Who owns this house? - The Orca
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Who owns this house?

Geoff Costeloe
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More transparency in land title searches may lead to smarter policy - but must be balanced with privacy and property rights concerns.

A day doesn’t go by in this province without the same conversation about housing. Wealthy immigrants, limited access to land, one of the world’s most liveable provinces; the list of reasons cited for the housing affordability crisis is wide and deep.

It’s a complicated issue. Case in point: the unavailability of accurate information about property ownership. On one hand, government has a responsibility to protect personal information and respect property rights; on the other, it’s hard to make intelligent policy if we’re not sure who really owns what.

B.C. currently manages property ownership through the “Torrens system,” as do most provinces and common law jurisdictions.

The essential component is that government guarantees the validity of the recorded titleholder, eliminating the need for historical searches inherent in a “deed” system. (A summary of the system in BC can be found here.) All titles are searchable through the Land Title and Survey Authority of BC (LTSA).

One feature of the Torrens system (and other title systems) is that the recorded owner of title may be a number of entities other than persons; corporations, partnerships, trusts, and other forms of interest can be listed as the owner.

While this is correct at law, it can mask who the actual beneficial owners of the land are.

For example, let’s say Alice and Bob enter into an agreement wherein Bob will hold and manage certain assets for Alice while Alice is out of the country. To ensure Bob can do this, Alice agrees to transfer the property to him, making him the legal titleholder of a piece of land.

Someone searching the LTSA would see Bob as the owner. What they would not see is the agreement between Alice and Bob that makes Alice the true beneficial owner. Unless Alice is obligated to report some aspects to Revenue Canada, the agreement would be hidden.

Bear in mind, this is a much-simplified example. There are vastly more complex relationships and agreements lingering behind the names in the LTSA. The situation can be made more opaque through the use of corporations and other structures.

It’s important to note there are many valid and just reasons to create these relationships, including the example above. It may not be Alice’s intention to hide her ownership; it’s just the way the system works.

However, it does open the door to nefarious actors to obfuscate their holdings in Canada. Even though these individuals and corporations are following Canadian laws and paying appropriate taxes, the uncertainty of true ownership creates roadblocks to creating legislation that appropriately addresses the underlying issues of housing affordability.

In other words – how can we expect politicians to draft good policy if they can’t understand the fundamental issues?

The provincial government has taken the long overdue step of addressing the Land Titles issue in BC. The main thrust of the proposed Land Owner Transparency Act is addressing the issue using “beneficial ownership” as opposed to simple “legal ownership.”

This change could have sweeping, positive benefits for the transparency of the title system, allowing more accurate audits, effective legislation, taxation, research, and penetrability of the ownership issue in BC.

In our example, this would force Alice to be listed on title as a “beneficial owner,” even if Bob remained the “legal owner.” Such a change would, in theory, allow the public to peek behind the curtain and determine the end beneficiary of a transfer.

It’s a good first step, but the government needs to be careful – there are a number of privacy concerns Victoria needs to address about the information they plan to collect.

The white paper claims to intend to collect social insurance numbers, citizenship, birthdays, the nature of ownership, and the other information depending on ownership. It’s unclear how this information will be handled by the government, and who will have access to it.

It’s also unclear if the changes will create additional costs and obstacles for the average property transfer in BC. One of the benefits of the Torrens system is that it allows all parties to have certainty around the parties to a land transfer without requiring significant due diligence work. If these costs are significantly increased, it will undermine a significant benefit of the current system.

Regardless, in a province where the never-ending discussion of housing affordability is unable to accurately determine what the problem is, more transparency is one step in the right direction.

 

Geoff Costeloe is a lawyer and entrepreneur located in Vancouver. The above article is not to be taken as legal advice. You can engage with him (civilly) on Twitter @gcosteloe.

 

 

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