Confused about HST

[Register123]

I bought a condo pre-con in Oct 2009 for $329 900 not including HST as stated in purchase agreement. I will be closing in 2012. Will I have to pay any HST, and if I do, is it all the HST paid up front then you have to apply somehow for the rebate. I still don't understand this builder 2% input reduction in building costs. Will I have to do or pay anything extra on closing with respect to HST. So confusing.

Any advise or input is appreciated.

 

[peter330]

Hello Everyone

I need to revive this thread as I am quite confused myself about HST and what it means to my preconstruction Condo. Admittedly, I was anxious in purchasing and didn't seek legal assistance when going over the purchase and sale agreement, I was just excited to be a new property owner.

1.) My condo has the HST built in to the purchase price however they have claimed all rights to HST rebates on behalf of me and will be receiving any and all benefits from this as per the P&S agreement. Is this common?

2.) What does this mean as far as land transfer tax? Are HST and land transfer tax one and the same? If not, will a new home owner have any recourse in collecting the fees paid? I feel like I might have rescinded this right to the builder.

I am really at a loss here which is no one's fault but my own but I hope someone can shed someone familiar with this could shed some light on this for me. Thanks in advance!

 

[Jennypea]

hi Peter330

I'm not an expert but this is my understanding:

1) the builder can claim any HST rebate in the agreement of purchase and sale, and unless you took issue with it at the time of purchase and had that clause negotiated out of your agreement of purchase and sale there's nothing you can do to get that money. we bought new construction a few years ago and our builder did the same thing and our lawyer said this is common. that being said, if anyone here knows a way to get around that please let me know as well.
so the short answer is that you won't get any HST rebates back on the purchase.

2) land transfer tax is unrelated to HST. you will have to pay that on closing. depending on where you're located I'm sure you can google a land transfer tax calculator to find out how much you'll owe.
Now, I think that the Toronto Land Transfer Tax is based on your purchase price less HST, so if you paid $500K for your condo including HST the land transfer tax is calculated on the non HST amount of ~$442,000, which is a small comfort

 

[adeel]

hi Peter330

I'm not an expert but this is my understanding:

1) the builder can claim any HST rebate in the agreement of purchase and sale, and unless you took issue with it at the time of purchase and had that clause negotiated out of your agreement of purchase and sale there's nothing you can do to get that money. we bought new construction a few years ago and our builder did the same thing and our lawyer said this is common. that being said, if anyone here knows a way to get around that please let me know as well.
so the short answer is that you won't get any HST rebates back on the purchase.

2) land transfer tax is unrelated to HST. you will have to pay that on closing. depending on where you're located I'm sure you can google a land transfer tax calculator to find out how much you'll owe.
Now, I think that the Toronto Land Transfer Tax is based on your purchase price less HST, so if you paid $500K for your condo including HST the land transfer tax is calculated on the non HST amount of ~$442,000, which is a small comfort

Re #1, not sure there is much value to be had by having HST clause negotiated out...the price you pay is HST/rebate inclusive. If you take the clause out, you will pay more on closing, to be refunded from the gov't later..but its extra work for not getting any benefit out of it...it is not as though you get more refund by doing the application yourself...in both situations your net position will be the same.

 

[AKS]

Re #1, not sure there is much value to be had by having HST clause negotiated out...the price you pay is HST/rebate inclusive. If you take the clause out, you will pay more on closing, to be refunded from the gov't later..but its extra work for not getting any benefit out of it...it is not as though you get more refund by doing the application yourself...in both situations your net position will be the same.

If your purchase price is 500k inclusive of HST. The provincial HST portion of 8% paid is 38,095. You will get a rebate of 24,000. That's how much the builder will be getting instead of the home owner. If you mean by removing the clause, the builder increases your purchase price by 24k, then the net position will be the same.
If the purchase price remains at 500k inclusive of HST, the owner will be ahead by 24k because the 500k will include the 38k portion of the 8% HST.

 

[adeel]

If your purchase price is 500k inclusive of HST. The provincial HST portion of 8% paid is 38,095. You will get a rebate of 24,000. That's how much the builder will be getting instead of the home owner. If you mean by removing the clause, the builder increases your purchase price by 24k, then the net position will be the same.
If the purchase price remains at 500k inclusive of HST, the owner will be ahead by 24k because the 500k will include the 38k portion of the 8% HST.

the purchase price is inclusive of HST AND rebate...without the clause your out an extra 24k that you then have to take the time to get back

there is certainly no way that the builder is going to let you somehow come out ahead...

