Doing Deals in Vancouver, BC


James McBeth
Owen Bird Law Corporation
Three Bentall Centre
2900-595 Burrard Street
Vancouver, BC
Canada V7X 1J5
Direct Line: 604-691-7576
Fax: 604-632-4442
jmcbeath@owenbird.com

1. Provincial Land Title System – A Torrens land system is used and parties can rely on the state of the title with limited exceptions. Title generally originates from a Crown grant and certain rights, such as the right to minerals and timber, may be reserved. Searches of land are usually conducted electronically through an on-line system administered by the Land Title and Survey Authority and only licensed users are permitted to use the system. Electronic filing of most land documentation by licensed users is now available. Prescribed forms are required to be used for all real property transactions (including land transfers, leases, mortgages and assignments of rents). Transactions are closed (and paid out) on the basis of a pending registration number as full registration may take one to two weeks depending on the complexity of the documentation and backlog at the applicable land title office.
2. Surveys and Title Insurance – The surveyed plans for a particular property filed in the provincial land title registry system will show the dimensions of the parcel and the areas of registered rights of ways, easements and similar interests, but will not show the location of any improvements or the existence of any encroachments. Institutional lenders will typically require a survey certificate, but will also accept title insurance which may be less expensive depending on the type of property. Given the Torrens lands title system, title insurance is not typically used in real estate transactions, but it can be useful in place of a survey or for those types of lands not included in the provincial land title system.
3. Other Land Registry Systems – Some lands are not contained within the provincial land title system, such as lands owned by the provincial government which will be covered by the Crown Lands Registry, federal foreshore lands, and lands owned or held by the federal government for First Nations peoples which will be registered in the Indian Land Registry. With respect to First Nations lands, more substantial due diligence may be required with respect to these lands as the Indian Land Registry does not guarantee title.
4. First Nations Claims – In addition to lands registered directly or indirectly in the names of First Nations, land may be subject to aboriginal claims to title by various First Nations groups, on the basis that aboriginal title has never been extinguished. Claims have been advanced by First Nations groups over most of the land in the province and some of these claims are overlapping. As a result of court decisions, lands in the provincial land title system owned by third parties are generally considered not to subject to aboriginal claims, but in any transaction involving interests to be obtained from the Crown (such as new Crown grants, licenses, rights of ways, permits), consideration must be given to the potential obligation of the Crown to consult with and accommodate First Nations groups.
5. Trust Declarations – It is very common for an owner of commercial property to structure ownership utilizing a bare trustee or nominee, usually a single-purpose company. There is no requirement for such a trust declaration to be registered on title to be valid, and registration is typically not done to facilitate off-title transfers.
6. Foreign Entities Acquiring Property – A foreign entity may acquire and hold an interest in real property (including an interest as mortgagee) without the necessity of registering as an extraprovincial corporation in British Columbia. A certificate of status or certificate of good standing from the jurisdiction of incorporation will be required to be submitted with the documents for registration. If the corporation is intending to carry on business in British Columbia, it should be registered as an extraprovincial corporation.
7. Zoning and Land Use – Local governments have jurisdiction with respect to zoning and land use. Inquiries should be made to the local government to determine the applicable zoning and other land use matters that could affect the development and use of property. If a parcel is included within a development permit area, this may also restrict the development and use of the property. If a development permit has been issued, a notice will be found on the title to the property, but a copy of the permit must be obtained directly from the local government. The provincial government retains some jurisdiction, most notably with respect to heritage sites and agricultural land, and designations will be filed on the titles to properties in the provincial land title system. The applicable restrictions should be obtained and reviewed to ensure the property can be used as intended.
