News & Views

Don’t Let Your “Plans” Fall Through: Registered Plan of Subdivision under the Planning
July 11, 2019

Don’t Let Your “Plans” Fall Through: Registered Plan of Subdivision under the Planning

Written by Leslie A. Fluxgold and Lauren Gruenberger

When you divide a piece of land into two or more parcels and offer one or more for sale, you are subdividing property, and the provisions of the Planning Act come into play.

Section 50 of the Planning Act

Section 50 of the Planning Act (“Act”)* is considered in all transactions involving real property interests in Ontario. Its purpose is to control the manner in which land is divided – it is the main enforcement mechanism of subdivision control in Ontario. What is subdivision control? It is the statutory control by government of the division of land into smaller parcels.

Why is section 50 of the Planning Act Important?

The consequences of not complying with section 50 of the Act are severe. No interest in land is created or is able to pass when a violation of the Act occurs. Consequently, a violation by a predecessor in title can disrupt the entire chain of title. Sales and mortgages are void if the Act is not complied with.

Section 50 of the Act (which contains the basic prohibition) provides that a person cannot enter into certain transactions such as a sale, transfer or mortgage unless the person does not retain an interest in the abutting lands.

While there are a number of important exceptions to the basic prohibition, one fundamental exception is in s.50(3)(a) of the Act being that no violation occurs if the lands in question constitute the whole of a lot on a registered plan of subdivision; thus an owner can sell or mortgage its property in these circumstances without concern for the ownership of the abutting lands.

What is a Registered Plan of Subdivision?

A registered plan of subdivision (“RPS”) is a plan that has been approved and registered under section 51 of the Act. A current RPS is:

  1. Surveyed by an Ontario land surveyor;
  2. In general conformity with the municipal official plan and with any county, regional or district plan as well as provincial policies;
  3. Approved by the proper authority; and
  4. Registered in the local land registry system.

A RPS creates new, separate parcels of land and can be legally used for the sale and mortgage of individual lots.

Determining if a Plan is a RPS is Not Always Straightforward

There is no singular definition of “registered plan of subdivision” in the Act. Accordingly, some who have attempted to avoid the inconvenience and expense of complying with certain other exceptions available in the Act have argued that whatever plan on which the land appears is a “registered plan of subdivision” and within the exception of s.50(3)(a). The courts have been faced with deciding which plans are prepared with planning or development concerns in mind, which simply confirm the current state of the landholdings and which are designed to illustrate legal descriptions.* Township Plans and Boundary Act Plans are examples of plans that are not RPSs under the Act while in some cases Composite Plans have been considered a RPS and others have not. Unless the plan is a registered plan of subdivision, the exception under s.50(3)(a) will not be applicable. Be careful not to confuse RPS’s with “reference plans” which are used solely to describe parcels of land.

When dealing with older or rural plans, it is best to contact our real estate department prior to entering into any agreements of purchase and sale. There is that saying that people don’t plan to fail, they fail to plan. Under the Act, a plan that is not a RSP will negate your transaction.

For more information on the matter, please contact Leslie A. Fluxgold directly at [email protected] or at 905 763 3770 x 210. 

*The material provided in this article is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.

__________________________

*R.S.O 1990, c. P.13.

*Sidney H. Troister, The Law of Subdivision Control in Ontario 3rd ed (Aurora: Canada Law Book, 2010) at 80.


About the Authors:

Leslie A. Fluxgold is a respected advisor to the business community, with a focus on commercial real estate and commercial lending. Les has the expertise and hands-on experience to guide clients through complicated real estate matters and commercial loan transactions.

Lauren Gruenberger is our summer student who has completed her second year of law school at Queen's University.

A “Resident” may not be a “Resident”
June 19, 2019

A “Resident” may not be a “Resident”

Written by David Meirovici

Confused yet? Depending on whether you are buying or selling real estate in Ontario, the use of the term “resident” or “non-resident” as it applies to your obligation to pay further tax (in the instance of the Non-Resident Speculation Tax), or your obligation to withhold tax from your sale proceeds (in the instance of Non-Resident Tax to be withheld) may refer to two entirely separate and distinct definitions.

“Non-Resident” for the Purposes of the Non-Resident Speculation Tax

For those purchasing property in Ontario, consideration must be made as to whether one qualifies as a “Non-Resident” for the purpose of Ontario’s Non-Resident Speculation Tax (the “NRST”). Implemented in April of 2017, and despite its name referring to “non-residents”, the NRST imposes a Fifteen Percent (15%) government tax – calculated on the final purchase price of the Property - only to classes of individuals and corporations designated as Foreign Entities. As an individual, the definition of a Foreign Entity or Foreign National is derived from the Immigration and Refugee Protection Act (Canada), and is defined simply as an individual who is not a Canadian Citizen or Permanent Resident.

As a result, and provided that one falls into one of those two categories, they would not meet the government’s definition and would not have to pay, on closing, the NRST. This exemption from the NRST extends as well to spouses of Canadian Citizens and Permanent Residents (despite they themselves not being “non-residents”) provided that the property will be occupied by the spouse as a principal residence. 

“Non-Resident” for the Purposes of the Withholding Tax

For those selling their Ontario (or Canadian) property, the applicable definition of “non-resident” is much stricter. 

Under the Income Tax Act (Canada), any “non-resident” that sells taxable Canadian property must first apply for, and receive, a clearance certificate from the CRA. Unlike the NRST, sellers cannot simply rely on being a Canadian Citizen or Permanent Resident to make a declaration against being a non-resident of Canada. Instead, an individual is considered a non-resident for tax purposes if they:

1. Normally, customarily or routinely live in another country and are not considered a resident of Canada

2. Do not have significant residential ties in Canada, and either:

    a) live outside of Canada throughout the year or;

    b) stay in Canada for less than 183 days in the next year

This definition of “non-resident” is thereby more factual based and takes into consideration whether one currently, or regularly resides in the country. For individuals who do not reside in, or have significant ties with the country of Canada, a Clearance Certificate would still be required despite citizenship. Failure to obtain such certificate on or before closing of a real estate transaction could result in up to Twenty Five Percent (25%) of sale proceeds being held by the seller or buyer’s lawyer, until such time as the Certificate is received.

Understanding these definitions, and more importantly which apply to you, is essential to ensuring that you are meeting your tax obligations.

If you have any questions regarding the above, or any general questions of a real estate nature, please feel free to contact David Meirovici at [email protected] or at 905-763-3770 x 222.

*The material provided in this article is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.


About the Author:

David Meirovici practices primarily in the areas of commercial and residential real estate, acting on behalf of individuals, corporations and financial institutions. In addition, David is a member of our corporate law group, providing support on commercial transactions as well as advising on will and estate matters.