Today 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.
Weaver demanded 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. "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 Muncipal Affairs and Housing Minister Selina Robinson hadn't followed through on this.
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 his 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 question about 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 ten weeks," Robinson stated. "Just think about what we are going to get done in four-and-a-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."More