Real Estate

Selling Pre-Construction Within One Year - HST Rebate

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  • May 15th, 2017 8:39 pm
Newbie
May 9, 2017
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Selling Pre-Construction Within One Year - HST Rebate

Question for any knowledgeable individuals out there - are there any exemptions to the HST rebate rule if you sell a newly constructed condo/home within the first year? From googling it seems like you will not be eligible for the HST rebate if you don't live in the newly constructed condo/home for at least a year (and thus will be required to pay back the HST rebate which can be up to $30,000). However, I'm wondering if anyone has experience with this and whether it's a black or white rule. What if you purchase another home and live in it for a year? Could you argue you had a legitimate reason for moving out within a year and that you were not in the business of investing? I find myself in this predicament where I purchased a new condo but due to the proximity to work I am would like to move within a year. Thanks!
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Jul 14, 2008
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From what I have read, it's a pretty strict rule. I know with buying a home as a PRIMARY RESIDENCE, you do have leeway. In that case, what matters is the INTENT when you purchased it, so there can be legitimate reasons, but you will have to make a persuasive case as to why.

However, when it comes to property purchased as a rental, I cannot find in any of the documents verbiage about "intent". Perhaps I missed it, but from what I could gather, you would need to have someone in there for 1 year, and if you sold before you did - and did receive the HST rebate - you'd be on the hook for not just the amount given, but also acrued interest.
Last edited by onlineharvest on May 10th, 2017 7:08 pm, edited 1 time in total.
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May 30, 2005
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No, if you sell, they will for sure find out. The best you can probably do is move out but keep your utilities and other identification info linked to your name, as if you were still living there. You are better off selling on assignment and not moving in and closing at all if you are not going to be there for a full year.
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OP, I hope you're also aware that even if you are eligible for the HST rebate as a landlord, you will have to pay it upfront when closing on the unit. A lot of people are not aware of that.

You said "pay back" so I just wanted you to be aware you don't get it discounted off the price at closing as when you purchased a home for primary residence. You pay it up front and receive a rebate from CRA. And should you disqualify yourself, be careful, as it may not happen right away and you'll be on the hook for additional fees, including interest.

Another option would be to simply pay the HST on closing, not apply for the rebate, and consider that additional money a cost of the sale. Should you actually be eligible (you decide to keep a tenant in there for 1 year after all), I believe you have 2 years to apply.

But after 2 years, no dice.
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onlineharvest wrote: OP, I hope you're also aware that even if you are eligible for the HST rebate as a landlord, you will have to pay it upfront when closing on the unit. A lot of people are not aware of that.

You said "pay back" so I just wanted you to be aware you don't get it discounted off the price at closing as when you purchased a home for primary residence. You pay it up front and receive a rebate from CRA. And should you disqualify yourself, be careful, as it may not happen right away and you'll be on the hook for additional fees, including interest.

Another option would be to simply pay the HST on closing, not apply for the rebate, and consider that additional money a cost of the sale. Should you actually be eligible (you decide to keep a tenant in there for 1 year after all), I believe you have 2 years to apply.

But after 2 years, no dice.
It's common for new builds to include the HST discount as part of the purchase price.
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Jun 11, 2013
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Wait a minute, so if you buy a new construction home as your primary residence and your builder got the HST rebate (since it was built into the house price) and you move out in the first year they can come and try and collect it back? I am thinking of possibly moving to Ottawa soon and cashing out on my current place so this would effect me quite alot.
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Oct 3, 2015
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From the CRA website. Doesn't mention minimum period of time you have to be at the house for.

Primary place of residence
Primary place of residence means a house, owned jointly or otherwise, that is intended to be inhabited by an individual on a permanent basis. The intention to use the residence as a primary place of residence must be evident at the outset of acquiring, constructing or substantially renovating the residence. While an individual may build or acquire a new house in Canada, if his or her primary place of residence remains outside Canada, then the house in Canada would be a secondary place of residence and not qualify for the GST/HST new housing rebate. A person may have more than one place of residence, but is considered to have only one primary place of residence.

Proof of occupancy
Proof of occupancy is the documentation that proves you occupy a new house. This proof could be:

the new house insurance policy with dates and coverage;
vehicle insurance or registration that shows the new address; or
an invoice for telephone, hydro, or natural gas hook-up and cancellation at the previous address.
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crucial1 wrote: Wait a minute, so if you buy a new construction home as your primary residence and your builder got the HST rebate (since it was built into the house price) and you move out in the first year they can come and try and collect it back? I am thinking of possibly moving to Ottawa soon and cashing out on my current place so this would effect me quite alot.
Yes, the CRA would ask you to pay the HST back. Notice that builder prices all say HST is included in the price, meaning the HST rebate is included.
Tons of things for sale!
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Getting some mixed messages here, just to clarify it is my place of residence and I was under the assumption that if so I would not have to pay back the HST when selling. My main concern is that this forum is the first I have heard mention of having to have lived in the place for a full year or I risk them taking the credit back. Lalalum I think you are correct and that is what I understood too...however it looks like I am seeing some conflicting info on this.
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Jon Lai wrote: It's common for new builds to include the HST discount as part of the purchase price.
Right, which is why it's a surprise to investors who once declaring the purpose of the sale on closing - non-primary - are forced to come up with that portion.
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crucial1 wrote: Getting some mixed messages here, just to clarify it is my place of residence and I was under the assumption that if so I would not have to pay back the HST when selling. My main concern is that this forum is the first I have heard mention of having to have lived in the place for a full year or I risk them taking the credit back. Lalalum I think you are correct and that is what I understood too...however it looks like I am seeing some conflicting info on this.
I think we got confused based on the language of your original post. It made it appear you were asking if you'd be responsible for the HST rebate if you leased out the property to a tenant for less than 12 months - indicating purchase as an investment property (landlord).

