest in land” as the following:
(a) an estate in fee simple;
(b) a life estate in land;
(c) a right to occupy land under a lease with a term of more than ten years;
(d) a right under an agreement for sale to occupy land or require the transfer of an estate in fee simple; or
(e) any other right or interest prescribed by regulation.
Types of Reporting Bodies
A “Reporting Body” is an entity or entities that is a registered owner of the interest in land. A Reporting Body includes a “relevant corporation”, trustee of a “relevant trust”, or a partner of a “relevant partnership” as defined below:
i. Relevant Corporation
A “relevant corporation” is a corporation or limited liability company. However, it excludes those entities listed in Schedule 1 of LOTA, including schools, publicly-listed corporations, corporations within a government body, trust companies, and insurance companies.
ii. Relevant Trust
A “relevant trust” is any express trust, including a bare trust. It excludes those trusts listed in Schedule 3 of LOTA, including charitable trusts, testamentary trusts, alter ego trusts, joint spousal or common-law partner trusts, pension plan trusts, and mutual funds trusts.
iii. Relevant Partnership
A “relevant partnership” includes a general partnership, limited partnership, limited liability partnership, and professional partnership.
Test for Interest Holders
The LOTA defines an “interest holder” as a natural person, specifically, a beneficial owner of a relevant trust, a corporate interest holder of a relevant corporation, or a partnership interest holder of a relevant partnership as defined below:
i. Beneficial Owners
Beneficial owners are individuals that have any of the following rights in respect of an interest in land that is registered or to be registered in the name of a trustee of a relevant trust:
(a) beneficial interest, other than an interest that is contingent on the death of another individual;
(b) the power to revoke the relevant trust and receive the interest in land; or
(c) an individual who is a corporate interest holder in respect of a relevant corporation with any of the above rights.
ii. Corporate Interest Holders
Corporate interest holders are individuals that have any of the following rights in respect of a relevant corporation:
(a) registered or beneficial ownership of, or “indirect control” over, at least 10% of the shares and/or voting rights in the relevant corporation; or
(b) 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 that right or “indirect control.”
“Indirect control” refers to situations where there is an “intermediary” between the Reporting Body and the interest holder. An “intermediary” is a legal entity or person who has control over another entity. Such situations can happen when a shareholder is not a natural person, or is a natural person who is holding the votes or shares on behalf of another person. In general, a company must follow the chain of control to determine the ultimate interest holder who is not further controlled by any other entity.
The test for control of a corporate intermediary is the ability to elect or appoint a majority of the directors of that entity. Whereas, for a partnership, a person controls the partnership if they hold 25% of votes in management, or have 25% ownership in the profits or assets upon windup. An intermediary has control over a trust if they can dictate how the trustee is to exercise rights related to the shares owned in the relevant corporation, or control how a trustee is to exercise control over an intermediary.
iii. Partnership Interest Holders
Individuals are presumed to be partnership interest holders if they are:
(a) a partner in the relevant partnership; or
(b) a corporate interest holder in a relevant corporation and that corporation is a partner in the relevant partnership.
Preparing and Filing the Transparency Declaration and Report
The Transparency Declaration and Transparency Report must both be completed through myLTSA. Both LOTR filings must be certified by either the Reporting Body or an individual who signs on behalf of the Reporting Body, given that they are aware the information provided in the reports is valid.
Each interest holder and Reporting Body that is an individual must provide the following:
• the full name, date of birth, Social Insurance Number, and residential address;
• whether or not the individual is a Canadian citizen or permanent resident of Canada, if not, every country or state of which the individual is a citizen;
• whether or not the individual is a resident in Canada for the purposes of the Income Tax Act (Canada); and
• the date on which the individual became an interest holder.
A Reporting Body that is a relevant corporation must provide the following:
• the name of the corporation;
• the registered office address and the head office address, if applicable;
• the jurisdiction of incorporation; and
• the incorporation number.
A Reporting Body that is a relevant partnership must provide the following:
• the partnership’s registered business name and number, if any;
• the registered office address and the address of the partnership’s principal business premises; and
• the jurisdiction of incorporation.
