The FYI on the LOTA
"While criminals may not be likely to jump out and disclose certain facts about their ownership of property, these tools will help law enforcement crack down on issues that are under investigation." - Brendan Craig
On Episode 5: The FYI on the LOTA – Mark Fancourt-Smith and Alix Stoicheff speak to real estate lawyers Ed Wilson and Brendan Craig about the Land Owner Transparency Act in British Columbia, and how this groundbreaking regulation will pave the way for other jurisdictions and countries around the world.
Guest(s):
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Don't have time to listen to the full podcast? Here's what this episode covered:
- What is the purpose of LOTA? 01:08
- What changes to land ownership will this legislation bring? 02:48
- How will LOTA affect real estate transactions for an individual or a corporation/limited partnership? 04:28
- What privacy concerns have been raised about this legislation? 06:40
- Are other jurisdictions watching to see how this plays out in BC? 09:27
- Will this legislation reach its objectives? 10:45
Transcript
Alix Stoicheff 00:00
New legislation in BC, the Land Owners Transparency Act is the first of its kind in the world in terms of the degree to which it makes property ownership, transparent and searchable. But what does it mean for owners privacy and will the new Act achieve its intended goals?
Mark Fancourt-Smith 00:29
Welcome to LawsonInsight! I'm Mark Fancourt-Smith, a litigation partner in Lawson Lundell’s Vancouver office.
Alix Stoicheff 00:34
And I'm Alixandra Stoicheff, a litigation associate located in our Calgary office. Thank you for joining us on our bi-weekly podcast brought to you by Lawson Lundell LLP, LawsonInsight breaks down the latest legal news and updates to give you the information and tips you need to know how the law affects your business.
Mark Fancourt-Smith 00:50
On this episode, we'll be speaking with two members of the firm's real estate practice group, Ed Wilson and Brendan Craig. Both Ed and Brendan are in the Vancouver office and they've spent considerable time digging into BC's new Land Owners Transparency Act. Welcome, Ed! Welcome, Brendan!
Ed Wilson 01:05
Happy to be here.
Brendan Craig 01:06
Hello. Thanks for having us.
Alix Stoicheff 01:08
So the Land Owners Transparency Act officially comes into effect on November 30. Can you give us a high-level summary of what the intended purpose of this legislation is and how it came to be?
Ed Wilson 01:20
Well, it's been a long time coming. But it seems a short time as well. There's been a lot of push around the world to increase transparency of land ownership, corporate ownership, and this is part of that larger, worldwide process. More specifically in BC at the last provincial election, not the one we just had last week. But the previous election, housing affordability really became a major issue in that election. And the province, or the NDP party that won the election, pushed hard for greater transparency, and put measures that would improve housing affordability, they were worried about foreign ownership of residential real estate in particular, but foreign ownership of land generally. And they were concerned about the foreign ownership pushing up the price of housing. This led to the speculation and vacancy tax, and other similar measures. This is all part of that push to improve housing affordability. And we'll see if that works. The other aspect of this is to try to reduce money laundering through our land ownership system, as well as they're doing this in other fields. So it's really it was an attempt of the province to try to rein in the rapid increase in housing prices and give the province some greater tools to enforce tax laws and disclosure laws.
Mark Fancourt-Smith 02:48
I have a couple of questions, but let's start with this: What are the structural changes or changes in the process that this legislation is going to bring?
Brendan Craig 02:56
At the risk of overgeneralizing, LOTA requires that anyone registering an interest in land pick some new types of filings. Those filings may be very minor in the case of most people who are just purchasing a home, for example, in their own right, but can be quite detailed, where we're dealing with complex corporate structures, or really any corporate structure or partnership or trust, that's holding property on behalf of beneficial or indirect owners. It's very difficult to paraphrase it in simple terms, you can probably hear me struggling with that a little bit because there are so many exceptions and exemptions, different types of entities that are not subject to these reporting obligations, as well as legal terms that have a fairly established meaning, such as interest in land or beneficial owner are used in a very different context under this legislation, a narrower meaning than we're used to. So it doesn't apply to all types of interest in land, some big ones that it does apply to our typical fee simple interest, as well as leases for a term of 10 years or more. But it does not apply to other types of interests in land, such as mortgages and easements, rights of way that typically are understood to be interested in land law.
Mark Fancourt-Smith 04:23
So how's it going to affect real estate transactions, say, for an individual, and alternatively for a corporation or for a limited partnership?
Brendan Craig 04:32
Yeah, so the good news is for individuals purchasing a home, for example, it's going to be a very minor obligation. It's a filing simply saying whether or not they are what's called a reporting body under LOTA, which is a person or entity that has to go on and make more detailed disclosures. So in most cases, a person just buying their home in their own right will simply make a filing saying I am not reporting body it’s a $5 filing fee. And that's the end of the story for them. For other transactions, there will be a larger burden at the outset, to collect information about all of the various people. Behind the scenes, the beneficial owners, the indirect owners of the property, they may be shareholders of companies, partners and partnerships, beneficiaries of trusts. And the reporting body who will become the registered owner will have an obligation to collect and verify quite an extensive list of information about these individuals. And we'll also have to give them notice in advance that transparency report, it's called, will be filed about them. After closing the acquisition, they'll have to give further notice to those interest holders, beneficial owners, providing an extract of the transparency report that shows all the information that's been disclosed about them. The reason for that is those people can then go on to make an application to have some of that information obscured from the public record, if there's a risk to their health or safety.
