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British Columbia lowers reporting threshold for property beneficial ownership

Monday, 12 August, 2019

British Columbia has lowered the threshold at which shareholders of a property-owning corporation must be disclosed to its public registry of beneficial and indirect land owners to 10 per cent.

The province's proposed Land Owner Transparency Act (Bill 23-2019, LOTA) is intended to combat the Vancouver property price boom, supposedly triggered by 'foreign speculators' who bought homes either to let them out or just to accumulate capital gains.

The first draft of LOTA, released for consultation last November, was regarded as imposing ‘potentially onerous disclosure compliance obligations on those who own a significant interest in real estate through corporations, trusts and partnerships', said law firm Thorsteinssons. The firm said that the Bill is far-reaching and highly detailed in the ownership information it would compel to be disclosed, and could make previously private ownership structures subject to scrutiny by officials both within and outside of Canada.

Originally, the ownership threshold at which beneficial owners were regarded as having a significant interest was set at 25 per cent, the same as for existing company ownership registration. However, in May this year, an expert report commissioned by the BC government estimated that billions of dollars of illicit money were laundered through property sales in the province in 2018, most of it in Vancouver.

The report of the Expert Panel on Money Laundering in BC Real Estate suggested that a total of CAD7.4 billion was laundered in BC during the year, of which CAD5.3 billion (USD4 billion) went through the real estate market. This represented about one in 20 real estate transactions.

The Expert Panel's estimate appears to have prompted the BC government to lower the 'significant interest' threshold to 10 per cent at the last minute. 'The amount of money being laundered in BC and through real estate is much more than anyone predicted', commented the province's Minister of Finance, Carole James, when the report was released.

The rationale is that the higher threshold is too easily avoided, commented law firm Dentons: 'This change means that any individual holding 10 per cent of the shares or voting rights in a relevant corporation must be disclosed in the new registry. The 10 per cent threshold can also be triggered if shares are held “jointly or in concert” with others in a group of shareholders who collectively own 10 per cent or more of the shares or voting rights.’

The reporting threshold for shareholders of private companies under other legislation is being left at 25 per cent.

According to the Ministry of Finance, LOTA is expected to be made effective sometime in 2020. For a pre-existing owner, in other words a legal or indirect owner on the effective date, regulations are expected to provide for a grace period after the effective date, during which time the pre-existing owner will be required to file a transparency report.

Sources