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HST REBATES:
WHEN BUYING FROM BUILDER

NOTE: This warning is aimed at Purchasers buying property in Ontario directly from a Builder ONLY.
NOTE: HST does not apply to a purchase of RESALE RESIDENTIAL PROPERTY.

In Ontario, the Harmonized Sales Tax (HST) consists of 8% PST (Ontario Provincial Sales Tax) PLUS 5% GST (Goods and Services Tax) being a total of 13%.

Keep in mind that the Builder's price in your Purchase Agreement is based on an assumption: the assumption is that you are USING the property being bought as a Primary Residence (meaning a residence for you and/or your immediate family) and, therefore, as a buyer, you qualify to receive the HST New Housing Rebate (to be assigned to the builder).

Because of this assumption, the Builder will require you to assign back to the Builder your entitlement to receive the HST New Housing Rebate from the government. That way, the Builder obtains the value of the HST rebates from the government and does not need to charge YOU to pay such an amount ON TOP OF your sale price. The assignment of this HST rebate typically occurs at Final Closing, and by assigning it, your purchase price from the builder will remain as stated in your Purchase Agreement.

IN CONTRAST, if you are an investor who does not intend to live in the property, then you DO NOT qualify for the HST reduced price arrangement with the Builder, but rather you are required to PAY THE HST IN FULL and then you must apply to have the amount of HST rebate RETURNED to you directly from the relevant government authority if you satisfy certain requirements (one year lease and to own for one year after closing).

The calculation of the total amount of available HST governmental rebates varies depending on the price of the property being purchased from the Builder, as noted in the following examples:

1)
Builder Price
$250,000.00
 
HST rebates are approximately
$18,500.00
   
2)
Builder Price
$300,000.00
 
HST rebates are approximately
$22,000.00
   
3)
Builder Price
$350,000.00
 
HST rebate are approximately
$26,000.00
   
4)
Builder Price
$368,200.00
 
HST rebates are approximately
$27,300.00
   
5)
Builder Price
$400,000.00
 
HST rebates are approximately
$26,000.00
 
6)
Builder Price
$450,000.00
 
HST rebates are approximately
$25,800.000
   
7)
Builder Price greater than
$484,500.00
 
HST rebates will be
$24,000.00

NOTE(A)   HOW BUYERS QUALIFY TO ASSIGN HST REBATES FROM GOVERNMENT TO BUILDER

     In order for a buyer to qualify to assign available HST government rebates into the builder's pocket, EACH BUYER taking title on closing must qualify by either personally residing in the unit as a PRIMARY RESIDENCE during occupancy leading up to closing (if a condo or if a registered condo has been purchased from a builder) OR by having an immediate family member reside in the unit (NOT including Cousins, Aunt, Uncle, Niece, Nephew).

     BE AWARE THAT the intention to acquire the unit for the PRIMARY PLACE OF RESIDENCE for the buyer (or for the immediate family member) MUST EXIST when the offer to purchase was originally signed with the Builder. This means that what you say to the builder's sales person at the sales office matters, so WATCH OUT! DO NOT lead the builder's sales person to believe you are an investor if you are NOT!

Example:   If a buyer resides in Newmarket and buys a new condo in downtown Toronto where one works 4 days a week returning to the Newmarket residence for 3 day weekends, the PRIMARY PLACE OF RESIDENCE (where one resides most often) will be the qualifying downtown condo.

NOTE(B)   HOW BUYERS QUALIFY TO ASSIGN HST REBATES FROM GOVERNMENT TO BUILDER

There is NO minimum time period to reside in the purchased unit BUT one should be able to establish that:
 
     (1)
Not only was any required moving elevator reserved BUT ALSO that some furnishings were moved in (at least into a bedroom);
 
     (2)
If one has later moved out after a short time (at least 30 days) there should be a reasonable cause for the unit not having been suitable (due to unsuitable size, location, personal circumstances, or whatever).
 
     (3)
It is wise to also be able to support the fact that the buyer or immediate family member (parent, grandparent, spouse, x-spouse, common law spouse, sibling, child, grand child) resided in the unit by being able to show as many of the following support items as possible:
 
          (i)
Driver's Licence was changed to reflect the address bought from the builder;
 
          (ii)
Invoice from mover or truck rental for move in;
 
          (iii)
Copy of post office address change notice;
 
          (iv)
Copy of bank statement showing address bought from builder;
 
          (v)
Hydro, Cable TV, Phone bills showing address bought from builder;
 
          (vi)
Insurance binder (contents and liability insurance) for address bought from builder;
 
          (vii)
Credit card statements showing address bought from builder.

NOTE(C)   PHONE CALLS FROM CRA AUDITORS

     If one receives a phone call from a person representing that the caller is from CRA (CANADA REVENUE AGENCY) or, from any governmental department, asking questions regarding your purchase from a builder, it is highly recommended that you give NO personal information to a stranger over the phone. Simply tell the caller that you do not give personal information by phone and that, if the caller writes a letter to you identifying himself, then you will reply in writing.

NOTE(D)   IF INVESTOR/BUYER MUST PAY HST REBATES TO BUILDER

     When a buyer is an investor (even if a corporation or a non-resident) and does not qualify to have the HST governmental rebates assigned to the builder (since the buyer or an immediate family member is not residing in the purchased unit as a PRIMARY residence), the builder requires the buyer to pay the HST rebates to the Builder in addition to the builder's price (as typically stated in the fine print in the builder's agreement).

     See above 7 examples for approximate amounts of HST Rebates payable for sample builder prices of $250,000.00; $300,000.00; $350,000.00; $368,200.00; $400,000.00; $450,000.00; or a price greater than $484,500.00.

     The investor/buyer OR, where there are two buyers or more but not all buyers qualify for the HST rebates being assigned from the government to the builder, must pay the amount of the HST Rebates (usually on final closing with the builder) and then can apply for a refund of such additional funds paid to the builder if:

     (a)
such application for refund is filed with the government within 24 months of payment of HST rebates amount to builder;
     (b)
a copy of a one year lease is provided to CRA (first occupancy by a tenant should be a one year lease and NOT a verbal or monthly tenancy);
     (c)
ownership by the investor will be one year from final builder closing.
 
 
NOTE: Should CRA check Land Titles and discover at the end of one year that the investor who had received the HST rebate refund had closed a sale of the unit within the first year of ownership, then CRA will reclaim the refund paid to the investor plus interest and penalties.

NOTE(E)   WARNING WHERE 2 PARTNERS BUY OR IF TITLE IS TO NON-QUALIFYING RELATIVES

     (a)
If 2 unrelated partners buy (not common law spouses) a residential unit from a builder and ONLY one partner moves in, the HST rebate amount must be paid to the builder in addition to the price since ALL persons taking title must qualify as owner occupiers (or by having an immediate family member occupy) in order for HST rebates to be assigned from the government to the builder.
     (b)
If 2 immediate family members take title (e.g. 2 sisters OR mother and daughter) and only one moves in, there is no problem since each buyer qualifies to assign governmental HST rebates to the builder (since each buyer is either moving in OR has an immediate family member moving in).
     (c)
If a buyer needs a Cousin or Aunt or Uncle to be added to title in order to qualify for a mortgage on closing (NOT simply be a guarantor on the mortgage), and only one moves into the unit, the HST rebates amount must be paid to the builder in addition to the price since Uncles, Aunts, Nieces, Nephews, Cousins do not qualify as immediate family members, being the same problem as in (a) (above) where 2 unrelated partners buy and only one moves in.

 

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