Ed Wilson 06:10
The goal of the province is ultimately good to have a if there's a corporate vehicle taking title to work down to the individuals who are the owners. So you can have may have to go through several chains of ownership to you could have a corporation taking title that has nothing but corporate shareholders, and those companies have corporate shareholders. But at the end of the day, there's some individuals, that's the goal of the province to get those individuals names into the system.
Alix Stoicheff 06:40
So Ed, Brendan, a lot of what you're saying it sounds to me like there's going to be quite a bit of new information that's going to be required to be provided. And I'm wondering if there have been any privacy concerns that have been raised about this legislation?
Ed Wilson 06:52
Just by background, clearly, this legislation was run past the BC Privacy Commissioner, and they blessed it or did not put up a big enough fight to get it not to be enacted, which was clearly done for political reasons. So yes, there are privacy issues. And there's going to be information out there that a lot of people will be displeased been available for the public. And Brendan can give some examples of those.
Brendan Craig 07:22
Yeah, certainly. So concerns have been raised by police officers and judges, for example, who don't want to have their information public, as it wouldn't typically be in, say, the phone book. There are other people who will actually have their information excluded, just as a matter of course, so for example, anybody under the age of 19, and individuals with capacity issues, if those facts are noted on the Transparency Report, the administrator of LOTA has to automatically obscure that information. So there has been some attempt there to address privacy concerns. I mentioned earlier as well that individuals can actually apply to have certain information obscured if there's a risk to their health or safety. So cases like police officers and judges, I assume would potentially fall under that application, as well as say, victims of spousal abuse who need some anonymity to avoid an abusive partner that they've escaped. That's been a common example of an application that would be successful.
Ed Wilson 08:31
Just to give some further thoughts on that. The key is that not only will the province have access to all this information, taxing authorities, RCMP, policing agencies and so forth, they'll have access to the full database, but the public will have access to the database, some parts will be shielded, they can't, for example, get social insurance numbers, but they will be able to find out if I own some property through a corporate vehicle that's on title. So that's this will be a fully searchable database for payment of search fees. But it is it will have public access and that was very deliberate. Both the province and other transparency organizations feel that public access is what will police the system is not going to be policed by the government. They're not going to go analyzing all this data. But the public might.
Alix Stoicheff 09:27
I understand that this legislation is unique in the world. Are you aware of whether other jurisdictions are watching to see how this plays out in BC?
Ed Wilson 09:35
Yes, other jurisdictions are looking at it. England plans to create a public registry in next year is the most reasonable report I have Quebec's launching down this road for foreign ownership. So it is coming. As I say it's part of the larger transparency goals being adopted in Europe and North America and elsewhere in the world, it's already been adopted for our corporate registries. This is just part of that transparency process that is becoming more common around the world. But we are the first, for better or for worse, others, we'll look at our system and see if it works, some of which is adaptable. It works well in BC because of our underlying torn registry system that this is sort of bootstrapped around. So I could see why we would be one of the leaders in the world just because our system is already very automated, computerized. And it allows the province to achieve some of its public policy goals in a relatively efficient manner.
Mark Fancourt-Smith 10:45
So speaking of those public policy goals, and you had identified transparency for the purpose of trying to get a handle on at least some of the causes of property on affordability, as well as organized crime, as well as taxation. Purely from a speculative standpoint, to what extent do you think this legislation is going to reach its objectives? Or Which ones? And what are some of the challenges that might exist to prevent it from doing so?
Brendan Craig 11:13
Well, in terms of determining ownership for taxation purposes, we think there's a good likelihood that it will be effective in terms of determining ownership for investigation and addressing housing affordability, it's likely helpful in getting a better sense of this part of the picture. But that's certainly a multifaceted problem. One thing it certainly will do is give increased tools for enforcement to the government, taxation agencies and others. There's quite broad enforcement mechanisms under the Act, including the ability to search and seize documents, levy quite substantial fines against non-compliant companies and individuals, as well as directors of companies who are complicit in offenses under the Act. While criminals may not be likely to jump out and disclose certain facts about their ownership of property, these tools will help law enforcement likely crack down on issues that are under investigation.
Ed Wilson 12:15
I agree. I think it's particularly on the money laundering side, it's a tool, it's not going to stop money laundering. First of all, the corporate entity or the person taking title is not going to say I hold this property in trust for Joe criminal. And so it's not going to jump out at anyone that this property is owned by a criminal, but it is part of the investigatory tool. If the police learn that Ed Wilson is notoriously known for taking title to properties for his cousin who is a criminal, then it allows them to start to build the chain and it provides them some documentary tools. But is it going to stop money laundering? No. Will it hinder it a bit? Maybe. And I think a lot of money anti money laundering things are just put up enough roadblocks and hopefully they will go launder their money somewhere else. And it won't be our problem.
Mark Fancourt-Smith 13:11
Ed, Brendan thank you both so much for being on the podcast today!
Ed Wilson 13:13
Thank you.
Brendan Craig 13:14
Thank you for having us.
Mark Fancourt-Smith 13:16
Thank you for joining us on LawsonInsight! Thanks again to Ed Wilson and Brendan Craig for joining us on the show today.
Alix Stoicheff 13:21
For more information, please visit our website at www.lawsonlundell.com and check out the blogs authored by Brendan and Ed on these issues. You can also stay up to date by connecting with us on Twitter using the handle @LawsonLundell, and by subscribing to the podcasts on Apple, Spotify or Google podcasts. Thanks for listening!
About LawsonInsight
Hosted by partner Mark Fancourt-Smith and associate Alix Stoicheff, LawsonInsight is a look inside the legal mind. If you would like us to cover a particular topic, please email your requests to inquiries@lawsonlundell.com
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