We frequently assist clients with transfers of title, particularly between family members where no money or other consideration is being exchanged. A common example is where a family member is added to title solely to help qualify for a mortgage, and once the intended owner is able to qualify for the mortgage independently, the family member is removed from title.

Before discussing Land Transfer Tax (LTT), there are two important considerations to keep in mind. First, if there is a mortgage registered on title, the mortgage lender's consent will typically be required before a transfer of title can proceed. Second, a transfer of title may have income tax, capital gains tax, or other tax implications. Accordingly, it is important to consult with a tax accountant before completing the transfer.

LTT is a provincial tax payable when a person acquires land or a beneficial interest in land. Properties located within certain municipalities, such as the City of Toronto, are also subject to a Municipal LTT in addition to the Provincial LTT. Generally, LTT is calculated based on the value of the consideration paid for the property, which may include not only the purchase price but also the amount of any existing mortgage or debt assumed as part of the transfer. In this blog, we focus on how LTT can become payable on transfers of title between family members or others, even where no money or other consideration is exchanged.

The person or entity transferring their interest in the property is referred to as the Transferor, while the person or entity receiving that interest is referred to as the Transferee.

If the Transferee is not providing any consideration to the Transferor in connection with the transfer of title, and there are no outstanding mortgages or debts being assumed by the Transferee as part of the transfer, then generally, no Land Transfer Tax will be payable.

If the Transferee is not providing any direct payment or other consideration to the Transferor in connection with the transfer of title, but the Transferee is assuming an existing mortgage or other debt registered against the property, LTT may still be payable. In such circumstances, the amount of LTT payable will generally be determined based on the value of the mortgage(s) and/or debt(s) assumed by the Transferee.

Let’s consider an example. In 2021, a Son purchased a property for $500,000 and obtained a mortgage of $300,000. Since the Son was unable to qualify for the mortgage independently, the Father was added as a purchaser on title, holding a 50% interest in the property.

In 2026, the Son is now able to qualify for the mortgage independently and wishes to remove the Father from title as part of the mortgage renewal process. Although no money is being paid by the Son to the Father for the transfer of the Father’s interest, the transfer may still attract LTT because the Son is assuming the Father’s 50% share of the mortgage obligation.

Assuming the outstanding mortgage balance at the time of the transfer is $250,000, the “consideration” for LTT purposes would generally be calculated as 50% of the outstanding mortgage balance, being $125,000.

There are ways to plan ahead when considering future transfers of title.

If a family member is being added to title solely for mortgage qualification purposes and there is an intention to remove them from title in the future, consideration should be given to registering their interest as a minimal ownership percentage, such as 1%. By limiting the family member’s ownership interest, the amount of mortgage debt or other consideration that may be attributed to that individual’s interest at the time of a future transfer may also be reduced. This can help minimize potential LTT implications, particularly where there is an outstanding mortgage being assumed as part of the transfer.

Another potential option is to enter into a trust agreement documenting that the family member is being added to title solely for mortgage qualification purposes and does not hold any beneficial interest in the property. However, any such arrangement must be carefully considered and properly documented. In fact, whenever a family member is added to title for this purpose—even where they are registered as only a 1% owner—it is generally advisable to have a properly drafted trust agreement in place. This helps clearly define the parties' intentions and beneficial ownership interests, and can help avoid disputes or uncertainty in the future.

It is also important to note that these arrangements generally must be disclosed to the mortgage lender, as they may affect the lender’s assessment of the transaction. Accordingly, this option should be discussed with your mortgage advisor.

Every title transfer is unique. While LTT may be an important consideration, it is only one aspect of the analysis. As mentioned earlier, there may be other tax implications and therefore, it is important to consult with an accountant before proceeding so that the transfer can be properly structured as part of an overall tax planning strategy.

Planning ahead is very important and therefore, it is important to have the right professionals by your side. Our firm frequently assists clients with real estate transactions, including title transfers. If you need assistance with your matter, please feel free to contact us by email at info@kormans.ca or by phone at 905-270-6660.

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