Billionaire's association with luxury B.C. mansion highlights property tax loophole

A billionaire's association with a luxury Vancouver Island mansion highlights land title anomalies that mean property transfer and foreign buyers taxes don't apply to purchases of some pricey B.C. homes.

CBC revealed last month that Russian-born billionaire Yuri Milner was the man behind the trust that bought the $18 million Mille Fleurs mansion in 2013 — seven years before the oceanfront property would house Prince Harry and Meghan Markle as they reportedly drew up plans to step back from their royal duties.

But beyond the intrigue associated with ownership of the mansion, the investigation also underscores an unusual property registration situation that predates strata title legislation passed in the 1960s.

In a nutshell, Mille Fleurs is one of a number of properties located on a larger plot of land owned by a corporation known as Towner Bay Country Club Ltd., which was incorporated in 1929. The bigger plot isn't subdivided, and the owners of the homes located within it are all shareholders of the corporation.

When a house is sold, the individual shares change hands, but the sale of one lot doesn't affect the ownership of the larger plot, which means there's no transaction to register with the Land Title Office — and as a result, no payment of the property transfer or foreign buyers taxes.

There's no suggestion anyone has done anything wrong — it's just the way land title is grandfathered in on certain properties.

A similar situation involving 1960s-era apartment buildings in Vancouver's West End has seen real estate agents trumpet in capital letters the fact there's "NO FOREIGN BUYER TAX and the PROPERTY PURCHASE TAX" in listings for multi-million-dollar apartments facing English Bay.

"These things live in their own wacky world of taxation," says Ron Usher, general counsel for the Society of Notaries Public of B.C.

Usher has catalogued with interest what he calls "historical anomalies" like Towner Bay and the West End apartment complexes which — to add another layer of confusion — are known as co-operatives, but are not the same type of rental co-ops that exist in B.C. as affordable housing.

He says they are probably best described as "housing corporations" created prior to the 1966 Strata Title Act as a way for people to have shared ownership of the building in which their apartments were located.

Similar ownership structures exist in older three- and four-storey buildings scattered around the Lower Mainland — often surprising purchasers when they find out there's no strata title on their individual units.

"I think the important point to make — they solved an enormous housing problem for many people before we had stratas," Usher says.

"These are ways in which people bought affordable housing. They were problem-solving schemes as opposed to tax-avoidance schemes."

Both Usher and Real Estate Foundation of B.C. professor Tsur Somerville say owning shares in a corporation — as opposed to having your individual property listed with the Land Title Office — has its drawbacks.