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The Potential For A New Land Transfer Tax In Ontario: What You Need To Know

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Recently, media outlets have been buzzing about the potential for a new land transfer tax ("LTT") in Ontario. More specifically, certain established and reputable publications have warned the general public that our provincial government may soon permit municipalities to require a "local" LTT in addition to the conventional provincial LTT that currently is paid by purchasers at closing.

By way of an example, on February 1, 2008, Toronto City Council approved a municipal LTT pursuant to the taxation powers granted by the City of Toronto Act, 2006. Since that time, purchasers in the Greater Toronto Area have been charged a separate local LTT that effectively doubles the total LTT payable at closing.

Today, the concern is that our provincial government may very well expand this taxation power to every local municipality in the Province of Ontario, by way of an amendment to the Municipal Act, 2001.

Many troubled potential purchasers have contacted me in recent weeks to discuss this news, and how it may affect their real estate purchases (now and in the future). The intent of this brief post is to cut through the noise to find a signal, and to establish clarity. Here are the facts:

  1. Municipalities across the province, including Ottawa, are always looking at new ways to generate revenue. Many medium-to-large sized cities in Ontario look at the greater City of Toronto with envy, notwithstanding the financial hardship its total LTT has caused to purchasers. From the perspective of municipalities, the idea of a separate local LTT has not only been conceived, but a successful program to charge it has been in place in the largest City in our province for almost eight years. In the opinion of many at the municipal level, Toronto is receiving special treatment. Therefore, requests were tabled with our government to review this issue.
  2. In October of this year, our provincial government announced that it had begun a "consultation process" to review the Municipal Act, 2001, which consultation process would include a discussion with respect to the LTT.
  3. Following the government's announcement with respect to the consultation process, the Ontario Real Estate Association launched an online campaign against amending the Municipal Act, 2001 to permit municipalities to charge their own LTT.
  4. On December 1, provincial Municipal Affairs Minister Ted McMeekin publically announced that, other than Toronto (where the practice already exists), municipalities will not be permitted to charge a local LTT for the foreseeable future. In other words, our provincial government does not plan to amend the Municipal Act, 2001 at this time with respect to the LTT.

While our provincial government does not intend to change the rules with respect to the LTT now, that may change in the future. However, for the time being, purchasers outside of the City of Toronto may continue to budget for closing costs on the basis of one LTT.

For more information on budgeting for closing costs, please review this primer, which was published earlier this year, and for more information on coordinating and closing your next real estate deal, please contact a member of the Real Estate Team at Merovitz Potechin LLP.

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