- When you pay a co-owner for their share, the amount paid and any mortgage assumed is consideration for land transfer tax.
- Assumed liabilities count as consideration, and an outstanding encumbrance is taxed regardless of the relationship between the parties, with limited spousal exceptions.
- Spousal transfers can be exempt if they comply with a written separation agreement or court order.
- Only authorized Teraview account holders and their registered users can submit documents electronically.
After a separation, or when siblings inherit or buy a home together, one person often wants to keep the house and pay the other out. A buyout can avoid a forced sale, but it involves several moving parts: agreeing on a value, finding the money, and transferring title properly.
This article walks through those parts in plain language. The details depend on your family situation, your mortgage and how title is held, so a lawyer should review your specific facts.
The basic steps of a buyout
- Agree on the value of the home, often with an appraisal.
- Work out the buyout amount after considering the mortgage balance and any other debts on the property.
- Arrange financing, often a refinance or new mortgage in the keeping owner's name.
- Sign a written agreement setting out price, closing date and who pays which costs.
- Prepare and register the transfer, release the departing owner from the mortgage, and pay the amount owed.
If you cannot agree, a court can order a sale unless one owner buys the other out. The Court of Appeal has upheld an order of that kind.
Valuation and the buyout number
The usual approach is to take the home's agreed value, subtract what is owing on the mortgage and other debts secured on it, and divide the remaining equity according to each person's share. The result is the amount the keeping owner pays. Owners sometimes disagree about adjustments, such as who paid down the mortgage or funded renovations, and those points should be settled in writing.
Two independent appraisals, or a single appraiser both sides accept, can reduce disputes. If the buyout is part of a separation, the figure is normally part of the wider settlement.
Mortgage and financing
If the existing mortgage is in both names, the departing owner usually wants to be released. Whether and how that can happen depends on your mortgage and your lender, so it is worth confirming with your lender and a lawyer. The lender will look at your income and credit on your own, so speak to a mortgage professional early. Whether your lender or title insurer has requirements for a family transfer is something to confirm with them and your lawyer.
Land transfer tax on a buyout
Land transfer tax is payable by the person who acquires the land or a beneficial interest in it, and it is payable when the transfer is registered. It is normally based on the amount paid, and any mortgage or debt the buyer assumes is added. Consideration includes the assumption of liabilities. An outstanding encumbrance is taxed as consideration regardless of the relationship between the parties, except for certain spousal transfers.
Provincial rates run from 0.5% on the first $55,000 up to 2.5% on the portion over $2,000,000 for land with one or two single family residences. A municipal land transfer tax may also apply in some cities, such as Toronto, so ask your lawyer.
| Situation | General treatment |
|---|---|
| Sibling buys others out for money | Amount paid and any mortgage assumed is consideration |
| Estate representative transfers to a beneficiary to satisfy their interest | Not subject to tax under the Act, reported as nil |
| Spouses: only consideration is assuming a registered encumbrance | Exemption may apply |
| Spouses: transfer follows a written separation agreement or court order | Exemption may apply; value is consideration plus amount owing on encumbrances |
| Gift where no consideration passes in any form | No tax payable |
| Transfer where the buyer takes on an outstanding encumbrance | The encumbrance is taxed as consideration, except for certain spousal transfers |
For a spousal separation-related transfer registered electronically, the exemption is claimed with Teraview statement 9085 plus 9086, 9087 or 9088, depending on the situation. Chattels such as appliances and furniture are excluded from the value of consideration and are reported separately.
The transfer and what to do next
Only authorized Teraview account holders and their registered users can submit documents in Ontario's electronic land registration system. Who handles the mortgage discharge or new mortgage and the tax statements in your case depends on your situation, so it is worth confirming with a lawyer.
If the other owner will not sign, a court may vest an interest in a person under s. 100 of the Courts of Justice Act, and a vesting order should use the word 'vest' and state the full name and date of birth of the party in whom the land vests. A court order directing the Land Registrar to alter the register is a separate document type.
- Get the title record, mortgage statement and property tax bill.
- Agree on how the home will be valued and by whom.
- Speak to your lender about approval before signing anything.
- Ask a lawyer whether any spousal or estate exemption applies.
- Put the buyout terms in a written agreement and have each person get legal advice.
- Have your lawyer register the transfer and confirm the departing owner is off the mortgage.
Frequently asked questions
Do I pay land transfer tax when I buy out my sibling?
Generally yes, if you pay money. The amount paid and any mortgage you assume is consideration. The tax is payable by the person acquiring the land when the transfer is registered.
Is a buyout between spouses taxable?
Transfers between spouses or former spouses are taxable unless an exemption applies, such as compliance with a written separation agreement or a court order. A lawyer can confirm which, if any, fits your documents.
What if my co-owner won't sign the transfer?
A court may vest an interest in a person under s. 100 of the Courts of Justice Act. Which order applies depends on the facts, so legal advice is important.
Can I do the registration myself?
Only authorized Teraview account holders and their registered users can submit documents electronically. If you are not one of them, you would need someone who is, and a lawyer can confirm your options.
Sources
- Ontario.ca – Land Transfer Tax — ontario.ca
- Ontario.ca – Calculating Land Transfer Tax — ontario.ca
- Ontario.ca – Transactions with Nominal Consideration — ontario.ca
- Ontario.ca – Transfers of Land Between Spouses — ontario.ca
- Ontario.ca – Determining Value of Consideration for Transfers of New Homes — ontario.ca
- Ontario.ca – Register land documents electronically — ontario.ca
- Inniss v. Blackett, 2022 ONCA 166 — ontariocourts.ca
- Ontario Land Registration Bulletin 2024-02 – Court Orders — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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