You didn't mention this will be your primary residence. If you move in, you are eligible for the HST rebate. What is important is that this was your intent when you signed the deal/purchased your home.
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thanks for clarifying I should be good then
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crucial1 wrote: thanks for clarifying I should be good then
Always speak about such things with your lawyer, but it is also my impression if you "flipped" the home pre-closing, or on assignment, and moved to Ottawa, you have a pretty clear-cut case with the CRA. Remember, intent is important at the time of purchase. And if you decided to move to a different city that is 4-5 hours away, and demonstrated no intent to move or sell the unit for a quick profit prior to, you should be good. Just remember in these cases the onus is on you to prove it was purchased to move in, but something changed. Requiring relocation for a new job is an easy sell IMO.

From an hst website:
"HST Rebate for New Condo Flippers
The intention of a buyer affects their eligibility for a rebate according to the recent court case Wong v. Her Majesty the Queen. A buyer must have bought the property with the intention of using it as their primary residence or the primary residence of a close relative. The buyer's intent only matters at the time of the initial purchase, not at any later time. This means that an individual who purchases a new condo to flip it for profit is not eligible for a rebate since the condominium was never intended to be their primary residence. The exact amount of time that a purchaser must reside in a home in order to be granted the rebate is handled on a case-by-case basis and the main determining factor is how legitimate is the claimant's usage of the property as his or her primary residence."
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crucial1 wrote: Wait a minute, so if you buy a new construction home as your primary residence and your builder got the HST rebate (since it was built into the house price) and you move out in the first year they can come and try and collect it back? I am thinking of possibly moving to Ottawa soon and cashing out on my current place so this would effect me quite alot.
Just to answer, yes, of course the CRA can come after someone if they suspect you misrepresented your intent to purchase as a primary residence. The fact that the CRA doesn't mention a minimum is not helpful really, as they can determine what they think is "too short":

"Also, if the property is your principal residence, there is no period of occupancy specified by the CRA required to allow you to keep your refund. That is, there is no minimum amount of time you, or a relation to you, must use it as a principal residence in order to keep the HST rebate.  Each case is handled on a case-by-case basis by the CRA as required. If the residency period is fairly short, less than a year for instance, as long as you can justify the reasoning for such a short residency, it may be enough to satisfy the CRA. For example, a qualified reason might be that shortly after moving into the property, your parents fell ill, thus requiring you to live with them. Another possibility is that you moved to a different city for work purposes."

The best advice is to talk to your accountant when you buy or sell your property, to understand the tax implications both from HST rebates and any potential issues in your present situation
Last edited by onlineharvest on May 11th, 2017 1:20 pm, edited 1 time in total.
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Jun 11, 2013
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Yeah its that "grey area" that I find a bit unsettling though...like when I bought my home I was 100% doing it because I wanted to live there and I have been living there...but now with how crazy the markets are I am thinking of cashing out and having a better quality of life elsewhere. It is kind of hard for me to predict whether they would think that is a valid reason or not and I would be pretty damn ticked if I ended up having to pay HST back because of that.
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Nov 4, 2008
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RealEstate101s wrote: I find myself in this predicament where I purchased a new condo but due to the proximity to work I am would like to move within a year. Thanks!
if you changed your job after purchasing a condo, you can prove you had intentions to live there, but circumstances changed...
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crucial1 wrote: Yeah its that "grey area" that I find a bit unsettling though...like when I bought my home I was 100% doing it because I wanted to live there and I have been living there...but now with how crazy the markets are I am thinking of cashing out and having a better quality of life elsewhere. It is kind of hard for me to predict whether they would think that is a valid reason or not and I would be pretty damn ticked if I ended up having to pay HST back because of that.
Which is why it's very important to speak with a professional (tax accountant, lawyer, etc). If you ever have to speak with CRA, you want to make sure you don't misrepresent yourself, and provide adequate rationale. For instance, it says "work purposes", but does it matter if its voluntary? While I don't think it's a problem in your case, I'm not 100% certain. Considering the amount, I wouldn't leave this to chance and ensure all your ducks and talking points are in a row should you have that discussion with the CRA.
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May 9, 2017
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onlineharvest wrote: From what I have read, it's a pretty strict rule. I know with buying a home as a PRIMARY RESIDENCE, you do have leeway. In that case, what matters is the INTENT when you purchased it, so there can be legitimate reasons, but you will have to make a persuasive case as to why.
Thanks! This is what I was hoping for - my intention when purchasing the condo was to live in it as I had received a job offer to work nearby (10 mins from the location). However my work requires travelling to clients and the vast majority are in downtown and so I was hoping to move downtown.

If anyone has any experience in this grey area I'd love to hear about it!

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