Real Es­tate

The Georgia Straight - - Contents - Char­lie Smith

On October 3 in the B.C. leg­is­la­ture, B.C. Green Leader An­drew Weaver took aim at “bare trusts”. Lawyers set up these in­vest­ment ve­hi­cles to help their clients avoid pay­ing the prop­erty-pur­chase tax. Dur­ing ques­tion pe­riod, Weaver wanted to know why the NDP hadn’t closed this “loop­hole”, which, he al­leged, was “so big you could drive a bus through it”.

“Please let me re­mind you that when the at­tor­ney gen­eral [David Eby] was in op­po­si­tion, he was a very fierce critic of the B.C. Liberal hous­ing pol­icy or lack of a pol­icy on af­ford­abil­ity,” Weaver said, ac­cord­ing to Hansard. “In­deed, a year ago he told Red­dit, the read­ers of Red­dit: ‘We need to elim­i­nate what’s called the bare trust loop­hole in the prop­erty trans­fer tax where these prop­er­ties can trans­fer with­out prop­erty trans­fer tax paid. It’s cost­ing us lit­er­ally hun­dreds of mil­lions of dol­lars, hun­dreds of mil­lions that could be used for af­ford­able hous­ing ini­tia­tives.’ ”

The B.C. Green leader em­pha­sized that it’s “straight­for­ward” to ad­dress the is­sue, not­ing that On­tario changed its rules sev­eral years ago. And Weaver wanted to know why Mu­nic­i­pal Af­fairs and Hous­ing Min­is­ter Selina Robin­son hadn’t fol­lowed through on this since the gov­ern­ment was sworn in this sum­mer.

Robin­son replied that in just 10 weeks in of­fice, her gov­ern­ment has in­creased fund­ing to the Res­i­den­tial Ten­ancy Branch, which wasn’t the sub­ject of Weaver’s ques­tion.

“We are pre­par­ing to close un­fair loop­holes that al­low land­lords to by­pass rent con­trol, some­thing that the pre­vi­ous min­is­ter said was rather com­pli­cated, which we learned was ac­tu­ally not that com­pli­cated,” she stated, again sidestep­ping the is­sue of bare trusts. “We’ve an­nounced the cre­ation of 2,000 units of mod­u­lar hous­ing with wrap­around ser­vices. We also an­nounced 1,700 units of af­ford­able hous­ing through­out the province.

“That’s in 10 weeks,” Robin­son stated. “Just think about what we are go­ing to get done in four-anda-half years.”

That left Weaver’s ques­tion on bare trusts unan­swered.

Ac­cord­ing to a 2013 ar­ti­cle by Law­son Lun­dell lawyer Edward Wil­son, a “bare-trust agree­ment is not reg­is­tered in the Land Ti­tle Of­fice”.

“The ben­e­fi­cial owner typ­i­cally owns all of the shares in the bare trus­tee com­pany,” Wil­son wrote.

This en­ables new in­vestors in the trust to avoid pay­ing prop­erty trans­fer taxes.

And be­cause a bare trust is a Cana­dian cor­po­ra­tion, Wil­son noted that there’s no re­quire­ment to ob­tain a clear­ance cer­tifi­cate from the Canada Cus­toms and Rev­enue Agency. That frees pur­chasers from hav­ing to hold back 25 to 33 per­cent of the pur­chase price un­til such a cer­tifi­cate is granted.

Four years ago, Weaver ex­plained the neg­a­tive im­pact that these in­vest­ment ve­hi­cles have on the pub­lic trea­sury. “Sup­pose you own a $10,000,000 home or apart­ment build­ing that you want to dis­pose of,” the B.C. Green leader wrote on his web­site. “If you sim­ply trans­ferred ti­tle, like most of us do when we sell a home, the pur­chaser would have to pay $198,000 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,” Weaver em­pha­sized. “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.”

In a news re­lease is­sued after the leg­isla­tive de­bate, Weaver de­clared that the pur­pose of hous­ing “should be to pro­vide homes for Bri­tish Columbians” and it should not be “a com­mod­ity that is wide open to in­ter­na­tional spec­u­la­tion”.

“The B.C. Greens are com­mit­ted to propos­ing bold so­lu­tions to the af­ford­able hous­ing cri­sis that is fac­ing so many com­mu­ni­ties,” he stated. “I have pre­vi­ously called for the non­res­i­dent foreign buyer’s tax to be ex­tended to the en­tire province, as com­mu­ni­ties from Vic­to­ria to Nel­son face a hous­ing crunch. I have also called for a ban on foreign own­er­ship of ALR land over five acres, in or­der to stem spec­u­la­tion and pro­tect Bri­tish Columbia’s food se­cu­rity.”

B.C. Green boss An­drew Weaver says bare trusts give B.C. a bum deal.

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