HST and new home purchase dilema

[Shane1975]

Not sure which is the right forum to post this question so I'm posting it both in the personal finance forum as well as the Home and Garden Forum.

With this new harmonized sales tax (HST) coming into effect july 1, 2010 on all new home purchases over $400,000, I'm in a bit of a dilema. I went to a builder last weekend and wanted to purchase a new home that would cost just over $500,000. The builder said the closing would be in June 2010, but there is always the possibility there could be a delay that could push the closing past July 1, 2010. When I asked about the HST, he said that he doesn't "think" it would effect people who purchase a home prior to July 1, 2010 but advised he can't be sure.

I asked if they could put an ammendment to the plan which would state that the builder will pay the PST if the closing takes place after July 1, 2010. He said that they won't do that, but kept assuring me that it won't effect me as I am buying before that date.

We really love the house but feel uncomfortable with this situation. Has anyone else come across this before? Any idea if Dalton is gonna penalise people who signed the deal prior to his crazy tax.

[alanbrenton]

Not sure which is the right forum to post this question so I'm posting it both in the personal finance forum as well as the Home and Garden Forum.

With this new harmonized sales tax (HST) coming into effect july 1, 2010 on all new home purchases over $400,000, I'm in a bit of a dilema. I went to a builder last weekend and wanted to purchase a new home that would cost just over $500,000. The builder said the closing would be in June 2010, but there is always the possibility there could be a delay that could push the closing past July 1, 2010. When I asked about the HST, he said that he doesn't "think" it would effect people who purchase a home prior to July 1, 2010 but advised he can't be sure.

I asked if they could put an ammendment to the plan which would state that the builder will pay the PST if the closing takes place after July 1, 2010. He said that they won't do that, but kept assuring me that it won't effect me as I am buying before that date.

We really love the house but feel uncomfortable with this situation. Has anyone else come across this before? Any idea if Dalton is gonna penalise people who signed the deal prior to his crazy tax.

I'd love to know the answer to this too. What transaction(s) has(have) to be completed/consummated prior to July 1st?

[alanbrenton]

Anyone :?:

[Linutor]

Apparently this is a point of contention between the home builders association and the government right now. The home builders are pushing for the government to apply it according to the purchase agreement date, not the closing date, but I don't think that it's been resolved yet. This is the information that we got from the sales office of the builder that we are looking at. Maybe someone has something more definitive?

[alanbrenton]

Apparently this is a point of contention between the home builders association and the government right now. The home builders are pushing for the government to apply it according to the purchase agreement date, not the closing date, but I don't think that it's been resolved yet. This is the information that we got from the sales office of the builder that we are looking at. Maybe someone has something more definitive?

One purpose of the HST/tax harmonization is to help businesses save 5% and streamline the GST input/credit process. In the end, consumers get shafted especially would be home buyers of properties over $500k. Properties over $500k will be slapped the entire 8% tax and not just on the portion over $400k. This seems more like a cash grab by the Maguinty government as oppose to more savings for the Canadian population.

Is there a way (collectively by would-be purchasers) to push the builder to move the closing date prior to July 1, 2010 even if all the home buyers can't move in yet? Will the start of a mortgage/insurance mark the closing date? Because it is the property developer we will all be dealing with one on one, can the closing date be determined individually (as in each home buyer)?. I was told by the sales representative that the closing date will be in September of next year. I'd rather start paying my mortgage/insurance on June 30 or earlier rather than wait until the "expected" closing date of September 2010 and pay an outrageous amount of taxes.

An old article from the Geulph r/e association (the exact same content can be found from various sources) can be found here:

http://www.guelphblog.ca/guelph-real-estate-news-views/2009/4/9/ontario-budget-to-introduce-hst.html

[gavbo]

It is my understanding that for first time homebuyers you will get a credit back from the gov't for the taxes. Not sure if you are a first time homebuyer or not though

[Shane1975]

No, I'm not a first time buyer, so I wouldn't qualify for any rebate.
This is really worrying me because it appears we have found the perfect home and the only thing holding us back is this stupid HST issue.
I spoke to the agent again today and he again insisted that they will try to close on time (Jun 2010) and it won't be an issue. I simply can't take the risk of a delay and then getting hit with a $40,000 tax.

I could lose out on a great deal if the government doesn't clarify this issue soon.

[ketchudj]

If they delay, sue them- you have easily definable damages.

[mself084]

If they delay, sue them- you have easily definable damages.

I REALLY dont think you can sue a builder for delaying the closing date. They can delay for months and months if they like, there is no legal recourse. Only if it is within 90 days of closing, and they want to delay, that you will get any sort of compensation.

OP - we're closing in Jan 2010, and i asked our customer care rep the exact same question about the new HST. She told me that our agreement is a binding contract, and they can't alter the final selling price without consent from both sides. im sure we'll get official clarification in the next few months.

I wouldn't buy the house if you can't afford the increased taxes. I'm 90-95% sure you won't close in June, as most new builders always delay. It's not worth the risk, IMO.

[thelefteyeguy]

way too many variable to determine if the house will be completed on time.

The salesperson will do everything to "promise" you that it will be completed on time but the contract will say otherwise (just to complete the sale and get the commission).

