The Harmonized Sales Tax (HST) New Housing Rebate is available for qualified owner-occupant purchasers of new homes and new condominiums. What is the catch? Well, there are several cases where the HST New Housing Rebate has been denied by the courts or the Minister of National Revenue has attempted to claw-back a rebate received by a purchaser or purchasers.
There are three essential requirements to qualify for the HST New Housing Rebate:
- the purchaser must intend to use the property as their primary place of residence (or a relation of the purchaser must intend to use the property as their primary place of residence); AND
- the first person to occupy the property must be the purchaser (or a relation); AND,
- ownership of the property must be transferred to the purchaser (and not to a relation) after the occupancy permit is issued.
Of utmost importance, is the intention of the contractual purchasers when entering into the Agreement of Purchase and Sale with the builder. The contractual purchasers (or a relation, being a blood relation and not a cousin, aunt, uncle) must truly intend to occupy the property as their primary place of residence at the time of signing the Agreement of Purchase and Sale, have title transferred to them, and reside there post-closing. It is not sufficient to change a mailing address and pretend to live in the property by, for example, furnishing it with a sofa or a lamp. The contractual purchasers/owners must be able to demonstrate that they are living in the property day in and day out. It is also not sufficient to move into the property after the HST New Housing Rebate has been denied. The intention to live in the property must be evident at the time of signing the Agreement of Purchase and Sale.
Receipt of the Rebate is also in jeopardy if one of the contractual parties does not take title to the property. If multiple purchasers enter into the Agreement of Purchase and Sale and one does not take title to the property, the Rebate is deemed not to be payable to anyone. Accordingly, it is important that the name of the contractual purchaser who no longer wishes to live in the property be removed from the Agreement of Purchase and Sale by way of an Amendment prior to closing. The Rebate is further in jeopardy if the contractual purchasers are not related and one of them does not intend to occupy the property as their principal residence at the time of signing the Agreement of Purchase and Sale.
The Rebate can be denied even when title is taken in the name of both spouses when only one spouse signed the Agreement of Purchase and Sale. The courts have ruled that who signed the Agreement of Purchase and Sale is more important than who takes title to the property.
Does it apply to businesses?
The Rebate is not available to corporations and cannot be claimed if the property is being purchased for investment purposes. In that case, the purchaser needs to apply for the HST New Residential Rental Property Rebate after closing. In order to qualify for that rebate, the purchaser must have a valid one-year lease with a tenant who is using the property as their primary place of residence. A purchaser must apply for this rebate no later than two years after the end of the month in which HST was first payable.
If you have questions about the HST New Housing Rebate, or require assistance with other residential real estate matters, please get in touch with us.