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 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" 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.
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.
"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:
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.
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.
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 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 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.
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.
The tax rates on the value of the consideration are as follows:
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.
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.
"Value of the consideration" includes,
the fair market value, ascertained at the time of the tender or submission for registration, of the land to which the conveyance extends, or
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