education property tax deferrals introduced in Ontario and Alberta

Ontario to increase land transfer tax rates

Tuesday, November 29, 2016

Ontario is increasing land transfer tax (LTT) rates on all types of real property for the first time since 1989. This change would be effective January 2017.

Recently, the province’s Bill 70, The Building Ontario Up for Everyone Act (Budget Measures), 2016, received first reading on November 16, and highlights several changes to the Land Transfer Act (LTTA).

For commercial, industrial and multi-residential properties, the tax rate will increase from 1.5 per cent to 2 per cent, for the portion of the consideration above $400,000. Due to a grandfathering clause, this hike would not apply to agreements of purchase and sale on or before November 14, 2016. For one or two single-family residences, a tax rate would increase from 2 per cent to 2.5 per cent on the portion of the value of consideration above $2 million.

According to national law firm Borden Ladner Gervais (BLG), buyers seeking to rely on the grandfathering clause should remain cautious as several issues may affect a purchaser’s ability to rely on their pre-November 14, 2016 APS.

The firm notes that amending a pre-November 14 APS may “risk triggering ‘novation,’ whereby extensive amendments could be considered, in effect, to create a new APS, effective after November 14, which would attract the increased rates.”

BLG says these rate changes could be significant. A $10 million transaction will attract an extra $48,000 in LTT if it closes on January 1, 2017, compared to a closing on December 31, 2016.

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