Yesterday in the BC Legislature we debated Bill 23: Land Owner Transparency Act, 2019 at second reading. This is an important bill that is aimed at increasing transparency in property ownership. The bill requires beneficial owners of corporations, partnerships and trusts to file a transparency declaration when there is a transfer of legal title of property or a change in beneficial ownership. It further requires pre-existing beneficial owners  to file a declaration. However, the bill will not affect individual property owners who are listed on title at the Land Title Office.

Transparency International Canada, the Canadian Chapter of Transparency International, is an anti-corruption NGO that recently published an extensive analysis of the scale of anonymous ownership of Canadian companies and Trusts. Their 2016 report states:

“Analysis of land title records by TI Canada found that nearly half of the 100 most valuable residential properties in Greater Vancouver are held through structures that hide their beneficial owners. Nearly one-third of the properties are owned through shell companies, while at least 11 percent have a nominee listed on title. The use of nominees appears to be on the rise; more than a quarter of the high-end homes bought in the last five years are owned by students or homemakers with no clear source of income. Trusts are also common ownership structures for luxury properties; titles for six of the 100 properties disclose that they are held through trusts, but the actual number may be much higher as there is no need to register a trust’s existence.“

For over five years I have been calling on government to plug a loophole that lets corporations and wealthy individuals avoid paying BC’s property transfer tax. Plugging this loophole would bring tens of millions of dollars into provincial coffers and correct an injustice that unduly penalizes ordinary BC families. While Bill 23 does not close the loophole, it does provide government with important information about beneficial property ownership in British Columbia. This will allow government  to get a sense of the scale of the problem without actually solving it. I am hopeful that once the data starts rolling in, government will quickly recognize that the bare trust loophole must be closed to ensure that property transfer tax is applied on a transfer of beneficial ownership not on a transfer of title.

Below I reproduce the video and text of my second reading speech in support of this important bill.

Video of Speech

Forthcoming

Text of Speech

A. Weaver: That took me a little bit by surprise, as it was so succinct, the previous speaker. She was so timely in her words that she was speaking in, I think, support — caveated support — to this bill, but I’m not quite sure. I was indeed listening.

It gives me pleasure to rise and stand in very strong — let me be very clear — unequivocal support of Bill 23, Land Owner Transparency Act, at second reading. This is something that is long overdue in British Columbia. I am absolutely delighted that the government is stepping up to create the important registry required to ensure that partnerships, trusts and corporations that own property in British Columbia have beneficial ownership registered in such a registry.

This legislation will require owners of such corporations and partnerships and trusts to file a transparency declaration when there is a transfer of legal title of property or change in beneficial ownership. Pre-existing beneficial owners will also be required to file a declaration. It doesn’t apply to individual owners. The ownership information of individuals is already publicly available through the land title office, as we know. You and I have to do that whenever we buy a property.

Therein lies the problem. This is an issue that I’ve been raising in this Legislature since not long after I got elected in 2013, within the context of what was going on, when I asked question after question after question to the then B.C. Liberal government about what they were going to do to close the so-called bare trust loophole, which is continuing to this day to be used to avoid paying property transfer tax and to avoid disclosure of who is buying or is not buying property in British Columbia.

This is a first step there. This is a requirement that beneficial ownership now be declared in the registry.

Let me give you an example about why that’s important. Let’s suppose I want to speculate in the Victoria or Vancouver real estate market. I assign somebody to go and buy a property — to buy that property and put it in a trust. I’m going to put it in a trust. There may be a corporation that owns that trust. The beneficial owners of that corporation may be some people who were there initially to buy that property and develop the corporation. Those individuals have no need to disclose the owners of the shares of the corporation that owns the trust. The trust is on title. The trust is all that’s on title. No matter how many times those shares in that corporation change, no matter how many times not only the beneficial but the majority ownership of that corporation changes, there is no change of the registered owner at the land title office. It is the trust, the bare trust.

We had examples of properties being flipped, typically high-end properties being flipped from owner to owner to owner, not through the sale and change of land title, but through the change of the transfer of the shares of the corporations that owned the trust that owned the land title. All the time avoiding property transfer tax, because you only pay transfer tax on transfer of title, not on transfer of beneficial ownership, which is an area that I hope government, at some point in the future, will move towards closing.

