RESOURCES

As a law firm acting on new construction residential transactions we hear that plea for help from our clients all too often. The closing date is fast approaching and the Purchaser will have to come up with an amount equal to the GST/HST New Housing Rebate on closing in the event that the Purchaser either does not qualify for the GST/HST New Housing Rebate or the Builder refuses to provide the Purchase with a credit in the Statement of Adjustment for the GST/HST New Housing Rebate.

There are a number of criteria under the Excise Tax Act (Act) that must be met for a Purchaser to qualify to receive the GST/HST New Housing Rebate, and then for a Builder to agree to have the GST/HST New Housing Rebate flow through the Builder to the Purchaser. In particular, the Purchaser must meet the all of the issues under subsection 254(2)(b) of the Act which provides that at the time the Purchaser becomes liable or assumes liability under an agreement of purchase and sale (APS) entered into between the Builder and the Purchaser, the Purchaser is acquiring the property for use as the primary place of residence of the Purchaser or a relation of that Purchaser. This leads to possible interpretations of (i) the intention at the time the APS was entered into, (ii) the “primary place of residence”, and (iii) who is a “relation” of the Purchaser.

What many new construction residential Purchasers are not aware of is that pursuant to the Act a Builder is jointly and severally liable with the Purchaser if the Builder credits the GST/HST New Housing Rebate directly to a Purchaser who is not entitled to the GST/HST New Housing Rebate where the Builder knew or ought to have known that the Purchaser is not entitled to the GST/HST New Housing Rebate. A Builder is also jointly and severally liable with the Purchaser if the Builder credits an amount that exceeds the GST/HST New Housing Rebate amount to which the Purchaser is entitled.

So it is not that the Builder does not want to co-operate with the Purchaser, it is that the Builder will choose to avoid any potential liability as soon as the Builder gets any sense that the Purchaser might not meet all of the requisite criteria for the GST/HST New Housing Rebate.

If the Builder does not provide the Purchaser with the GST/HST New Housing Rebate the Purchaser can apply for it on its own directly to the Ministry after closing. If the Purchaser does not qualify for the GST/HST New Housing Rebate and the property is leased out as an investment property the Purchaser might qualify to get the rebate funds back from the Ministry pursuant to a different rebate program, the GST/HST New Residential Rental Property Rebate.

We encourage all potential Purchasers of new construction residential properties to seek proper legal advice before entering into an APS. At Kormans LLP, are committed to guiding you through challenges of meeting the criteria for the GST/HST New Housing Rebate. Please contact us at info@kormans.ca or call (905) 270-6660 to learn how we can assist.

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David H. Korman is the Managing Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at dkorman@kormans.ca.

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