May 01, 1998

Property Transfer Tax - Avoidance of Tax Upon Subdivisions and Consolidations of Property #285


By Gerry Neely
B.A., LL.B.

The Ministry of Finance issued a Property Transfer Tax Act Information Bulletin 1-96, to set out in detail the steps that must be taken, if property transfer tax is to be avoided in the following circumstances.

The first is where owners of adjacent parcels of land plan to consolidate and subdivide them, with each owner receiving the same proportion of the area of the subdivided lands, as each owner held in the total lands before the subdivision took place. To avoid having to pay property transfer tax on the subdivision, the lands must be transferred to and from a trustee.

A variation of up to 1% is allowed in calculating the area transferred to each of the registered owners following subdivision. The exemption is strictly interpreted, and in one case, a difference of 5% in the apportioned values meant that the adjoining owners had to pay tax upon the value of the lands they owned and took back following the subdivision. The Ministry suggests that in view of the complexities of ownership and area calculations, the parties may wish to obtain an advance ruling.1

The second circumstance applies where one parcel of land owned by two or more owners is to be subdivided and following the subdivision, each owner receives a separate lot. If property transfer tax is to be avoided, each owner must receive a lot whose value is no greater than the fair market value of the interest held by each owner before the subdivision took place.

The Bulletin recognizes the reality that fair market value may be increased merely by the act of subdivision, or that the exemption may be lost if a significant amount of time passes between the registration of the plan of the subdivision and the transfers to the original owners, if development takes place before the lots are retransferred.

In either case, a long delay or nearby development may result in a original owner having a greater fair market value after subdivision than before. Once again, it is recommended that an advance ruling be obtained of the information concerning this, or to obtain an advance ruling by telephoning (250) 387-0604 in Victoria.

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Column #204 discussed an Ontario case where the regulations of a strata corporation limited pets to animals weighing less than 25 pounds. Two owners, who were aware of the regulation before they purchased their units, brought dogs weighing more than 25 pounds with them. The trial judge held that there was no evidence that large dogs were more of a threat to the safety, security or welfare of the owners than are smaller dogs, or that large dogs would unreasonably interfere with the use and enjoyment of the common elements and of other units any more so than small dogs. He held the regulation to be unreasonable and therefore unenforceable.

The Ontario Court of Appeal disagreed, stating that a court should not substitute its opinion about the propriety of a rule enacted by a strata corporation, unless the rule is clearly unreasonable or contrary to the legislative scheme. In the absence of that, courts should defer to the rules that are deemed appropriate by a strata corporation with the responsibility for balancing the private and communal interests of the unit owners.

The court said that different approaches might have been taken to regulate the keeping of pets. The 25-pound rule may not have been the best rule or the least arbitrary, but that, however, did not make it unreasonable. The threshold for overturning a strata corporation’s regulations, which are reasonably made in the interests of unit owners, is high.

Since the Ontario and British Columbia condominium legislation have comparable sections, giving strata corporations the right to make rules and regulations, in reflection to the enjoyment and safety of the common property, this Ontario Court of Appeal decision is one that could be followed in British Columbia.

The trial took place in 1992 and the appeal was heard in 1997, showing "dogged" determination on the part of the strata council in support of a principle.2

 1. Dumphy v. British Columbia, 31 B.C.L.R. (3d), 394.
 2. York Condominium Corp. 382 v. Dvorchik, 12 R.P.R. 3(d), p. 148.

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