If you practice commercial
real estate law, chances are that
you’ve had to consider some concepts concerning the Land Transfer Tax Act, R.S.O. 1990, c.L. 6, as
amended. What is the “value of
the consideration”? Is this transaction exempt? Is this even a taxable “conveyance” of “land”?
Test yourself and see if you know
whether, and when, land transfer
tax is payable in the following per-
haps less common situations:
SYLVIA
ADRIANO
&BRADLEY
MCLELLAN
tax is calculated on the fair mar-
ket value of the land to which the
lease extends, as determined at
the time of registration.
Subsection 1( 6) of the Act provides that tax is payable on “the
registration of the transfer of the
interest of a lessee under a lease
of land…or a notice of any kind in
writing signifying the existence of
a transfer of the interest of a lessee under a lease of land” if, at the
time of registration, the unexpired
term of the lease can exceed 50
years, including any renewal or
extension rights of the term.
tenant. A right of first refusal is
not equivalent to an option to
purchase. For example, if no third
party offer was ever submitted to
the landlord for the leased lands,
the tenant would never have an
opportunity to exercise his or her
right in a typical right of first
refusal situation.
1. A disposition of a beneficial
interest between affiliated
corporations
Land transfer tax is payable at
the time of disposition in this circumstance unless the corporation
acquiring the beneficial interest
applies for, and the Ministry of
Finance grants, a deferral of the tax
payable. Under subs. 3( 9) of the
Act, the minister can defer the payment if the corporation acquiring
the beneficial interest meets prescribed criteria, including undertaking that it will continue to own
the beneficial interest and will
remain an affiliate of the corporation making the disposition for a
three year period, submitting security for the tax (i.e. a letter of credit),
and not registering any conveyance,
instrument or electronic document
evidencing the disposition.
Under subs. 3( 11) of the Act, at
the end of the three-year time
period, the minister must return
the security provided and the
amount of the tax deferred is no
longer owing under the Act if the
minister is of the opinion that the
undertaking given has been satisfied and no conveyance or instrument evidencing the disposition
of the beneficial interest in land
was registered.
4. The registration of a Notice of
Sublease for a term exceeding
50 years
According to the Ministry of
Finance’s Land and Resources
Taxes Section, land transfer tax is
payable upon the registration of a
Notice of Sublease with a term
that can exceed 50 years, including renewal and extension rights.
This is the case even where a
notice of the head lease was registered with a potential term that
exceeds 50 years and land transfer
tax had already been paid upon
registration of notice of the head
lease. According to the ministry,
tax is payable in this situation
since a “sublease” is no different
from a “lease” pursuant to the Act,
and it would consider the granting of a long-term sublease to be a
grant of a new interest in land,
even if the land has already been
leased pursuant to a head lease. n
Sylvia Adriano and Bradley
McLellan are both partners in
the Real Estate Group at Weir-
Foulds LLP.
2. The registration of an
assignment of lease
When an assignment of lease
is registered for a lease with an
existing, unexpired term (as of
the date of the assignment) that
can exceed 50 years, land transfer
tax is payable upon registration
of the Notice of Assignment of
Lessee’s Interest in a Lease. The
3. The granting of a lease
containing a right of first refusal
or option to purchase
Tax is payable upon the registration of a lease containing an
option to purchase, regardless of
the term or potential term of the
lease. This is because the definition of “convey” in the Act
includes “the giving of an option
upon or with respect to any land
in Ontario.” However, the tax is
payable upon the consideration
that passes to acquire the option
and not on the fair market value
of the land, as would be the case
for a lease over 50 years.
No tax is payable upon the
registration of a lease with a right
of first refusal in favour of the
Butterworths®
Real Estate Practice in Ontario,
7th Edition
Donald J. Donahue, Q.C.,
Peter D. Quinn, B. A., LL.B. &
Danny C. Grandilli, B. A., J. D.
$135 + tax
480 Pages
Hardcover | March 2011
ISBN: 9780433467700
A Comprehensive Overview of Procedural and
Substantive Issues
Lawddities
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Property Law
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“Donahue and Quinn” has been within arm’s reach of real estate
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This new edition continues to be the real estate authority
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of interest to the profession such as real estate fraud. It also
includes discussion of recent developments affecting:
liability
Growing your own organic
vegetables at home could end up
costing you a lot more than
going to the grocery store, at
least in Oak Park, Mich.
Julie Bass, plant lover and
mother of six, was charged with
a misdemeanour for violating
the City of Oak Park’s planning
code because she dug out a portion of her front yard to plant
zucchinis, tomatoes and other
garden vegetables.
• Tax issues
• Easements
• Real estate agents
• Agreement of Purchase and Sale
• Sales of condominium units and new homes
• Proper execution of documents for registration
The city claimed that vegetables are not “suitable” for the
front yard. Bass faced the possibility of 93 days in jail, but
luckily for her the city dismissed the case, according to
montrealgazette.com.
Bass created a blog and Face-
book page titled “Oak Park
Hates Veggies” which garnered
attention and support from
around the world. She even had
to go so far as to ask her sup-
porters to stop harassing city
officials on her behalf. —Anum
Lateef
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