[LAWPRO Alert] Clarification on implementation of non-resident speculation tax changes
The information in this Alert is dated. Please visit our Always up-to-date LTT and NRST Frequently Asked Questions webpage for the most current information.
[The following is a LAWPRO Alert that LAWPRO sent to all Ontario lawyers with REPCO coverage on April 24, 2017]
With the new Non-Resident Speculation Tax (NRST) statements being required as of April 21, an issue arose as previously signed documents would have lost their approval if someone added the new statements. Late Friday afternoon the Ministry of Finance posted an update that clarifies how previously signed documents can be handled. The Ministry has confirmed that there is a transition period for the NRST changes which is similar to the transition period for the LTT changes (see update on LTT transition period here).
The Ministry now recommends that all transfers registered on or after April 21, 2017, include one of the three statements regarding the NRST. These statements will become mandatory for deals closing after May 5, 2017. However, during a transition period from April 21 to May 5, 2017, omitting one of these statements will not affect the registration of the transaction or incur penalties. The Ministry’s update makes it clear that previously signed documents will remain signed and can be registered “as is” through the transition period. If you choose to add one of the required NRST statements the document will have to be resigned.
Note that the transition period ends at the end of the registration day on Friday, May 5. Documents registered after that point in time will be required to have one of the three NRST statements included in them. You can access the Ministry update here.
Risk management advice
The LTT and NRST changes impose new obligations on lawyers to collect specific and detailed information that they would previously not have collected from real estate matter clients, and to provide that information via Teraview in order to complete property transfers. LAWPRO suggests the following steps be taken to lessen the likelihood of a malpractice claim, and to put yourself in a better position to defend any malpractice claim brought against you:
- Document the information provided to you by your client: In their file notes and otherwise, lawyers are encouraged to carefully document the LTT and NRST information provided to them by clients. Upon completing the Prescribed Information for Purposes of Section 5.0.1 of the Land Transfer Tax Act Form (PIPS5 Form), you are presented a “success page” which contains the confirmation number. On that page there is a Print to PDF option which will give you a document confirming the information that was submitted on the PIPS5 Form. Consider having a client sign a copy of the submitted PIPS5 Form. You could also confirm the information the client provided by including it in a reporting letter to the client.
- Make sure you understand the type of information required to complete PIPS5 Form: The PIPS5 Form requires very specific information about the property and transferee(s). The PIPS5 Instructions sheet has more detailed instructions on completing the PIPS5 Form, including specific definitions of many of the terms used in the Form (these terms are new definitions in O. Reg. 120/17 under the Land Transfer Tax Act).
- Exercise an appropriate level of due diligence when collecting the information required by the LTT and NRST changes: In similar circumstances, lawyers are typically able to rely on what a client has told them, absent some knowledge or indication that the information being provided by the client is not in fact accurate, which would trigger an obligation to ask further questions. It remains to be seen what level of due diligence will be required with respect to the collection of LLT and NRST prescribed information.
Update your systems and processes to make sure you have all necessary information for deals closing after the transition period: The LTT and NRST transition periods give lawyers some flexibility to complete transfers without the required information during the transition periods. Lawyers are encouraged to make sure their systems and processes are updated so that all required information is collected for deals closing after the transition period ends.