Real Estate

My property was closed as a primary residence but my intention is to rent it. What should I do?

  • Last Updated:
  • Jan 4th, 2021 10:10 am
[OP]
Newbie
Feb 7, 2020
19 posts
2 upvotes

My property was closed as a primary residence but my intention is to rent it. What should I do?

I bought a new condo that was closed in early December on the basis or a primary residence. I want to rent it. What is my best course of action keeping in mind the primary residence tax exemption and HST rebate in mine (Ontario)

Ideally, I would go back in time and close on the basis of an investment property but what can I do now to obtain the HST rebate and not harm the primary residence tax exemption I have built up for my primary home?
15 replies
Deal Fanatic
Jan 19, 2017
5610 posts
3133 upvotes
Technically, you have to live in the condo to be considered a PR.
Deal Fanatic
Aug 27, 2004
7437 posts
882 upvotes
Toronto, ON
Shouldn't you call your real estate lawyer and ask him/her how to "fix" this? Presumably he/she had you fill out various paperwork about the HST rebate... shouldn't this have come up then?
[OP]
Newbie
Feb 7, 2020
19 posts
2 upvotes
VivienM wrote: Shouldn't you call your real estate lawyer and ask him/her how to "fix" this? Presumably he/she had you fill out various paperwork about the HST rebate... shouldn't this have come up then?
Not every real estate lawyer does what they are supposed to. I won't be using this one again but need to somehow clean up the mess they created. Could really appreciate from advice from someone more knowledgeable about this than myself
Newbie
Jun 16, 2016
43 posts
23 upvotes
Contact CRA GSTHST department. They will direct you. Most likely you will pay back the rebate difference only once you have the one year lease agreement.
Deal Addict
User avatar
Feb 1, 2012
1642 posts
2491 upvotes
Thunder Bay, ON
I have sold a couple of principal residences, one of which was PR for only part of the time I owned it. From a PR exemption perspective I'm pretty sure the only thing that matters is the declaration you make when you sell the property and declare it as your PR for all or some of the years you owned it.

This is the form to use when the property is sold:
T2091IND Designation of a Property as a Principal Residence by an Individual

And supporting info:
Income Tax Folio S1-F3-C2, Principal Residence

Cannot help you on the HST issue.
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
Deal Addict
Jun 18, 2018
1363 posts
844 upvotes
Toronto
I believe there is also a rental HST rebate... best recourse is to reach out to the lawyer/CRA....
Newbie
May 23, 2011
83 posts
107 upvotes
There is an HST rebate for rental properties. So you be giving back a rebate and getting another.

However, is it worth the hassle? Did you intend to live in it and then things changed? Like maybe a global pandemic?

CRA looks at intent. If you intended to live in it and now it’s not economical to do so, you’ve done nothing wrong and don’t need to correct it.

But otherwise, yes it’s bout two things. Capital appreciation and the tax rebates. The tax rebates sound like it’s already done. Cap appreciation you can decide when you sell it.
Deal Fanatic
User avatar
Jul 4, 2005
7163 posts
1271 upvotes
Ottawa
Is this a mistake that the lawyer would do or is it the builder? The builder is charging me with the hst rebate discount even though I told them that’s not right since it’s an investment property. I don’t want more work for myself so would I raise it with my lawyer or theirs?

Btw for the new residence rebate for rentals, does the one year lease have to begin on date of closing? That is, can my house close on Jan 1st, then I take few months to furnish it, then get a tenant in July? Would I still qualify?
Member
Jun 30, 2009
349 posts
201 upvotes
JoloLo wrote: There is an HST rebate for rental properties. So you be giving back a rebate and getting another.

However, is it worth the hassle? Did you intend to live in it and then things changed? Like maybe a global pandemic?

CRA looks at intent. If you intended to live in it and now it’s not economical to do so, you’ve done nothing wrong and don’t need to correct it.

But otherwise, yes it’s bout two things. Capital appreciation and the tax rebates. The tax rebates sound like it’s already done. Cap appreciation you can decide when you sell it.
I would not consider this good advice anymore. It may have been in the past but now with house prices skyrocketing, CRA has started considering house flipping to be a business even if it was intended initially to be primary residence. OP may be able to get away with it this time, but if its done often they will likely be flagged for an audit.
Member
Jun 30, 2009
349 posts
201 upvotes
jeeva86 wrote: Is this a mistake that the lawyer would do or is it the builder? The builder is charging me with the hst rebate discount even though I told them that’s not right since it’s an investment property. I don’t want more work for myself so would I raise it with my lawyer or theirs?

Btw for the new residence rebate for rentals, does the one year lease have to begin on date of closing? That is, can my house close on Jan 1st, then I take few months to furnish it, then get a tenant in July? Would I still qualify?
If it's going to be an investment property, you will pay the hst up front. Once you have the lease signed in hand, send everything in together requesting the hst rebate for rental housing.

If you told the builder upfront you are fine. You should also mention it to your lawyer so they can also direct the builders lawyer to ensure that the builder adds the hst rebate for new housing back to the purchase price.

If you have signed paperwork stating it's for primary residence at closing and then change your mind after closing, you can still file to pay the rebate back and then claim the rebate for rental housing after you have the lease signed.

You do not need a signed lease at closing. You can take the few months you needed. At this time, I believe you still have up to 2 years to file for the rebate.
Deal Addict
Jun 18, 2018
1363 posts
844 upvotes
Toronto
What's the diff between the rebate you would get for PR vs rental? I was told by the CRA that is is not much different but not sure.
Deal Guru
Feb 22, 2011
10683 posts
13384 upvotes
Toronto
I think you need to change the use with CRA and pay the hst then apply for the partial rebate once you have a long term lease in place.
Deal Addict
User avatar
Mar 14, 2006
4381 posts
786 upvotes
mazerbeaner wrote: I think you need to change the use with CRA and pay the hst then apply for the partial rebate once you have a long term lease in place.
This is correct, do it ASAP and you will pay some minor interest on the $24,000.
I've used an accountant for this, they were posting here on RFD, was like $350+hst, they wrote a letter and filled the form for me. Generally, it's just simple apply for rental rebate, I can DIY, I thought this scenario, it's better to hire a pro.
Newbie
Nov 15, 2019
89 posts
36 upvotes
The best way to handle this situation will depend on the facts of your case, such as whether the unit has been occupied, and for how long it has been occupied.

I am a tax lawyer specializing in HST rebates, and I have dealt with several scenarios such as this in the past. It is important to be strategic in deciding how to address the situation.
[OP]
Newbie
Feb 7, 2020
19 posts
2 upvotes
santafe wrote: If it's going to be an investment property, you will pay the hst up front. Once you have the lease signed in hand, send everything in together requesting the hst rebate for rental housing.

If you told the builder upfront you are fine. You should also mention it to your lawyer so they can also direct the builders lawyer to ensure that the builder adds the hst rebate for new housing back to the purchase price.

If you have signed paperwork stating it's for primary residence at closing and then change your mind after closing, you can still file to pay the rebate back and then claim the rebate for rental housing after you have the lease signed.

You do not need a signed lease at closing. You can take the few months you needed. At this time, I believe you still have up to 2 years to file for the rebate.
Thanks everyone. It was just closed a few weeks ago. There is no tenant yet.

@santafe , could you direct me towards the procedure for filing to pay the rebate back and then claim the rental rebate after the lease is signed?

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