Does land transfer tax apply to a long-term lease of property in Ontario?

Ontario's Land Transfer Tax Act applies not only to outright purchases but also to transfers of interests in land, which can include long-term leases in certain circumstances. A lease that has an unexpired term exceeding 50 years (including renewal options) may be treated as a transfer of a beneficial interest in land and attract LTT.

Shorter-term commercial or residential leases — standard 1-to-5-year commercial leases or residential tenancy agreements — are not subject to LTT. The tax is aimed at transactions that effectively transfer economic ownership or a substantial long-term interest, not routine rental arrangements.

Leasehold condominiums, where buyers purchase a long-term lease rather than freehold title, can attract LTT at the time of the initial leasehold transfer. The rules for leasehold interests are technical and depend on the length of the term and the overall structure of the arrangement. If you are entering into a long-term lease or acquiring a leasehold interest, have a lawyer review the transaction before it is completed.