HST REBATE – New Home/Condominium purchased from Builders (not resales and not commercial properties)
It is always important to review and understand your Agreement of Purchase and Sale. Unless it otherwise provides, if you entered into an Agreement of Purchase and Sale after June 18, 2009, and which in fact closes on or after July 1, 2010, you will be responsible for the HST, net of the GST/HST rebate, if any, if you qualify.
If you (and others, all being individuals) are purchasing a newly constructed home or condominium unit from a builder with the intent that it will be occupied as your and their primary place of residence, or the primary place of residence of your or their “relation” (being limited to parents, children, or other descendants or siblings, or a spouse or a person connected to the spouse by blood or adoption, but specifically excluding uncles, aunts and cousins, friends, co-workers and employees), you may be entitled to the HST New Housing Rebate.
Most Agreements of Purchase and Sale for newly constructed residences provide that the purchase price includes a component equivalent to the HST exigible less all applicable new housing rebates ie: the builder has already given you credit for and deducted the rebate from your purchase price. You have warranted that all purchasers are individuals who qualify for the new housing rebate as they are acquiring the property on their own account as their, or their relation’s primary place of residence.
If any buyer (other than an individual or his relation who intends to occupy the property as his primary residence), for example, a friend, is buying as little as 1% (as, perhaps, the mortgage lender requires it as a condition of approving the loan), does not have the intent to occupy the property as his primary place of residence, or that of his relation, then the entire rebate is lost and the builder will collect and your buyer will pay, on closing, an amount equivalent to the HST rebate that has already been deducted from the purchase price.
If you own a residence and are about to purchase a recreational property, which will not be your primary residence or that of your relation, you do not qualify for the HST New Housing Rebate.
If you should later add a purchaser (other than a spouse, parent, child, grandchild or sibling), in order to qualify for financing, who will not be living at the property as his primary place of residence, then the property will not qualify for the rebate at all, even where such added purchaser will only be shown on title as a 1% owner.
Although purchasers in the past have tried to satisfy the “intent” rule by entering into declarations of trust wherein, for example, the friend states that he holds the 1% in trust for his friend, as the case may be, as the sole beneficial owner of the property, the courts have taken a strict view of the legislation and have denied the entire refund if any purchaser doesn’t have the intent to occupy as his primary place of residence.
If a purchaser doesn’t qualify for the HST New Housing Rebate, he must pay the full amount of HST on closing, without, as mentioned above, entitlement at that time to any rebate, but he may qualify for the HST New Residential Rental Property Rebate which, generally speaking, is available to purchasers of newly constructed homes and condominium units if he owns and rents the property out for at least one year after closing. The application for the refund can be made immediately after closing, but must be made within 2 years thereof.