Media Statement: July 7th, 2016
Weaver Criticizes Government’s Laughably Incomplete Housing Data
For Immediate Release
Victoria B.C. – “The BC Government has already allowed the housing market to become a crisis, and now they are sitting on their powder keg holding press conferences based on 19 days worth of data,” said Andrew Weaver, MLA for Oak Bay – Gordon Head and Leader of the B.C. Green Party. “They have dropped the ball on this file — completely dropped the ball.”
“19 days worth of data is completely meaningless. This would be like me arguing that since the Canucks didn’t play any games between June 10 and the 29th, Vancouver doesn’t have a hockey team. It’s just laughable.
“Despite promises made in the 2016 budget, the government has failed to deliver any data on the occurrence and impact of beneficial ownership changes in bare trust owned properties. I have been asking for the data for three years now.
“When properties are registered in bare trusts and beneficial ownership is flipped there is no change in title at the Land Title Office. When there is no change of title there is no property transfer tax paid and no data collected by the BC government.
“The minister said our province has seen higher rates of house flipping in the past, but that data is based on registered sales only. There are a lot of houses out there that are flipping through changes in beneficial ownership, and those people are not paying property transfer tax.”
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Press Secretary – Andrew Weaver MLA
Cell: 250 216 3382
At present, anyone other than a first-time or new-home (< $750,000) buyer who buys a house must pay property transfer tax upon transfer of title at the Land Title Office. The tax owed is calculated as 1% of the first $200,000, 2% on the amount greater than $200,000 and less than $2,000,000 and 3% on the portion above $2,000,000.
But there is a glaring loophole that is being exploited more and more frequently by wealthy individuals and corporations. That loophole involves having the property held in what is known as a “bare trust”.
A bare trust is a legal entity that allows for the separation of beneficial and legal ownership. The beneficial owner of a property is the person or persons who make all the decisions concerning such things as rent, repairs, management, sale etc.; they are also the person or persons who receive all the revenue from and arrange financing for the property. The trustee of the bare trust has no substantive decision-making capacity as they simply act upon the instructions of the beneficial owner. Typically the trustee is a corporation that has no other purpose but to act as a trustee for the bare trust and for which the beneficial owner owns all the shares.
Suppose you own a $10,000,000 home that you want to dispose of. If you simply transferred title, like most of us do when we sell a home, the purchaser would have to pay $278,000 in property transfer tax.
But if instead the property is in a bare trust where the trustee is a company, then you will pay no tax. All you have to do is sell your shares in the company for 1$ (the company has no assets anyway), and sell the “beneficial ownership” rights of the property to a third party via a “bare trust agreement” which is not registered at the Land Title Office. Since no change in title occurs, no tax is paid.
Ontario has a similar property transfer tax system in place but they have plugged the loophole. They apply the property transfer tax upon change in beneficial ownership, not just change in the title registered as the Land Title Office. This could and should be done in British Columbia to ensure everyone is treated fairly.