Concerns raised about proposed B.C. legislation on real estate transparency

Posted by Michael La Prairie on Friday, September 14th, 2018 at 6:32am.

The B.C. government has introduced a bill aimed at ending hidden ownership of real estate and ensuring taxes are being paid on their properties, but community groups and legal experts are raising concerns about its privacy implications and reporting requirements.

In June, Finance Minister Carole James introduced the Land Owner Transparency Act as part of B.C.’s plan for housing affordability. The bill would create a new, publicly accessible registry of who owns real estate in British Columbia and authorize the collection of information on beneficial ownership, where an individual or organization enjoys the benefits of owning a property even though title is not in their name.

“British Columbia has developed a reputation as an attractive place to anonymously invest and hide wealth. Right now in B.C., real estate investors can hide behind numbered companies, offshore and domestic trusts, and corporations,” said James. “Ending this type of hidden ownership in real estate will help us fight tax evasion, tax fraud and money laundering. Our goal is to return fairness to the housing market.”

The intent of the legislation is to increase transparency of land ownership in B.C. by eliminating the ability to hide ownership through vehicles like trusts and shell corporations. For corporations, personal information about individuals who control 25 per cent or more of the property is required, including their date of birth and social insurance number, with the same information required for partnerships and trusts.

The Union of B.C. Municipalities (UBCM), while generally supportive of the legislation, said the province needs to take “further steps to ensure that the data [is] effectively used for enforcing tax law, with due consideration to potential privacy concerns.”

“We commend the provincial government for beginning to take action to bring greater transparency to home ownership,” said Sharon Gaetz, UBCM third vice-president and mayor of Chilliwack, B.C. “Knowing exactly who is purchasing a home will help ensure that all real estate owners in the province pay their fair share of taxes. Closing loopholes and better transparency will lead to the kind of enforcement needed to slow speculative real estate purchases that are driving up prices in B.C. beyond what people can afford.”

Jonathan Reilly, English Bay Law Corporation

Jonathan Reilly, English Bay Law Corporation

But not all are totally supportive. Jonathan Reilly, managing lawyer at Vancouver’s English Bay Law Corporation, said the legislation is being rushed without wide enough consultation with those who are being most affected. While the “idea of transparency sounds laudable,” he said the government already has tools at its disposal to pursue those who are not being honest about their transactions.

“If the process of transferring property becomes too onerous, it encourages people to fudge on the details and corrupt the information, or, worse, to start maintaining private records pertaining to land ownership so that the title registry is no longer accurate and reliable,” he said. “If the government makes it too onerous or too expensive to comply with the law on registering property, I think there’s a real risk we’re going to see straw agents as the owners and then the real records of who owns those properties will never ever be discovered or shown to the government.”

Reilly noted, under the proposed legislation, a land transfer can be defected, meaning it cannot be legally transferred, if the provincial Land Transfer Office doesn’t like the information provided.

“Defecting a transfer also defects any mortgage registered at the same time and would put lawyers in breach of their undertakings to sellers and banks,” he said. “[The bill] greatly adds to the time, and difficulty of verifying information — clients do not want to pay the cost of this, and it sounds like there is an expectation that the lawyers should bear [the cost].”

Reilly’s colleague Ryan Klassen said he doesn’t feel the proposed bill will do much to catch people who are trying to cheat the system.

“If there’s a straw buyer, where a person abroad sends money and gets a cousin or brother to buy a property here, as long as they pay the taxes when they go to sell the property, or on any investment income when they sell, they won’t get caught,” he said. “All this disclosure stuff — there are family planning ways around the system to avoid it. They may not get the tax benefits from [the property] on the way it’s registered on title, but it’s not going to prevent [people] from still duping the system.”

Klassen said he shares concerns about privacy issues in the database.

“I had a police officer for a client who was stalked by somebody they had pulled over, and they had to sell their property and move because that person had located them in the Land Title Office,” he said. “In the legislation there is an ability to redact or have your information removed from that registry, but I didn’t see guidelines. They’re [also] saying there will be exemptions for women who have been abused and understandably so, but what about police officers? What about judges or lawyers who don’t want their information to be on title? There can be legitimate reasons for hiding your address.”

The government is holding consultations on the bill until Sept. 19, but Reilly said he thinks the consultation period needs to be extended and widened to ensure all voices are heard.

“The government is asking us to make determinations that create problems for the professionals making those determinations in terms of where control of a corporation lies, where all the shareholders are and where they live,” he said. “I think we need to spend some more time on how to get that streamlined and not cause problems for the professionals that are trying to make these transactions go smoothly.”

The B.C. government has introduced a bill aimed at ending hidden ownership of real estate and ensuring taxes are being paid on their properties, but community groups and legal experts are raising concerns about its privacy implications and reporting requirements.

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