OPTrust – Ontario Superior Court finds that Ontario LTT applied to contingent deferred purchase price which, in fact, never became payable
The Ontario Land Transfer Tax Act definition of “value of the consideration” includes not only the “the amount expressed in money of any consideration given or to be given for the conveyance” but also “the value expressed in money of any liability assumed or undertaken by the transferee” and of “any benefit of whatsoever kind conferred by the transferee on any person as part of the arrangement relating to the conveyance.”
Purchasers of prospective shopping mall lands paid LTT based not only on the cash amount paid at closing but also on future amounts that would become payable by them upon the vendors achieving specified “milestones” relating to matters such as zoning and prospective leases. The future amounts were expressed to be part of the purchase price and their payment was secured by vendor take-back mortgages with stated principal amounts equal to the maximum future amounts. None of the milestones were achieved, no future payments were made and the purchasers sought refunds of the LTT paid at closing on the future amounts.
In rejecting this claim, Gans J quoted with approval a statement of the Federal Court of Appeal in Daishowa-Marubeni that:
… if the parties to an agreement attribute a value to a future liability, then the Minister is entitled to add this amount to the vendor's proceeds of disposition - whether or not the liability assumed by the purchaser is contingent or absolute.
He also referenced the 2004 Guide of the Ministry of Finance, stating:
…[T]he Appellant could have created a different contractual arrangement and availed itself of [such guidelines] which, arguably, might have resulted in a deferral of the payment of land transfer tax….
Neal Armstrong. Summary of OP Trust v. Ontario, 2016 ONSC 3648 under LTTA, s. 1 - value of the consideration.