HST New Housing Rebate – What New Home Builders Should Know

By of Merovitz Potechin LLP on Monday September 30, 2019.

Most agreements of purchase and sale for newly built homes in Ontario are premised on buyers qualifying for the HST New Housing Rebate and assigning it to the builder. In exchange, the builder credits the buyer with the amount of the rebate and relieves the buyer of the burden of paying the full amount of HST on closing.

While the HST rebate program is a great incentive for promoting the purchase of new homes, builders should remain alert to instances where buyers do not qualify for the rebate. If a buyer claims the rebate on closing, but the CRA later disallows the rebate, the builder will be left having to claim back the amount of the rebate from the buyer after closing.

As the rebate can be worth tens of thousands of dollars, new home builders should be aware of the basic rules regarding the applicability of the rebate.

Criteria to qualify for the rebate

In order to qualify for the rebate, buyers must meet the following criteria:

1. The buyers must be at least be 18 years of age.
2. The buyers must intend to occupy the home as their primary place of residence or that of a qualified relation – meaning either a direct blood relation (includes parents, siblings, and children but excludes aunts, uncles and cousins), a spouse (common law or marriage) or a direct blood relation of a spouse.
3. The persons taking title to the home must be the same persons as named in the agreement of purchase and sale.
4. The first persons to occupy the home must be the named buyers or their qualified relations.
5. All of the buyers must be individuals, not corporations, trusts or other entities.

Multiple buyers

Where there are multiple buyers named in an agreement of purchase and sale, all must qualify as set out above, otherwise the rebate cannot be claimed.

Non-related buyers

Where there is more than one buyer and they are not qualified relations, all must qualify by occupying the home as their primary place of residence or that of their qualified relations. Should one of the buyers decide not to live in the home (or go on title), the rebate will not be allowed.

Renters and flippers

If the buyers are purchasing the home with the intent of flipping it or using it as an income property, the rebate will be disallowed.

Can foreign buyers qualify?

Buyers do not have to be Canadian residents when they sign the agreement of purchase and sale. However, they must have the intent of making the home their principal worldwide residence or that of their qualified relation.

A word about assignments

If an agreement is assigned, it is the assignee who must qualify for the rebate, not the original purchaser.

Scenarios where an amendment may be necessary

• If there is a person named in the agreement of purchase and sale that will not be taking title to the home, there should be an amendment deleting this individual from the agreement.
• If there is a person taking title who is not named in the agreement, this person should be added to the agreement.
• If two non-related persons sign an agreement but one decides not to live in the home (or go on title), the non-occupant should be deleted from agreement.

New home builders beware

When in doubt, new home builders should always consult with their counsel to ensure that a buyer qualifies for the rebate. If a builder elects not to credit an otherwise qualifying buyer with the rebate, the buyer will be free to claim the rebate directly from the CRA after closing. If you are a new home builder in Ontario with questions regarding the HST rebate, or if you are a first time home buyer looking to claim the rebate, contact real estate lawyer Frank Bourgault at Merovitz Potechin LLP.