I understand the rationale that they’re bringing forward now. They want to gather the data first to see how the scale of the problem is, in order to deal with the problem rather than going straight to deal with the problem. I have some sympathy from that argument. It’s taken some time to get here, but we are here, and I’m absolutely delighted that we are here. The registry that will be here will be publicly searchable, but with some information only accessible by government and law enforcement for reasons that were articulated by the minister in her opening remarks.

The bill also allows individuals to apply to omit information if their health or, as the minister alluded to, safety is at risk from public disclosure. You might imagine, for example, the issue of someone fleeing domestic violence or someone in the witness protection program. It would be kind of odd to have the beneficial ownership of a property of someone in witness protection to be actually in their original name. So there are reasons that we have that.

Coming back to the background for this article, the confidence and supply agreement the B.C. NDP and the B.C. Greens signed back in 2017 states as follows: we will collectively focus on shared values to “make housing more affordable by increasing supply of affordable housing and take action to deal with the speculation and fraud that is driving up prices.” The B.C. Green caucus has been calling for this for I don’t know how long. We know we’ve been calling on government to eliminate the ability of buyers to hide their identities through shell companies, numbered companies and trusts.

We’ve been calling on them to improve transparency in the land title registry — not only this government, but the previous government before that — and to improve the land title and corporate registry by requiring the disclosure of beneficial ownership. Disclosure is critical to actually dealing with any issues that may be out there. We also have been, for quite some time, pleading with government to make existing and new data more regularly and freely accessible to researchers and the public. We hope that as the registry is created, and was promised in Budget 2018, that this will be the case.

This registry is, without a doubt, a significant step forward for transparency that ends hidden ownership. As we know, hidden ownership is intricately tied into speculation tax avoidance and money laundering in our housing market. One of the issues raised by the minister, and prior to that, by the member from Point Grey when in opposition, was the notion of shadow flipping, a notion where I put in a contract to purchase a property, but it’s me or my assignee who purchases that property. So I might, with the member for West Vancouver–Capilano…. I may buy his property. I may put an offer on his property with “the MLA for Oak Bay–Gordon Head, or assignee.” The member for West Vancouver–Capilano might say: “That’s a great offer. I want it.” But my “or assignee” clause is such that I could actually start assigning this contract to whoever I want, who can reassign it to whoever they want, who can reassign it to whoever they want, and they can jack up the price as we go along.

Now, steps have been taken. I think it was the previous government, or was it this government? I can’t remember. This place becomes a blur after a while. But certainly, we now have legislation that requires that any profits realized after the shadow flipping goes on actually go back to the original seller of the property.

So the member for West Vancouver–Capilano would not lose out if I were shadow flipping. Nevertheless, the transfer of the properties in between those stages would not be required even today to be disclosed.

This registry is critical. All stages of the process — transparency. The use of shell companies, as I mentioned, and trust and proxy ownership structures has obscured who has owned property in this province, undermining efforts at gathering and analyzing and allowing for an analysis of large-scale tax evasion and the data used to support this.

A report by Transparency International found that government can’t identify the owners — now get this — of almost half of Metro Vancouver’s most expensive homes. Government, whether it be Metro Vancouver or the city of Vancouver or the province or the federal government…. No government knows who more than half of the high-end properties in Vancouver…. We don’t know who owns them.

What a recipe for abuse. It’s just unbelievable this has been allowed to go on for so long. It’s absolutely unacceptable. This bill will close that. It will ensure that transparency is there.

We know that wise accountants, who know full well about the existence of the bare trust loophole, have been advising clients to avoid paying the property transfer tax by buying their property in a trust. If I, for example, were to buy a property in a trust…. Any house that I wanted to live in I buy in a trust instead of me. As soon as I buy it in a trust…. The very first time it happens, you will pay the property transfer tax. But every single time that that house is traded from thereon in, you will never pay any property transfer tax as you transfer the shares of the corporation that owns the trust from one to another.

This is one of the reasons why the higher-end homes, so many of them, have been put into trusts. When they flip, there is no property transfer tax, and the property transfer tax can be expensive.

There are also means and ways of hiding foreign ownership behind…. Some of that was indeed closed, again, by the previous government after much pestering.

We know that some of the money laundering has taken advantage of this, too, in Metro Vancouver. We still await Peter German’s report. We still await at least another chapter. We got one chapter. There’s got to be more coming. It’s clear…. We continue to push, and I will be doing so in the weeks ahead, for a public inquiry. We need a full-scale public inquiry into money laundering in this province. It is inexcusable that we have had as much as $5 billion laundered through Vancouver’s real estate market since 2012, distorting housing prices, particularly in the high-end markets.

