Land Transfer Tax and Fractional Ownership Resorts

Bulletin LTT 1-2009
Published: December 2009
Content last reviewed: December 2009
ISBN: 978-1-4435-1331-9 (Print), 978-1-4435-1332-6 (PDF), 978-1-4435-1333-3 (HTML)

  • This bulletin sets out the application of the Land Transfer Tax Act to the purchase of an interest in a fractional ownership resort in Ontario.
  • The purchase of an interest in a fractional ownership resort is subject to land transfer tax.
  • This bulletin provides general information. It is not exhaustive and should not be considered as a substitute for the Land Transfer Tax Act and its regulations.

General

Introduction

This bulletin focuses on the form of land ownership often known as fractional property ownership. It is a form often used for recreational properties and the terms fractional ownership cottages and fractional ownership resorts are common.

Fractional Ownership Resorts

"Fractional ownership resorts" offer a type of shared ownership arrangement where the occupancy of the property is divided so that each of the owners may enjoy occupancy of the property for a set period of time in a given time cycle, usually each calendar year. Each owner purchases an interest in the resort, often referred to as an "interval," which entitles the purchaser to the right to occupy the property in accordance with the shared ownership arrangement. The arrangement may include an entity or association that co-ordinates occupancy and makes arrangements for repairs and upkeep to the property for the benefit of the owners.

  • For example, a purchase of an interest in a fractional ownership resort might give the purchaser the right to exclusively occupy a specific cottage for five weeks each year. The weeks of occupancy may fluctuate and may not be consecutive; however the purchaser remains entitled to occupy that cottage for five weeks each year.

Application of the Act

Unless specifically exempt under the Act, every acquisition of land in Ontario is subject to land transfer tax. This applies to both registered transfers of land and, since July 19, 1989, unregistered transfers of beneficial interests in land.

An unregistered transfer occurs when a person acquires a beneficial interest in land, but no document reflecting the acquisition is registered with the land registry office. Unregistered transfers include a sale, transfer or assignment of any part of a beneficial interest in land, and any change in entitlement to or increase in a beneficial interest in land.

In general terms, land includes not only land and buildings, but also any interest a person may have relating to land and buildings. This includes partial interests, surface rights and even a right to cross over a property that is owned by someone else.

Definition of "land" in the Act

"Land" includes lands, tenements and hereditaments and any estate, right or interest therein, a structure to be constructed on land as part of an arrangement relating to a conveyance of land, a leasehold interest or estate, the interest of an optionee, the interest of a purchaser under an agreement to sell land, or goodwill attributable to the location of land or to the existence thereon of any building or fixture, and fixtures.

"Land" is broadly defined in the Act to include a wide variety of forms of interests in land in recognition that new forms and structuring of ownership in land may arise or be created. While new forms and structuring of ownership may be created, it does not alter the fact that if what is acquired is a beneficial interest in land, land transfer tax will apply.

A beneficial interest in land may include some or all of the following attributes:

  • the right to profit on any increase in value of the land,
  • the responsibility for any decrease in value of the land,
  • the responsibility for upkeep of the land,
  • exclusive right to occupy a particular unit (this may be for defined periods of time),
  • entitlement to rents from the land, and
  • entitlement to bequeath the interest in the land.

Rulings and Interpretations of Act

If a question of interpretation of a term or provision of the Act or a question of the application of the Act to a specific fact situation arises, a written request for an interpretation may be submitted to the ministry at the address provided at the end of this bulletin. Full and fair disclosure of all of the facts and documents must be provided.

Fractional Ownership Interests

Application of Act to fractional ownership interests

As stated above, the definition of "land" in the Act is very broad and includes the land itself, structures on or to be constructed on the land, and any right or interest in land. The right to exclusively occupy land is a right or interest in that land, even if it is for a defined period of time.

The purchase of an interest in a fractional ownership resort gives the purchaser the right to occupy a property even though it is for only part of each year. This is a right or interest in the land. As a result, the purchase or acquisition of such an interest is an acquisition of a beneficial interest in land which is taxable under the Act, regardless of whether or not the interest is registered on title.

Reporting and Calculating the Tax on an Acquisition of a Fractional Ownership Interest

Tax based on the value of the consideration

The amount of the land transfer tax payable is calculated based on the "value of the consideration" given or to be given for the interest in the fractional ownership resort. The definition of "value of the consideration" is broad and is not limited to the purchase price stated in the agreement of purchase and sale. The value of the consideration also includes liabilities assumed and benefits conferred as part of the arrangement relating to the transfer. The reference to "the arrangement relating to the transfer" encompasses many forms of consideration that may be given in order to facilitate the transfer of land.

The complete definition of "value of the consideration" can be found at the end of this bulletin.

Where acquisition registered

Where the acquisition of an interest in land is registered on title at the Land Registry Office, the land transfer tax is payable at the time of the registration of the document, usually a Transfer/Deed of Land.

Where acquisition not registered, Return must be delivered

Where the acquisition of a beneficial interest in land is not registered on title at the Land Registry Office, the transaction must be reported to the ministry within 30 days of the acquisition by sending a completed Return on the Acquisition of a Beneficial Interest in Land form [PDF - 812 KB], along with the applicable land transfer tax payment, directly to the ministry at the address provided below. If payment of the tax is made by cheque, it should be made payable to the "Minister of Finance."

The legal title holder, as trustee, must deliver a Return on the Acquisition of a Beneficial Interest in Land [PDF - 812 KB] within 30 days of becoming aware of the change in beneficial ownership. This Return is required to provide information only, and no land transfer tax is required to be submitted.

