Do You Need a Lawyer to Transfer Title to a Family Member in Ontario?

Putting a house or other land into a relative's name can look simple: sign a form and change the name. In practice, a transfer touches land transfer tax, income tax, any mortgage on the property and sometimes family law rules.

This article walks through how a family transfer generally works in Ontario, where the tax treatment differs, and what to check first. Your facts may change the answer, so treat it as a map and not as advice for your situation.

Gift, sale or something in between

Ontario land transfer tax is normally calculated on the value of the consideration, meaning the amount paid for the land, including liabilities the new owner assumes, such as a mortgage. The Act defines the value of the consideration broadly: the gross sale price plus any benefit of whatever kind conferred as part of the arrangement.

That is why the wording of the transfer matters less than what actually passes between you. Ontario's Land Transfer Tax Act has no general exemption for gifts of land, but if no consideration of any kind passes, no tax is payable because the tax is calculated on a nil value.

A transfer for a token sum, or one that recites love and affection, is therefore not automatically tax-free or taxable. What counts is whether any consideration, including a mortgage taken over or another benefit, is really part of the deal. If you are unsure, ask a lawyer or the Ministry of Finance before you register.

When a family transfer is still taxed

The most common surprise is a mortgage. When land is gifted subject to a mortgage the recipient takes on, land transfer tax is payable on the amount owing at registration, whatever the relationship between the parties. Provincial rates are tiered. They run from 0.5% on the first $55,000 up to 2.0% over $400,000, and 2.5% over $2,000,000 where the land contains one or two single family residences.

Rates, exemptions and refunds can change, so confirm the current ones before you rely on them. Toronto also has its own municipal land transfer tax on top of the provincial tax, so a property there may cost more to transfer.

Foreign nationals, foreign corporations and taxable trustees buying residential property also pay the Non-Resident Speculation Tax at 25%.

Understating the price or consideration is risky. Making false or deceptive statements is an offence under section 6 of the Land Transfer Tax Act, with fines and possible imprisonment of up to two years.

Transfers that are exempt or not taxable

For spouses, the Family Law Act definition includes married spouses and unmarried couples who cohabited continuously for at least three years, or who are in a relationship of some permanence and are parents of a child.

A deed that only corrects an earlier legal description is not taxable if no consideration passes and tax was properly paid or exempted on the earlier document. The farm and business exemptions have conditions, so confirm eligibility before relying on them.

Income tax and family law issues

Land transfer tax is only part of the picture. 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, which 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.

Capital property transferred to a spouse or common-law partner, where both are resident in Canada, is generally deemed transferred at cost, so no gain arises immediately, although the transferor can elect out on their return. 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. An accountant can tell you how this applies.

If you are married, the matrimonial home has special protection. No spouse may sell or mortgage an interest in it 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. Both spouses have an equal right to possession of a matrimonial home, whoever is on title.

Steps to take before you transfer

Documents are registered electronically through Teraview by authorized account holders, so the transfer has to be registered through one of them. Anyone can search and download current and historical property records through OnLand for a fee. ServiceOntario reviews and certifies registrations but cannot give legal advice or explain a property's records.

• Get a current parcel register and confirm who is on title and what is registered against it.
• Find out whether there is a mortgage, and ask the lender about its terms before the transfer.
• Decide whether any money, mortgage or other benefit will pass, because that sets the land transfer tax.
• Ask an accountant about capital gains and the principal residence exemption.
• If you are married, check whether the property is a matrimonial home and whether your spouse must consent.
• Keep written records of what was agreed and why.

Given the tax, mortgage and family law issues, it is wise to speak with a lawyer before signing, especially if a mortgage, a spouse or a trust is involved. For some situations, such as adding a family member to title or using a trustee, the tax depends on what consideration passes and whether beneficial ownership changes, and the Ministry of Finance can be contacted for guidance.

Frequently asked questions