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HST Rebate Credit on Pre-construction Purchases!
Taimoor Qureshi
January 11, 2024
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Usually, the purchase price in a new construction residential Agreement of Purchase and Sale is inclusive of HST less the amount of the HST Rebate which the Builder has already taken off the purchase price up front.
In order to remain eligible for that HST Rebate credit at the time of Final Closing with the Builder, the Purchaser or an immediate blood relation (parent, child, sibling or spouse) has to be the first occupant of the property and must use the property as their principal place of residence.
Once a Builder finds out about a property being listed on MLS or any other public medium including social media prior to Final Closing or of an intention of a purchaser to try to assign it or lease it out prior to Final Closing, the Builder can exercise its right to remove the HST Rebate credit being provided to the Purchaser up front at the time of Final Closing since the Purchaser in such instances has shown their intention of possibly wanting to sell the contract by listing it for sale via an assignment or leasing out the property during the occupancy period. Thus, it is no longer assured that the Purchaser is buying the property for personal use for themselves or their immediate relation.
It is important to know that the right to the HST Rebate credit up front is not automatic. In any preconstruction residential Agreement of Purchase and Sale, there are provisions which state that the Builder providing the HST Rebate credit up front at the time of Final Closing is at the discretion of the Builder since at the end of the day it is a rebate and thus the onus is on the Purchaser to apply for the rebate themselves.
It is not an absolute right that a purchaser receives this credit upfront from the Builder, however, in cases of properties being purchased for personal use, the Builders usually provide the HST Rebate credit to purchasers at time of closing to make the overall process easier. However, again they do not have to do this if they don’t want to since it is not a legal requirement for them to do so.
The Builder at their sole and absolute discretion can ask the Purchaser to pay the amount equivalent to the HST Rebate credit in addition to the rest of the amount owed to the Builder as part of the funds owed on Final Closing and then the Purchaser would have to apply to CRA directly to try and claim that rebate amount!
Therefore, it is vital to discuss all legal implications of listing a preconstruction Agreement of Purchase and Sale for assignment or to list the property for lease during occupancy with a real estate lawyer before doing so, otherwise you may find yourselves out of pocket for additional thousands of dollars come Final Closing time!
For more information about the topic discussed in this blog, do not hesitate to contact us at (905) 270-6660 or e-mail us at: info@kormans.ca.
Taimoor’s practice areas include Commercial law; Commercial Leasing; Corporate law; Mortgages; Residential Real Estate; and Wills and Estates.Taimoor was called to the Bar of Ontario and joined Kormans LLP in January 2019.Prior to joining Kormans LLP, Taimoor articled and clerked for boutique law firms where his exposure to residential and commercial matters from beginning to end helped develop his knowledge and skills in the aforementioned areas of la.
Taimoor is a strong believer in efficient client communication and does his best to keep clients as up to date as possible along all steps of a transaction.In his spare time, Taimoor is an avid follower of all major sports and enjoying the outdoors during the summer months.
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