Over recent months, the Government of British Columbia has enacted legislation called the Information Collection Regulation that will come into effect September 17th, 2018. This regulation will be enacted to keep with the Government’s mandate to require increased transparency from purchasers of real property.
The last several years have been tumultuous for British Columbia’s real estate market. From foreign investment to undersupplying of property, the province has had some of the wildest fluctuations of real estate markets in the country. With the introduction of this regulation, in conjunction with several other legislated efforts, the Government is aiming to bring the province’s markets back into a more stable, balanced state.
The details of the legislation
The Information Collection Regulation will require the disclosure of personal information regarding certain individuals who are acquiring any property within the province. The individuals who will be subject to this regulation are those with a significant interest in a corporation, as well as trustees of a trust.
The Government has outlined that for each named individual under this regulation their name, date of birth, citizenship information, contact details, and tax identifiers must all be collected. And, like with all other information that is collected through a property transfer tax return, the regulated data collected will be treated as confidential.
Under the regulation, corporations that acquire property within BC must clearly identify any and all individuals with significant interest and express trusts must identify all trustees on property tax returns. The only exception to this is if the trust or corporation falls under any of the exemptions outlined within the regulation.
Another highlight under the regulation defines what a Corporate Interest Holder is. On top of having a significant interest in a corporation, the individual must also:
- Have direct, or indirect, control or ownership of shares representing 25% or more of the equity value of the corporation
- Have direct, or indirect, control or ownership of shares representing 25% or more of voting rights in regards to the corporation
- Have a right to appoint or remove the majority of the corporation’s board of directors
- Or, can exercise significant influence or control over the corporation.
While these may seem clear on paper, the BC courts and government will encounter a slight hurdle in trying to interpret and define what “significant influence or control” might mean.
The Information Collection Regulation creates an added layer of transparency to real estate transaction, in that the government will have full knowledge of property acquisition and ownership. This is a step in the right direction in regards to stabilizing the real estate markets throughout the province.
However, this added layer of transparency also creates a layer of complexity as well. Practitioners will see a large spike in the amount of work relating to these transactions. Also, it will be sure to spur debate as the regulation could be considered as a move towards Orwellian Government as an infringement on free and open property ownership.
Would Ontario follow suit?
While this may not seem relevant to Ontario landowners and potential buyers, Andrew Fortis – of Hummingbird Lawyers LLP – addressed that Ontario has replicated BC legislation in the past, especially regarding property acquisition and ownership.
Fortis noted that the most recent example is the Non-Resident Speculation Tax. This legislation imposed a 15% additional land transfer tax to Non-resident purchasers. The reporting obligations have also increased, as have the retention period of the documents of the transaction (seven years). When enacted in Ontario, this increased the amount of paperwork and processing of transactions.
If the Ontario Government was to enact a similar regulation to BC’s Information Collection Regulation, the province could see added stability in some markets around the GTA and other metropolitan areas that have recently – over the last several years- become shaky and unpredictable. It would also see the province shake the influence of passive investment from Non-resident purchasers, and afford more opportunity of land ownership to Canadian citizens and residents.