If a Reporting Body is unable to provide any of the above listed information, the Reporting Body must disclose the steps taken to reasonably retrieve this information.
If there is a change of interest holders or a determination of incapacity has been made, a Reporting Body must file a new Transparency Report within two months of becoming aware of these changes. A Reporting Body will not be required to make changes if they are no longer the registered owner of the interest in land.
If a corporation, trust, or partnership ceases to be a relevant corporation, relevant trust, or relevant partnership, notice must be given to the administrator within two months after it is ceases.
Deadlines to Disclose
If the interest in land was acquired on or after November 30, 2020, the Transparency Declaration must be completed immediately, as well as a Transparency Report if the registered owner or Transferee is a Reporting Body.
If the interest in land was acquired before November 30, 2020 and this interest will continue to remain on or after November 30, 2022 (“Pre-existing Owners”), the Transparency Report must be filled out by November 30, 2022. No Transparency Declaration is required for Pre-existing Owners.
Inspection of the Transparency Register
The minister may designate an enforcement officer (the “Officer”) who is responsible for ensuring compliance with the LOTA requirements. An Officer may enter a place where the Reporting Body conducts business or keeps records. To enter a private residence, the Officer must obtain permission or receive a warrant. During the inspection, the Officer is authorized to inspect records and makes copies of such records that are relevant to the inspection.
Other inspecting officials, including an enforcement officer, ministry official or employee, an official or employee of a taxing authority, an officer within the meaning of the Police Act or member of the Royal Canadian Mounted Police, and an official or employee of a regulator, may inspect transparency records and search reported information. These records are inspected for the purposes of compiling statistical information, evaluation of government policy and to combat the laundering of proceeds of crime, administer or enforce a law of British Columbia or Canada, or for the purposes of conducting an investigation.
Privacy Issues
The LOTR is a publicly searchable database. The public can search by the name of a person or by parcel identifier (“PID”). Searching by the name of a person will show the interests in land to which the person is identified as a Reporting Body, interest holder, or settlor. A search by PID shows the persons whom are identified as a Reporting Body, interest holder, or settlor for that land.
However, the public is unable to search information about individuals who are under 19 years of age, are incapable of managing their own financial affairs, have submitted an application to omit some or all publicly accessible information, or have been registered in the LOTR system for 90 days or less.
In general, the public can view primary identification information for corporations and limited liability companies, individuals, and relevant partnerships.
Primary identification in respect of individuals includes:
• the individual’s full name;
• the individual’s citizenship status; and
• the individual’s principal residence city and province in Canada, or city and Country if it is outside of Canada.
Primary identification in respect of a corporation or limited liability company includes:
• the corporation’s or company’s name and registered office address;
• if the corporation or company’s head office address, if applicable; and
• the jurisdiction in which the corporation or company was incorporated.
Primary identification in respect of a relevant partnership includes:
• the partnership’s registered business name, if any;
• the type of partnership;
• the partnership’s registered address or head office address, as applicable;
• the address of the partnership’s principal business premises; and
• the jurisdiction the laws of which govern the partnership.
Penalties for Non-Compliance
Companies, as well as individuals, may be subject to penalties for non-compliance with the new rules. These penalties vary based on the entity and whether any reasonable steps were taken to comply with the new rules.
In particular, penalties for failing to file a Transparency Report, or providing false or misleading information, may result in companies facing penalties from the greater of $50,000 or 5% of the assessed value of the property to which the Transparency Report relates. Individuals may be fined the greater of $25,000 or 5% of the assessed value of the property to which the Transparency Report relates.
However, for more serious offences, such as a Reporting Body misusing information or misusing publicly accessible information, penalties range from $100,000 for companies and $50,000 for individuals.
Next Steps
These new rules impose significant obligations and potential penalties for non-compliance. Currently, only legal professionals can submit a filing for the Transparency Declaration and Transparency Report. For more information on the new rules, visit https://landtransparency.ca/