How to Transfer Property Title to a Family Member in Ontario

Many owners want to move a house into the name of a child, sibling or parent. The reasons vary: helping a child buy, planning an estate, or simplifying who looks after the property. The paperwork is not complicated, but the tax, mortgage and family-law consequences can be.

This article explains the usual steps and the issues to check first. Rules can change, and your facts matter, so confirm the details with a lawyer before you sign anything.

Start with what is really changing hands

Before choosing a document, decide what you want. You might give the property outright, sell it to a relative for a price, or add the relative to title as a co-owner. Each choice has different tax and control consequences.

Ontario land transfer tax is normally calculated on the value of the consideration, which means the amount paid for the land, including a mortgage the new owner assumes. The Act defines value of the consideration broadly, as the gross sale price plus any benefit of whatever kind conferred as part of the arrangement. A transfer described as a gift can still be taxed if something of value passes back.

Land transfer tax on family transfers

The Land Transfer Tax Act has no general exemption for gifts of land. If no consideration of any kind passes, though, no tax is payable because the tax is calculated on a nil value.

The big exception is a mortgage. When land is gifted subject to a mortgage that the recipient takes on, land transfer tax is payable on the amount owing at registration, whatever the relationship between the parties.

Ontario also offers exemptions for certain transfers of farmed land between family members, and from an individual to their family business corporation. Toronto charges its own municipal land transfer tax on top of the provincial tax, so a Toronto property needs separate checking. Provincial rules and exemptions can change, so confirm the current position before closing.

Adding a family member to title, other than a spouse, depends on what consideration or assumed mortgage passes and whether beneficial ownership changes. Ask a lawyer to review it before you register.

Income tax: the part people overlook

A person who gifts property, or transfers it to a non-arm's-length person for less than fair market value, is deemed to have received proceeds equal to fair market value. That can trigger a capital gain when a home is gifted to a child. The person who receives property by gift is deemed to acquire it at fair market value.

If the home was your principal residence, you must report the sale and designate the property on Schedule 3 to claim the principal residence exemption. A second property, such as a cottage or rental, may not qualify, so speak to an accountant.

Transfers to a spouse or common-law partner, where both are resident in Canada, are generally deemed to happen at cost, so no gain arises immediately. The transferor can elect out on their return.

Mortgages, spouses and other legal traps

• Mortgage: check your mortgage terms and speak to your lender before transferring. Any mortgage the relative assumes affects land transfer tax.
• Your spouse: no spouse may sell or mortgage an interest in a matrimonial home unless the other spouse joins in or consents, has released their rights in a separation agreement, or a court order authorizes it. A transaction that breaks this rule may be set aside.
• The receiving relative's marriage: on a marriage breakdown, the full value of the family home must be shared even if one spouse owned it before marriage or received it as a gift or inheritance. A gifted home can become part of your child's separation.
• Non-residents: foreign nationals, foreign corporations and taxable trustees buying residential property also pay the Non-Resident Speculation Tax at 25%.
• Honest reporting: making false or deceptive statements, such as understating the price, is an offence.

Steps to take next

• Decide whether this is a gift, a sale or adding a co-owner.
• Get the current parcel register and your mortgage statement.
• Ask an accountant about capital gains and the principal residence exemption.
• Check whether a spouse must consent.
• Have a lawyer prepare and register the transfer and confirm the land transfer tax.
• Review your will and the new owner's circumstances afterward.

Frequently asked questions