When politicians around the globe went looking for the property of oligarchs to potentially seize as worldwide condemnation kicked in over Russia’s invasion of Ukraine last month, British Columbia joined in.
But Finance Minister Selina Robinson quickly announced the province was unable to determine whether there were any Russian holdings in the province because a much-touted land registry aimed at finding hidden owners – also known as “beneficial owners” – wasn’t anywhere near complete enough to be of use.
B.C.’s Land Owner Transparency Registry, a first of its kind in Canada and touted by the government as a world-leading effort when it was created in May, 2019, only had information on 37,000 owners, with a total of 66,000 properties. That’s a tiny fraction of the province’s 2.2 million titles worth $2-trillion.
Full compliance with the registry, which was supposed to be in effect by November, 2021, has now been delayed a year, a result of heavy lobbying by B.C. lawyers. They have complained that the province’s definitions of beneficial ownership are unclear, and that there are problems with how much personal information is revealed.
The B.C. branch of the Canadian Bar Association recently sent a lengthy letter to registry administrator Reuben Danakody outlining adjustments lawyers would like to see. Some are technical, such as allowing duplicate forms and more characters in an entry box, and some appear to go to the heart of the registry’s purpose.
“One of our primary concerns is ensuring the confidentiality of our respective clients’ information. The registry is accessible to all … users within a firm and there is currently no ability to restrict certain users’ access to draft filing forms or previously filed forms,” says the letter dated March 17.
“Given the sensitivity of information included in the filings, many property owners and clients have expressed serious concern with the preservation of their private, personal information once uploaded to the registry.”
Damon Chisholm, a partner at the law firm McMillan and a specialist in the registry’s evolving rules, said he has witnessed these concerns first-hand.
“With this level of drill-down, it’s difficult to walk a client through. And with the client, there’s a concern about giving up a lot of private information and they don’t know where it’s going,” he said, adding that it’s especially difficult when the client is a foreign entity that doesn’t have registry requirements in their home countries.
The registry’s rules are so unclear that law firms are being left to interpret what the intent is, Mr. Chisholm said, with the result that different firms are coming up with different answers and advice for clients.
For example, he said ownership is defined differently in the forms required for the registry and those required for the 20-per-cent provincial property tax that foreign buyers pay. The two provincial systems also have a different bar for who has to be declared an owner.
The delay caused by those kinds of concerns has led to groups and people who monitor foreign ownership and global corruption to express disappointment at how the registry has not lived up to the potential the government promised.
“There was a lot of ambition a few years ago. That’s come to a stall,” said James Cohen, the Ottawa-based executive director of Transparency International Canada. “It was a big step forward and there was a lot to applaud B.C. for, so hopefully we’ll see that ambition pick up.”
The sluggish rollout is no surprise to those familiar with land dealings and ownership complications in the province.
“It was a very difficult law to write. We’ve brought in this very complicated system,” said Ron Usher, general counsel for the Society of Notaries Public of B.C.
That system is, in part, the result of how multilayered property ownership can be.
Most pieces of land in the province are owned straightforwardly by individuals whose names are listed in public records. But many thousands are held by trusts, real estate investment companies, partnerships and, occasionally, obscure companies whose real directors are hidden from view – all ultimately part of a group commonly referred to as “beneficial owners.”
Those are people who benefit from the property and its value even though their names might not appear on the land registry at the B.C. Assessment Authority. Even parents who loan children money for property and are then listed on title, with as little as a 1-per-cent share, are considered beneficial owners who have to comply with the requirements of the new registry.
Accounting firm PricewaterhouseCoopers noted in an article last year that B.C.’s law is part of an international trend to allow for more scrutiny owing to concerns about “use or misuse of private corporations and trusts for tax evasion and other illicit activities.”
Elsewhere in Canada, Manitoba is setting up a registry, as is the federal government. Several European countries have registries in place or are working on them.
But each country is moving at a different pace and with slightly different policies on how accessible the information will be and who is included.
In B.C., sorting that out has become the main reason for the delay, a Finance Ministry representative said.
“Because the legislation is new, there were some areas of concern and confusion regarding how to register and who was required to do so,” ministry spokeswoman Lisa Leslie said.
Complying with the requirements may require parties to look through a chain of ownership, she said.
“For example, a corporation may have a significant shareholder that is itself another corporation. This shareholder corporation may in turn have shares owned by the trustee of a trust or by another corporation. The reporting body must look through the chain until they identify the individuals with ultimate control over the reporting body.”
One example of that kind of complexity was the high-profile purchase five years ago of Grouse Mountain by a newly created company named GM Resorts LP, whose incorporation documents showed a dense web of ownership.
The company was represented by a man named Kenny Zou in news coverage during the sale, who told the CBC that the property would be operated by a “completely Canadian company through and through.”
But figuring out who was actually involved in the purchase was difficult.
The public is legally entitled to look at the incorporation documents of private companies by requesting access from the law office that handled the company’s setup, something few regular citizens or even journalists know. As well, there is public access, for a fee, to founding articles and annual reports of all companies registered in B.C. Still, those documents don’t provide a clear picture of who qualifies as a beneficial owner.
GM Resorts LP was described in the company’s release as an entity established by CM (Canada) Asset Management Co. Ltd., a Canadian company with more than 60 per cent Canadian investors. China Minsheng Investment Group was described as a silent international investor.
But the incorporation documents at Fasken Martineau had three other companies named in the partnership, along with shares owned by various other entities, including a holding company based in Hong Kong, a numbered company in B.C. and another B.C. holding company, all with their own directors, most of whose identities weren’t included in the GM Resorts documents.
There were indications that some of those entities held shares but nothing to clearly show who qualified as a beneficial owner. (The resort was bought back in 2020 by B.C.’s Gaglardi family.)
A final complication in the land registry’s troubles, lawyers say, is that the province simply hasn’t done a good job of telling people they have to comply.
“A year ago, the B.C. government committed to circulating notices to property owners alerting them to the November 30, 2021, filing deadline. However, by November, notices had not been sent. The government’s social media campaign was laudable but didn’t have the reach necessary to raise sufficient awareness,” said Clare Jennings, the local bar association president, in an e-mail.
“The registry is the first of its kind in Canada. But even today, many property owners in British Columbia are unaware of their obligations under LOTA and the approaching filing deadline,” she wrote, adding the rules were communicated to lawyers but not to property owners directly.
Even once everyone is notified, B.C. is going to have to put some muscle into its enforcement if the registry is going to have any impact, both Mr. Cohen and Mr. Usher said.
Tracking down all the levels of ownership, along with doing whatever it takes to find out if there are silent “handshake” deals between a legal owner and a secret beneficial owner, is hard work, they say.
“To truly enforce it would be breathtakingly expensive,” Mr. Usher said.
As a result, the people registered so far are those whose situations are relatively easy to document.
“The only people who have paid the price are regular people. Who it’s catching is not Russian oligarchs but mom and dad who co-signed for their son’s condo.”
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