There could be strikes from a number of associations and supply shortages (but I doubt the stortages)

[Shane1975]

It appears as though we will have to put the purchase on hold until this matter is resolved or we have more direction from the government about this.
It's such a shame because the home is perfect in every way.

It's not a matter of if I can afford the additional amount - I simply cannot justify paying the government ~$40,000 of my hard earned cash, even though I entered into an agreement to purchase "BEFORE" the HST issue was actually legislated. Besides, can you imagine the upgrades i could do for that price ;)

I will post here if I find out any more info on this.

Thanks for everyones input.

[elty]

June 2010 is simply too tight. There is a huge chance that it will be delayed past July and the sales can't really do anything. Most contract specifically stated the buyer is responsible for any increase of tax or development fee.

Also, think of it this way, when the GSP was set to drop, (almost) all developer drop their price immediately despite the new rate did not kick in yet. That's only because they know they can charge tax based on the reduced GST during the time of closing. Now the situation is reverse...

[licious]

It appears as though we will have to put the purchase on hold until this matter is resolved or we have more direction from the government about this.
It's such a shame because the home is perfect in every way.

It's not a matter of if I can afford the additional amount - I simply cannot justify paying the government ~$40,000 of my hard earned cash, even though I entered into an agreement to purchase "BEFORE" the HST issue was actually legislated. Besides, can you imagine the upgrades i could do for that price ;)

I will post here if I find out any more info on this.

Thanks for everyones input.

It's a shame that you had to walk away from the house. :( I really wish the government would clarify this issue.

[afici0nad0]

i signed a schedule 'a,' in addition to the initial agreement, stating that should the builder delay the transfer of possession past july 1, 2010, the builder will be paying the provincial component of the HST, and not me (the buyer).

the builder's tentative closing date is june 9, 2010. with the HST coming into effect, who knows how fast builders will want to complete their projects now, given that buyers have signed schedules such as mine...

[ghostryder]

No, I'm not a first time buyer, so I wouldn't qualify for any rebate.

I see nothing in the rebate documentation that says it only applies to first time homebuyers.

http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html


http://www.rev.gov.on.ca/english/notices/str/02.html

Enhanced New Housing Rebate
The province is proposing an enhancement to the new housing rebate that was announced in the 2009 Ontario Budget[1].

The new housing rebate would be enhanced so that new homes purchased as primary residences across all price ranges would qualify for a rebate of up to $24,000, while continuing to ensure that, on average, new homes priced up to $400,000 would not be subject to additional tax compared to the retail sales tax (RST) currently embedded in the price of new homes.

The effect of the enhanced rebate would be to apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new home and at a rate of eight per cent on the portion above $400,000. The rebate would be calculated as 75 per cent of the provincial portion of the single sales tax payable on the purchase of a new home, up to a maximum rebate of $24,000.

This provincial rebate for new housing would be provided for the same types of new residential properties for which a Goods and Services Tax (GST) new housing rebate is available. Qualifying housing would include substantially renovated housing, co-operative housing, owner-built housing, housing on leased land, mobile homes and modular homes for use as primary places of residence.

Ontario's new housing rebate would be federally administered in a manner similar to the GST rebate for new housing. Individuals would be able to file an application for the rebate directly with the Canada Revenue Agency (CRA) if the builder does not pay or credit the rebate to the purchaser at the time of purchase.

[TheRed]

I see nothing in the rebate documentation that says it only applies to first time homebuyers.

http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html


http://www.rev.gov.on.ca/english/notices/str/02.html

Enhanced New Housing Rebate
The province is proposing an enhancement to the new housing rebate that was announced in the 2009 Ontario Budget[1].

The new housing rebate would be enhanced so that new homes purchased as primary residences across all price ranges would qualify for a rebate of up to $24,000, while continuing to ensure that, on average, new homes priced up to $400,000 would not be subject to additional tax compared to the retail sales tax (RST) currently embedded in the price of new homes.

The effect of the enhanced rebate would be to apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new home and at a rate of eight per cent on the portion above $400,000. The rebate would be calculated as 75 per cent of the provincial portion of the single sales tax payable on the purchase of a new home, up to a maximum rebate of $24,000.

This provincial rebate for new housing would be provided for the same types of new residential properties for which a Goods and Services Tax (GST) new housing rebate is available. Qualifying housing would include substantially renovated housing, co-operative housing, owner-built housing, housing on leased land, mobile homes and modular homes for use as primary places of residence.

Ontario's new housing rebate would be federally administered in a manner similar to the GST rebate for new housing. Individuals would be able to file an application for the rebate directly with the Canada Revenue Agency (CRA) if the builder does not pay or credit the rebate to the purchaser at the time of purchase.


If this is correct, then any home buyers will be eligible for this rebate?

[kkmelodykk]

I encountered the same problem today. When my agent asked me to sign those docs, she said the buyer has to take full responsibility for the HST under any circumstances....I think this is ridiculous.....any good advise

[Jungle]

Put the pressure on the sales agent. Tell them you will sign the dotted line when they can confirm from govenment sources that you will not pay the extra tax. Make them do the work in finding out.

[alanbrenton]

I encountered the same problem today. When my agent asked me to sign those docs, she said the buyer has to take full responsibility for the HST under any circumstances....I think this is ridiculous.....any good advise

Thought this was only if closing was pushed back past July 1, 2010? Yes, get them to shoulder if they push back the closing date.