8. Lease of Portion of Land – A lease of a portion of land, as distinct from a portion of a building, is not registrable in the provincial land title system unless there is compliance with subdivision requirements, which requires that an approving officer approve a leasehold plan and that issues normally the subject of a subdivision application, such as access, be dealt with. Given the sometimes complex nature of the subdivision process, it is rarely used for leases. There are historical leases in British Columbia for portions of land and the courts have found them to be unenforceable. Recent amending legislation provides that such leases are enforceable as against the parties making them, but the leases are not registrable. There are ways to structure a transaction to effectively achieve the leasing of a portion of land and get registration, but local advice should be sought.
9. Environmental Legislation – The Environmental Management Act is the primary environmental legislation in British Columbia and is aimed at ensuring that hazardous sites are cleaned up. The range of persons potentially liable for clean-up is broad, but secured creditors taking possession (and not exercising control) are exempt, as are certain “innocent” purchasers. Certain land in British Columbia may also be subject to the Canadian Environmental Protection Act. Environmental searches should be undertaken as part of standard due diligence. It is common for a vendor to place the onus of such investigations on the purchaser and the vendor will often include a provision in the purchase and sale agreement providing that the vendor is not required to provide a “site profile” to the purchaser as required under the Environmental Management Act.
10. Taxes – the following taxes or taxation issues will be applicable to real property:
• Property Taxes – property taxes will be required to be paid on an annual basis (and in the City of Vancouver, on a bi-annual basis) and taxes in arrears may entitle the taxing authority to sell the property to recover unpaid taxes;
• Property Transfer Tax – there is a tax payable at the time of registration of certain land interests, including land transfers, at the rate of 1% of fair market value up to the first $200,000, and 2% on the remainder. Tax is also payable on the registration of a lease with a term (including all renewals) of greater than 30 years. There are exemptions available for certain types of residential property, depending on size, value and transferee. On a corporate level, tax need not be paid as a result of an amalgamation, but there are otherwise few exemptions applicable to corporate reorganizations. Since the tax is only payable when a transfer or other document is registered, off-title beneficial transfers can occur without paying this tax;
• Goods and Services Tax (GST) – federal goods and services taxes may be payable on the transfer of property at the current rate of 5% of the consideration paid. Used residential property is typically exempt and, where commercial property is being purchased, the tax need not be paid at the time of the transfer if the purchaser is a GST registrant; and
• Income Tax – under the Canadian income tax system, the sale of real property may give rise to a gain or loss on the part of the vendor and if a non-resident is selling property there may be a requirement for a portion of the sales price to be withheld pending receipt of a clearance certificate from the federal Canada Revenue Agency. If the clearance certificate is not obtained within a specified period of time, the amount withheld is required to be paid to the federal government. Withholding may also apply to non-resident income from property.
11. Lending – Lenders of funds for the acquisition of commercial real property or construction will typically register a mortgage and assignment of rents in the land title system, and register a security interest in personal property in the provincial Personal Property Registry. Registration in the Personal Property Registry is also completed electronically and in prescribed form. Realization can involve foreclosure (borrower has an “equity of redemption” and, if the real property securing the debt is worth more than the debt, the borrower will usually be given 6 months to pay the arrears), the federal Bankruptcy and Insolvency Act or Companies’ Creditors Arrangement Act, and local assistance should be obtained to ensure the appropriate alternative is chosen.
12. Real Estate Development Marketing – The Real Estate Development Marketing Act governs the sale of developments in British Columbia, including real property located in other jurisdictions. A disclosure statement may need to be filed before marketing can commence.
13. Escheat Act – Land owned by individuals who die without a will and without heirs devolves or escheats to the provincial Crown. Land owned by a corporation that ceases to exist also escheats to the Crown and this will not be noted on the title. British Columbia corporations that are not in good standing (have not filed an annual report for 2 years) may be struck from the companies register after 2 years. Corporations can be restored and then property will again become the property of the corporation in certain circumstances.
14. Competition Act/Investment Canada Act – The acquisition of a business or assets in Canada may require review and/or notification under these Acts. Purchase agreements should make adequate provision for subject conditions, if necessary, to ensure that the appropriate consents are obtained or reviews completed before the parties are obligated to complete the transaction.