Embedded Files
When purchasing a newly built home or condo in Ontario, buyers often qualify for an HST rebate worth up to $24,000.
What many people do not realize is that eligibility for this rebate depends entirely on how the property is used. Claiming the wrong rebate or structuring the transaction incorrectly can result in the rebate being denied or even repaid years later.
There are generally two rebate programs that apply to new residential property.
If the property will be lived in by the buyer or a close family member, the new housing rebate may apply. If the property is being purchased as a rental investment, a different program applies known as the new residential rental property rebate.
At first glance the distinction appears simple. In practice, this is where many problems begin.
Buyers often lose the rebate in situations where the transaction was structured under the wrong rebate program, where the timing of occupancy creates issues, or where the property is used in a way that does not match the rebate that was claimed.
Recently I reviewed a situation involving a buyer who purchased a newly built condominium intending to rent it out. The buyer applied for the residential rental property rebate after closing and eventually secured a tenant under a lease.
Months later the Canada Revenue Agency reviewed the rebate claim.
During the review CRA discovered that immediately after closing, a relative of the owner had stayed in the unit while it was vacant and before the tenant moved in. From CRA’s perspective the property had been occupied by the owner’s family before it was rented, which meant it had effectively been used as a secondary residence rather than acquired strictly as a rental property.
The result was straightforward. The rebate was denied.
Situations like this often come down to small technical details. The timing of occupancy, the structure of the lease, and the way the closing documents are handled can determine which rebate applies and whether it will ultimately be approved.
Buyers are often surprised to learn that facts surrounding how the property is first used after closing can affect eligibility for the rebate.
For many purchasers the HST rebate represents tens of thousands of dollars connected to a single transaction. Ensuring that the correct rebate is claimed and that the transaction is structured properly from the outset can prevent unnecessary problems later.
Many rebate issues arise not because the buyer intended to do anything wrong, but because the rebate rules were not considered carefully before closing.
If you are purchasing a newly constructed property in Ontario and want to confirm that the correct HST rebate is being claimed, you are welcome to contact Counsel Direct to discuss your transaction.
Report abuse