TRANSFER OF PROPERTY TO FAMILY MEMBER
Situations arise when you may want to transfer your property to your relative for a variety of reasons. When you sell the property as a commercial sale for consideration you can follow the general guidelines on the sale of the property and have independent lawyers carry out the purchase and sale parts of the deal. However, when you sell the property to a relative for no consideration the following matters should be given consideration.
Principal Residence is exempt from the Capital Gains Tax when if you reside in the property. This exemption does not apply to Land Transfer Tax. When you convey the property the Ministry of Revenue of Ontario expects payment of half the value of the outstanding mortgage on the property even when no consideration or value is being paid. You should advise the lawyer on the current amount of the mortgage on the property so he can work out the amount of Land Transfer Tax to be paid on registration of the deed.
It is very important that the parties seek Independent Legal Advice when there is a purchase and a sale because each party has a different interest. Transfer without consideration amounts to a gift and once the property is transferred it cannot be taken back. If you want one lawyer to carry out the transaction you will have to provide a consent indicating that there is no conflict of interest between the transferor and the transferee.
If you transfer the property to the relative as a joint tenant there will be a right of survivorship and the survivor will continue to own the property without estate transfer formality and the accompanying probate fees.
If the property was held by the transferor as a trustee for the person whose name you wish to put on the title you will be exempt from the land transfer tax provided that there is no mortgage on the property. The effect of trust ownership is to confirm that the real ownership includes the interest of the beneficiary although his name was not on title. Where there is a trust there should be a trust agreement.
Under the current system in Ontario the deed is prepared on the Teraview computer system and the registration is also done on the same Teraview system and you need a lawyer or an agent who has access to the Teraview system. The government filing fees apply and currently the amount of fees payable is CAD$ 70.70.
Where the purchaser has any concerns on the title, usual title searches should be conducted. Teraview system provides for the title search. If you do not want the title search to be done you should confirm these instructions to the lawyer in writing. Other helpful searches would be the search of taxes and zoning and bylaw compliance.
The fees for the transfer of the property will depend on the time required to advise the parties. Understanding the issues pointed out above will help to minimize the cost and time required to carry out the transfer transaction.