The provincial government is seeking to dissuade artificially increased condo prices and potentially close a tax loop through a new system aimed at registering assignments. An assignment is when a buyer has purchased a pre-sale condo, and sells it to another buyer (for a higher price) before the building is complete. Often referred to as “flipping”, this practice results in a grey area of tax law as the original buyers have not been paying related income or property transfer taxes on the sale, or considered the transaction from a capital gains perspective.
The registry is also part of the government’s 30 Point Housing Plan, aimed at addressing home affordability in the province. It is seen as a way of creating greater transparency in the real estate market, and with the goal of reducing the incidence of flipping so that condo prices move more organically in the marketplace.
The registry, called the Condo and Strata Assignment Integrity Registry or CSAIR, commenced January 1st of 2019. CSAIR’s first quarter report was due April 30th, 2019. Developers (and their agents) were to have registered by March 31st, 2019 and must pay a fee of $195 per assignment. The registry is administered by the Land Title and Survey Authority of British Columbia.
The registry concept aligns with a number of similar initiatives in the Housing Plan, which also includes a beneficial ownership registry that will require disclosure from corporations, trusts and partnerships about the underlying owners (beneficial owners) of the land.
A legal owner is the one responsible for the property, whereas a beneficial owner is the entity that ultimately controls the property and is entitled to the benefits of the property – monetary or otherwise. For example, a limited partnership cannot hold legal title to property in the BC Land Title Office. Instead, it appoints a separate legal entity, often the corporate general partner or a separate holding company to serve as the legal owner. This legal owner (trustee) has no ability to make any unilateral decisions about the property. Rather, it can only act at the specific direction of the beneficiary, the limited partnership.
The steps are aimed at deeper investigation of money laundering in real estate and strengthening the ability of the Property Transfer Tax Auditor to take action on tax evasion.
It remains to be seen whether the Assignment registry will dissuade flipping due to the tax implications; however, there’s no doubt that the two new registries will certainly increase transparency.
For more information on the registry, please visit the LTSA Help Site
For more information on the provinces 30 Point Housing Plan, please download this PDF.
