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How Does HST Rebate Work for New Houses & Condos?
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Jonathan A. Hacohen
August 30, 2018
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You visit a sales centre to look at the plans for a new house or condominium unit. Before you know it, you're falling in love with one in particular and sign a massive stack of papers for it. Everything after that becomes a blur but one particular thing you recall the salesperson emphasizing about is the HST and how it's included in the purchase price. Diligently, you send off the paperwork to your Real Estate Lawyer for a review.
This scenario is very common when it comes to purchasing a new house or condominium unit. It’s easy to get swept up in the moment and make a decision. Luckily, for a new condominium purchase you have a 10-day "cooling-off period" to terminate the deal if you change your mind. However, in order to get out of the deal when purchasing a new house you need a clause that makes the deal conditional upon review by your lawyer. This is why it is highly advisable to send the agreement to your lawyer in time for review on a new home purchase.
Assuming you had a period for review and you sent the agreement to your Real Estate Lawyer in time, your lawyer will ask you “What is your intention with this property?”
You might be wondering, "why does the builder care about my intention with this property?" The reason is because when you enter into an agreement to buy a new house or condominium unit, yes, the HST is included in the price but the builder does this knowing that the government will rebate a portion of the HST back to the purchaser (this is based on a formula equation, ~$24k in most cases). In the agreement, the builder indicates that the purchaser needs to sign the paperwork to apply for the HST rebate and assign the rebate back to the builder. What happens is the purchaser’s price was all-in with HST, so the money coming back from the HST rebate goes to the builder and not the purchaser based on the agreement you signed with the builder.
The purchaser or their immediate family needs to live in the unit as a primary residence in order for the builder to apply for the HST rebate. If not, what happens is the builder will charge you as the purchaser on closing for the HST rebate and then it will be up to you to apply to CRA after closing to receive the HST rebate back. So in the case that you bought the house or condominium unit as a rental investment, you would need to sign a 1 year lease minimum with a tenant and apply for the rebate after closing.
If you purchased the unit in order to flip it after closing, you would be disqualified from eligibility to receive back the HST rebate (depending on the timing of when you sold the property and the use of it before the sale). If you purchased the property by way of an assignment deal, well...then even more layers of complications are involved. So be weary of the HST rebate on new construction homes: they aren’t as simple as they may seem!
Jonathan (aka “The Chosen Lawyer”) was called to the Ontario Bar in 2002, graduated from Osgoode Hall Law School in 2001 and completed his Bachelor of Business Administration at The Schulich School of Business (York University) in 1998. In addition to being a Partner at Kormans LLP, Jonathan’s journey in law started as an Associate with a large Bay Street law firm, as well as enjoying a secondment working in-house at Tim Hortons (TDL Group) for almost a year!
Jonathan was an Instructor with OREA, teaching the Real Property Law course to future realtors in Ontario. The Chosen Lawyer is a sought-after lecturer at seminars, team meetings and conferences—often speaking to groups including realtors and mortgage brokers on a variety of legal topics including real estate, corporate/commercial and wills/estates law. He also speaks on non-legal topics including Organization, Productivity, Motivation, Work/Life Balance and Mindfulness. Jonathan adopts a zen-like approach to the practice of law and shares his real-life experience with others in order to help them achieve success and happiness! In order to book The Chosen Lawyer for your next session, please email Jonathan at info@kormans.ca
Before entering the legal field, Jonathan chose to study business as he envisioned having a background in all aspects of business (including accounting, economics, finance, marketing and HR) would prove to be very useful as a lawyer—in understanding and communicating with business clients on their respective businesses and industries. Jonathan has a diverse client base, including many first-time home purchasers, residential clients (purchases, sales, refinances, assignment transactions), corporate/commercial clients (real estate transactions, leases, incorporations, shareholder agreements), as well as assisting clients with preparing wills and powers of attorney.
When he is not in the office or in front of a computer, Jonathan can either be found in the gym, boxing ring, learning a new recipe in the kitchen or on a yoga mat. Jonathan has competed with UFE (Ultimate Fitness Events) and is a double medal winner in the physique category! Jonathan is also an avid animal lover and can usually be found with his trusted pal Ollie (Shih-tzu dog) by his side.
Don’t forget to watch episodes of Podcasts/Docuseries hosted by Jonathan “The Chosen Lawyer”TM on the Kormans LLP YouTube channel or listen to it across all podcast players, including Apple Podcasts and Spotify!
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