Selling a Parent’s Home? The "Old Title" Loophole That Could Save You Thousands

For many Executors in Ontario, the family home is the single most valuable asset in the estate. It is also the asset that most frequently triggers the requirement to apply for probate—a court process now formally known as a Certificate of Appointment of Estate Trustee.

In Ontario, probate is the judicial stamp of approval that confirms your authority to act as an executor. However, it comes with a price tag. The Estate Administration Tax (EAT) is charged at roughly 1.5% of the estate’s total value. On a typical Toronto home worth $1.5 million, that tax bill alone is nearly $22,000.

But there is a specific exception rooted in Ontario’s history that might allow you to bypass this requirement entirely. It is called the First Dealings Exemption, and understanding it could save your estate significant time and money.

The "First Dealings" Loophole Explained

To understand this exemption, you have to look back at how Ontario used to track property ownership. Decades ago, property records were managed under a paper-based system called the Registry Act. In the late 1990s and early 2000s, the province modernized to an automated electronic system called Land Titles.

When the government converted millions of property records from the old paper system to the new digital one, they granted a special concession. They recognized that under the old system, a Will was sufficient authority to sell land without a court order, while that is no longer the case under the Land Titles system. To facilitate the transition, the province established a rule: if a property was purchased under the old system and is being transferred from an estate for the first time since the conversion, the old rules still apply.

This means that if your parents purchased their home before the mid-1990s and the property has not been sold, mortgaged, or transferred since, the property may be designated as "Land Titles Conversion Qualified" (LTCQ). If the property meets this specific criteria, the Land Registry Office may allow us to transfer the title to an executor or beneficiary without a probate certificate.

If a property qualifies for this exemption, and the estate’s other assets (like bank accounts or investments) have named beneficiaries or are jointly held, you might be able to avoid the probate process entirely.

The "Small Estate" Trap

Even if you don't qualify for the First Dealings exemption, you might hope to use the "Small Estate" process. In Ontario, estates valued under $150,000 can use a simplified court process. Furthermore, estates valued under $50,000 are exempt from the Estate Administration Tax entirely.

But be careful: Value is cumulative. We recently advised a client whose relative left a modest bank account and a 1% ownership share in a property. The bank account held roughly $47,500 and the property share was valued at $5,000.

$47,500 + $5,000 = $52,500

Because the total exceeded the $50,000 threshold by just $2,500, the estate was required to file a probate application. The lesson? Even nominal assets like a 1% interest in a cottage or a rental property can push an estate over the tax-exempt threshold.

The Takeaway for Executors

Before you list an estate property for sale, or even before you begin the estate administration process, have a lawyer conduct a Title Search. Determining whether the property qualifies for the First Dealings Exemption early on can save the estate thousands of dollars in tax and months of waiting for court processing.

If you are acting as an executor, contact us today to verify your options before you file.