Is land transfer tax payable when an option to purchase a property is granted or exercised?

Granting an option to purchase property does not in itself transfer land — it merely gives the option holder the right to purchase at a future date. The grant of an option, therefore, does not typically trigger Ontario land transfer tax at the time the option is given.

Land transfer tax becomes payable when the option is exercised and the transfer of title is actually completed and registered. At that point, the LTT is calculated on the full value of the consideration for the transfer, which would generally include the original purchase price agreed in the option agreement — and possibly the option premium paid earlier if it forms part of the overall consideration for the land.

Sophisticated commercial transactions sometimes use options or rights of first refusal to manage the timing of LTT obligations. The rules are technical, and structuring matters. If you are involved in a transaction using an option arrangement, have a real estate lawyer review the full structure to ensure the LTT treatment is correctly understood and disclosed.