Failure to deliver Return and pay tax

If a Return is not delivered as required or the tax is not remitted with the Return, the Minister may assess a penalty in an amount equal to 5% of the amount of tax payable. Interest will accrue from the date of default.

Tax Rates-Calculating the Tax

The tax rates on the value of the consideration are as follows:

  • Amounts up to and including $55,000: 0.5%
  • Amounts exceeding $55,000 up to and including $250,000: 1.0%
  • Amounts exceeding $250,000: 1.5%
  • Amounts exceeding $400,000 where the land contains one or two single family residences: 2.0%

As a simple example, if the total value of the consideration paid for a fractional ownership interest is $50,000, the land transfer tax payable on the acquisition of that interest is $250 ($50,000 × 0.5%).

More examples may be found in the ministry's Tax Bulletin LTT 2-2005 Calculating Land Transfer Tax.

Assessments and Reassessments

The general four-year time limit for assessment or reassessment does not apply where a person has made a misrepresentation or committed fraud, whether by commission or by omission, in supplying or disclosing information, or has failed to deliver any return required by the Act.

Definitions in the Land Transfer Tax Act

"Value of the consideration"

"Value of the consideration" includes,

  1. the gross sale price or the amount expressed in money of any consideration given or to be given for the conveyance by or on behalf of the transferee and the value expressed in money of any liability assumed or undertaken by or on behalf of the transferee as part of the arrangement relating to the conveyance and the value expressed in money of any benefit of whatsoever kind conferred directly or indirectly by the transferee on any person as part of the arrangement relating to the conveyance,
  2. in the case of a final order of foreclosure under any mortgage or charge affecting land, the lesser of,
    1. the value of the consideration determined under clause (a) plus the amount owed under the mortgage or charge at the time it is foreclosed, including principal, interest and all other costs and expenses other than municipal taxes, secured by the mortgage or charge and owing at the time plus the amount owing similarly calculated under any mortgage or charge that is subsequent in priority to the mortgage or charge in respect of which the final order of foreclosure is made and that is held by the mortgagee or chargee in whose favour the final order of foreclosure that is registered is made, or
    2. an amount established to the satisfaction of the Minister to be equal to the fair market value of the land that is subject to the mortgage or charge,
  3. 1. in the case of a conveyance of land to the mortgagee or chargee under a mortgage or charge affecting the land when the conveyance is given in satisfaction of the amount owed under the mortgage or charge, the lesser of,
    1. the value of the consideration determined under clause (a) plus the amount owed under the mortgage or charge at the time the conveyance is made, including principal, interest and all other costs or expenses other than municipal taxes, secured by the mortgage or charge and owing at the time plus the amount owing similarly calculated under any other mortgage or charge that is subsequent in priority to the mortgage or charge in respect of which the conveyance is made, if that mortgage or charge is held by the mortgagee or chargee to whom the conveyance is made, or
    2. an amount established to the satisfaction of the Minister to be equal to the fair market value of the land that is subject to the conveyance,
  4. in the case where a lease of land, a transfer of the interest of a lessee under a lease of land, or a notice of any kind in writing signifying the existence of an unregistered lease of land or of an unregistered transfer of the interest of a lessee under a lease of land is not exempt from tax by virtue of subsection (6), the fair market value, ascertained as at the time of the tender or submission for registration, of the land to which the lease extends or of a smaller portion of such land if only such smaller portion is conveyed,
  5. in the case of a caution or notice of any kind in writing signifying the existence of any unregistered instrument or writing by which land is conveyed and that is not a notice in writing described in clause (c), the value of the consideration determined under clause (a) or (b) for the land conveyed by the unregistered instrument or writing that is referred to in such caution or notice in writing that is not a notice in writing described in clause (c),
  6. in the case of a conveyance of land from a trustee (whether or not the trustee is so described in the conveyance) to a person to whom or for whose benefit any equitable or beneficial interest in the land has been transferred by a conveyance or conveyances that have not been registered, the value of the consideration determined under clauses (a) to (d), whichever is applicable, in respect of the unregistered conveyances made to such person,
  7. in the case of a conveyance of land from a trustee to another trustee (whether or not either trustee is so described in the conveyance) where,
    1. the person to whom or for whose benefit any equitable or beneficial interest in the land is held is not the same person to whom or for whose benefit any equitable or beneficial interest in the land was held by the trustee making the conveyance when that trustee first acquired legal interest in the land, and
    2. valuable consideration has been given by the transferee of an equitable or beneficial interest for the transfer of any equitable or beneficial interest in the land held by the trustee making the conveyance while that trustee was the holder of the legal interest in the land,

    the fair market value, ascertained at the time of the tender or submission for registration, of the land to which the conveyance extends, or

  8. in the case of a conveyance of land to a corporation where any part of the consideration consists of the allotment and issuance of the corporation's shares or in the case of a conveyance of land from a corporation to any of its shareholders the fair market value, ascertained at the time of the tender or submission for registration, of the land to which the conveyance extends.

Additional Information

If this bulletin does not completely address your particular situation, refer to the Act and related regulations, visit our website at ontario.ca/finance or contact:

Ministry of Finance
Land Transfer Tax Program
33 King Street West
Oshawa ON  L1H 8H9

  • 1 866 ONT-TAXS (1 866 668-8297)
  • Fax: 905 433-5770
  • 1 800 263-7776 for teletypewriter (TTY)
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