September 10th - 2010

LEGAL BEAT: How to save your client’s money

I act for a builder buying several lots from a developer on which individual homes will be built.

Question to the Ontario Ministry:
I act for a builder buying several lots from a developer on which individual homes will be built. Can there be separate deeds/transfers for each Lot, or does Ontario Land Transfer Tax have to be paid on the total purchase price for all of them.

Ministry response:
"Our understanding of your query is whether, when a builder is purchasing several lots from a developer and will be constructing a house on each of the lots, the builder may register a separate deed/transfer for each lot. Without full disclosure and knowledge of all of the facts of your client's situation, we are only able to advise that, generally speaking, a builder may register a separate deed/transfer for each lot, provided:

  • Each of the lots has its own separate legal description and can be registered independently of the other lots;
  • Each deed/transfer conveys the entire interest in that lot;
  • The value of the consideration for each lot has been agreed upon as between the vendor and the purchaser and noted in the Agreement of Purchase and Sale; and
  • The total of the values of the consideration for the deeds/transfers covering all of the lots equals the total purchase price in the Agreement of Purchase and Sale."

MERV'S COMMENTS
Assume that the deal is 10 lots for $1 million. How much is the total Ontario LTT? Change that to 10 lots @ $100,000 each. Now how much is the total Ontario LTT?

In the second example you pay for nine additional deed registrations - and may have to pay the seller's lawyer additional fees for preparing nine more deeds. Assume that is $75 $100 x 9 = $1,575. What was the net saving for your client?

Just be certain that you follow the Ministry process noted above and confirm it with the buyer's lawyer before you finish drafting the APS.

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