B.C. cracking down on shell companies owning real estate

B.C. cracking down on shell companies owning real estate
The maximum fines for non-compliance would be $100,000 for companies or $50,000 for individuals.

After years of money laundering that has infiltrated the Greater Vancouver real estate market, the B.C. government announced a new law that will combat the practice.

The land owner transparency act would force companies that own real estate to “report who the beneficial owners of properties are through disclosure reports,” according to the province’s consultation press release.

“To improve tax agencies’ ability to enforce laws, the B.C. government is proposing to collect information about beneficial ownership of land in a public registry. The registry would help give tax authorities and law enforcement the information they need to crack down on tax evasion, and identify tax fraud and money laundering.”

The maximum fines for non-compliance would be $100,000 for companies or $50,000 for individuals.

According to the international organization Transparency International Canada (TIC) issued a report that said almost one-third of the 100 most valuable properties in B.C.’s largest city were owned by shell companies.

The new law would bring B.C. up to speed with other jurisdictions around the world, said Finance Minister Carole James at a press conference, but it would be the first of its kind in Canada.

“You see these kinds of registries in Europe and the U.K. We need to make sure that the opportunity is there to know who is behind these companies, because shining a light on transparency is one of the best things you can do when you are talking about getting rid of money laundering or bad action when it comes to housing.”

The measures were not fully welcomed by all however.

“We are concerned that the detailed disclosure requirements and the impact on purchasers for whom privacy is an important investment consideration may negatively affect the construction industry,” according to a comment letter written by law firm Farris, Vaughan, Wills and Murphy LLP.

“As such, the act will have an impact on the construction industry and the availability of much needed housing.”

But so far, the impact of the new law is unknown, wrote Rob Shaw in the Vancouver Sun.

“Whether increased transparency like this actually affects housing prices in Metro is legitimately unknown, said Tom Davidoff, the University of B.C.’s director of the Centre for Urban Economics and Real Estate. ‘It might. There’s certainly a view out there that people who don’t really want their identity to be known are putting money in Vancouver because it’s easy to hide your identity here. People think that’s a force in the housing market. I honestly don’t know the magnitude.’”

Privacy was also raised as a potential downside to the new regime, according to Claire Immega, partner with Singleton Reynolds in Vancouver.

“The use of vehicles such as corporations, trusts, and limited partnership have facilitated anonymous ownership of land in British Columbia for the last 150 years. Many people consider their real estate investments to be a personal matter, similar to their bank account balances, and do not relish the idea of any member of the public, government, or media being able to search their property interests in an online database,” she wrote on The Goodman Report.

Under the proposed legislation, any person can search the database by paying a fee.

But according to the executive director of TIC James Cohen, it’s a welcome move.

“Based on initial review, we applaud the government of B.C. for putting forward this needed legislation. Canada has been criticized globally for our lax beneficial ownership legislation and this is one step forward to correcting the problem,” he said to the Globe and Mail’s Wendy Stueck.

If the act passes and it helps alleviate rampant money laundering in B.C., don’t be surprised if the legislation moves east and more provinces enact similar laws.

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