We know…. I forget how many thousand homes are empty in the member’s riding, the member for West Vancouver–Capilano. I met with the council and mayor of West Vancouver–Capilano, who were at odds, not knowing what to do to actually go after the owners of these vacant homes that they simply are leaving there, not paying the social cost that has been historically developing by these homes being left vacant and distorting a market that would otherwise not be where it is, if it weren’t for someone laundering and nefarious activities going on.

We know, for example, just in 2016, over $1 billion of Vancouver’s property transactions have links to Chinese organized crime. Over $1 billion in one year alone had links to Chinese organized crime. That’s not counting any Russian organized crime, any Canadian organized crime, any American organized crime. Just one. It’s rampant in Vancouver, and we’ve sadly got a reputation internationally for being the home to the so-called Vancouver model of money laundering. Not a nice thing to be known for.

The president of the Law Society of B.C. stated: “This groundbreaking move by the B.C. government will increase the transparency of land ownership in B.C. and make it more difficult to use arrangements for tax evasion, fraud and money laundering. British Columbians will benefit from a fairer and more transparent real estate market.” Those are pretty powerful words of support from the president of the Law Society of British Columbia. I think that’s a strong independent endorsement of this legislation.

Transparency International has applauded the establishment of this registry — another pretty strong endorsement from an international organization. And a former director of FINTRAC has said that the province is now leading the country with this legislation. I can tell you, hon. Speaker, that if there is one thing I want British Columbia to be, it is a leader. We’re seeing, finally, leadership and transparency in the real estate sector in our province, and for that, the minister deserves a great deal of credit. I thank her, and I thank this government for bringing this forward.

You know, if ever there was a moment that we have second-guessed our decision in 2017 as to whether or not we support this side or that side in terms of a minority government, let me tell you that legislation like this makes us not question for a second that we did the right thing. The Liberals opposite had many, many years to deal with this, but they ignored it. I can’t remember how many times I stood up in this Legislature and posed questions to the then Finance Minister, asking him when he would take steps to deal with the transparency and beneficial ownership and close the bare trust loophole that was being used to avoid paying property transfer tax and also being used to launder money. The public record of this is available on my blog site. You can see it there, going back years. The answers I was getting were platitudes, because, to be honest, the members opposite simply had no idea. They had been in government too long. They’d lost ability to determine what the issues were. And there is absolutely no doubt in my mind that this issue is before us.

S. Bond: Relevance.

A. Weaver: Thank you to the member for Prince George–Valemount for calling for relevance. Thank you. And the reason why I called it to your colleague — because every time anybody in our caucus stands up, you have the audacity to stand up and call relevance, yet you’re not willing to accept others calling relevance to the other side. So it’s part of the hypocrisy that we see. I enjoy the conversation, and I will make this relevant, hon. Speaker, before you must tell me to make this relevant.

Coming back to the bare trust loophole, as I noted, I’ve been calling on government for years to deal with this, and frankly, this is a step in the right direction. Hopefully, government will move forward to closing this. I know that the market had discounted this, both the real estate market and the accounting market. They had both already discounted that government was going to close the bare trust loophole. They didn’t, but now they’re collecting data and that probably will lead it up to move for it.

Looking at this, we also need to expand this progressive approach to transparency, also to the corporate registry. Right now, the corporate registry is not searchable by director name, and as it’s hampering transparency and accountability, hopefully we’ll be able to see this transparency that we’re seeing here with respect to land-ownership move into the corporate registry as well. The Attorney General has called this issue a deliberate or grossly negligent decision that limits transparency, a benefit to firms and individuals who wish to evade accountability. I urge government as well to move beyond this and to change the corporate registry to fix this problem, in line with the spirit of the legislation before us today.

In conclusion, this legislation is an important step forward for opening up hidden ownership in real estate in British Columbia. And it’s timely. I’m very pleased the government has done it. And it’s just a shame that we’ve got to get to the position we’re in after so many years of neglect in this sector. We need to go further and crack down on tax avoidance, using the ownership structures that the data will be collected, and I’m looking forward to government stepping in to close that bare trust loophole, which many use to avoid paying property tax. I look forward to seeing information in the registry and will continue to push for action on this file and get to the root of the housing crisis.

With that, I do note the time. I would like to move adjournment of the debate and reserve my right to continue at the next sitting of the House after today.

A. Weaver moved adjournment of debate.