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B.C.’s Land Owner Transparency Act Comes Into Force November 30th - Are You Ready?
Posted in Real Estate

On September 20, 2020, the Province of British Columbia confirmed by Order in Council that most of the provisions of the Land Owner Transparency Act, SBC 2019, c 23 (“LOTA”), will come into force on November 30, 2020. The Province also released the Land Owner Transparency Regulation (the “Regulation”), which will come into effect concurrently with LOTA. The Regulation and Order in Council 549/2020 answer some key questions that have remained unanswered since the government introduced the initial framework for LOTA in 2018.

By way of background, LOTA creates and governs the Land Owner Transparency Registry (the “Registry”), a publicly accessible registry for the disclosure of beneficial ownership of lands in B.C. In our previous blog post, “Developing Land in B.C.? How the Province’s Proposed Land Owner Transparency Act May Impact You”, we discussed some of the basic concepts and requirements under LOTA. Some of these concepts are summarized below, but we suggest you refer to our earlier post for a more detailed overview.

The following summarizes some of the key information made public by Order in Council and the Regulation:

1. LOTA and the Regulation will (mostly) come into force on November 30, 2020

Beginning on November 30, 2020, any person who applies to the Land Title & Survey Authority to register an “interest in land” must also file a Transparency Declaration. An “interest in land” is a technical term under LOTA that includes fee simple estates, any lease with a term greater than 10 years, and certain other real property interests.

If the person acquiring the interest in land is a “reporting body” – as disclosed in the Transparency Declaration – that person must also file a Transparency Report. Under LOTA, a “reporting body” is a “relevant corporation”, “trustee of a relevant trust”, or “partner of a relevant partnership”. In general terms, these categories encompass most individuals or entities that hold land as an intermediary for a beneficial owner or other indirect owner; however, there are many exceptions, such as government bodies, public companies, and others that are specifically excluded from the definition of “reporting body”.

The Transparency Report is required to contain a variety of information about the reporting body and the beneficial/indirect owners behind the reporting body – called “interest holders” under LOTA. Determining which interest holders are subject to the disclosure requirements is a complex exercise, due to the highly technical nature of LOTA. The Transparency Report must be updated in certain circumstances, including whenever there is a change in the interest holders (even if the registered owner of the interest in land does not change).

2. The Registry will not be searchable until April 30, 2021

The Order in Council delays the implementation of certain provisions of LOTA and the Regulations until April 30, 2021 and certain others indefinitely. The provisions that will come into force on April 30, 2021 deal primarily with inspection rights and searches of the Registry. As a result, we understand that the Registry will not be available for inspections and searches by members of the public, government entities, or law enforcement until these provisions come into force on April 30, 2021.

3. Reporting bodies who hold an interest in land immediately before November 30, 2020 have until November 30, 2021 to file a Transparency Report

If, immediately before November 30, 2020, a reporting body is a registered owner of an interest in land, that owner must file a Transparency Report by November 30, 2021 – one year after LOTA comes into force. A pre-existing owner is exempt from this filing requirement if it transfers its interest in land to another person by November 30, 2021.

Note that there is no requirement for any owner of a pre-existing registered interest in land to file a Transparency Report (or, for that matter, a Transparency Declaration) if the owner is not a reporting body. Accordingly, individuals holding a registered interest in land solely in their own right as legal and beneficial owner are not subject to the filing requirement.

4. The “remaining term” of a lease does not include renewals or extensions

Under LOTA, any lease with a term of more than 10 years is an interest in land and accordingly subject to LOTA’s disclosure requirements. The Regulations clarify that when calculating the remaining term of a lease, any periods for which the lease may be extended or renewed are not to be included.

This is welcome relief to lessees, as a reporting body is not required to file a Transparency Report on registration of a lease if the remaining term of the lease is 10 years or less. Additionally, a reporting body with an existing registered lease when LOTA comes into force is not required to file a Transparency Report if the remaining term of the pre-existing lease is 10 years or less on November 30, 2020. Finally, a registered owner of a lease who becomes a reporting body after LOTA comes into force is not required to file a Transparency Report if the remaining term of the lease is 10 years or less on the date that the owner became a reporting body.

5. The Regulations clarify the meaning of “control” with respect to shares in a relevant corporation

Any individual who controls 10% or more of the shares in a relevant corporation is a “corporate interest holder” for the purposes of LOTA. In many cases, determining who controls the applicable shares will be a simple determination; however, in other cases there may be a complex structure of intermediaries – corporations, trusts, partnerships, and agents – between the relevant corporation and the controlling individual. The Regulations provide rules and guidance for determining who has indirect control over the shares of a relevant corporation where intermediaries are involved.

To address the above, the Regulations introduce the concepts of “relevant intermediaries” and a “chain of relevant intermediaries”. A relevant intermediary is any a person that is one the following and is controlled by another person: a relevant corporation; a relevant partnership; or an individual, relevant corporation or relevant partnership that is a trustee of a relevant trust (including a trust that is an agent or a personal or other legal representative). A chain of relevant intermediaries is a hierarchy of two or more relevant intermediaries in which the first relevant intermediary (at the top of the hierarchy) is controlled by an individual who is not a relevant intermediary, and each relevant intermediary controls the one below it.

A detailed consideration of the concept of “control” under LOTA is outside the scope of this article; however, we find the newly-introduced regulations regarding partnerships to be of particular interest. Where relevant intermediaries are concerned, a person (including a legal entity) controls a relevant partnership if (i) that person is a partner, other than a limited partner, in the relevant partnership, or (ii) the person is a limited partner and is: entitled to at least 25% of profits from partnership assets or 25% partnership assets on wind-up; or, has at least 25% of the votes in the partnership management; or, has the right to appoint or remove the majority of the partnership’s management.

In some circumstances, the above will reduce the reporting burden with respect to minority partnership interest holders; however, where a complex ownership structure is involved, identifying which persons qualify as interest holders and obtaining the disclosures required from those interest holders will remain a complicated and potentially onerous exercise.

Conclusion

In addition to the matters discussed above, the Regulations set out various procedural and technical requirements regarding enforcement of LOTA, including with respect to the inspection and seizure of lawyer’s records, claims of solicitor-client privilege, and so on. These are very detailed and less likely to be relevant on a day-to-day basis, so we have omitted any discussion of these provisions here.

Over the coming weeks, we will be publishing more blog posts regarding discrete issues raised by LOTA and its Regulations – stay tuned.

If you would like to discuss this article or need assistance preparing for the implementation or LOTA on November 30, 2020, please contact a member of our Real Estate Group.

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