 

[AKS]

the purchase price is inclusive of HST AND rebate...without the clause your out an extra 24k that you then have to take the time to get back

there is certainly no way that the builder is going to let you somehow come out ahead...

That would be different if the buyer was old the purchase price is inclusive of HST AND REBATE. If the buyer wasn't told it's inclusive of rebate and stuffed in a small clause within the thick document that it inclusive of rebate in the purchase price. Then that would be a different story.

 

[jchiu]

Hi there,

I bought a condo in 2008 before HST. The price includes the GST minus the rebate.

The condo occupancy just happened, and I want to rent the unit out.

The builder is asking me to amend the agreement such that..

"The Purchaser acknowledges that the purchase price in the Purchase Agreement is
inclusive of HST, less the Rebate. The Purchaser acknowledges
the Rebate will be added to the purchase price."

This does not sound right to me. Why do I have to pay HST?

Thank you.

 

[James]

Hi there,

I bought a condo in 2008 before HST. The price includes the GST minus the rebate.

The condo occupancy just happened, and I want to rent the unit out.

The builder is asking me to amend the agreement such that..

"The Purchaser acknowledges that the purchase price in the Purchase Agreement is
inclusive of HST, less the Rebate. The Purchaser acknowledges
the Rebate will be added to the purchase price."

This does not sound right to me. Why do I have to pay HST?

Thank you.

The HST new housing rebate only applies if you are living in the unit. Builders, by default, price their units under the assumption that it will be your place of residence therefore they discount their selling price by the HST rebate. As an investment property, the rebate that was applied initially will now have to be added back to the purchase price.

More info from CRA here: GST/HST New Housing Rebate
and here: GST/HST New Residential Rental Property Rebate

 

[jchiu]

hi there, thanks for the reply.

I understand the rebate applies to if living in the unit.

However, as this is a property bought in 2008 where only GST is applicable, it is not clear as to why I must pay the HST. I understand that GST rebate will have to be paid..

 

[James]

^ I'm wondering if by HST, they are really referring to the GST/HST. In your case the GST/HST would only consist of the GST portion since that was what the builder would've rebated back in pre-construction. Best thing is to check with your lawyer who will be facilitating the final adjustments.

 

[jchiu]

Checked with two accountants and CRA as well and also verified in the following link..

http://www.cra-arc.gc.ca/E/pub/gi/gi-077/gi-077-e.html

"In the case of a written agreement of purchase and sale entered into on or before June 18, 2009, to purchase newly constructed or substantially renovated "single unit housing", a residential condominium unit or condominium complex, where both ownership and possession of the housing are transferred under the agreement after June 2010, the purchase of the housing may be grandparented."

For single unit housing, the grandparenting rule only applies if the purchaser is an individual. There are no conditions with respect to how the individual will use the housing. For example, the purchase may be grandparented whether the individual (purchaser) rents the housing to a third party on a short or long-term basis or occupies the housing either as a principal residence or otherwise."


The key is there is *no conditions* with respect to how the individual will use the housing.

 

[Kalpesh]

Hi,

I would like to buy under construction condo town home in Scarborough area which has HST included in price. With HST it's price is $3,97,999. Closing will be in 22nd August 2016. Above unit is my 2nd home which I might rent out or the place where I am living right not will be rent out. I haven't decided yet which one I will rent out.

Do I have to pay HST in my closing amount? I am paying HST to builder in his total price. In other words what would be my exact closing amount? I am confused please any one knows answer of my above confusion.

Online closing cost calculator says some big amount if that's right then I don't have that much closing amount.

Please reply

Thanks

 

[rbt]

Hi,

I would like to buy under construction condo town home in Scarborough area which has HST included in price. With HST it's price is $3,97,999. Closing will be in 22nd August 2016. Above unit is my 2nd home which I might rent out or the place where I am living right not will be rent out. I haven't decided yet which one I will rent out.

Do I have to pay HST in my closing amount? I am paying HST to builder in his total price. In other words what would be my exact closing amount?

This depends on your specific contract. Often the agreement states that you will give the builder your first time buyer HST credit and that the price shown has been discounted by that amount. The fact that the price is $2k under the limit implies this is true here too (price is for first time buyer who will use it as primary residence).

In that case, a chunk of HST will be added on closing which is not in that price. This is a question for your lawyer. In fact, it's something your lawyer will tell you about during your 10 day cooling off period. You have this opportunity to take the agreement to a lawyer and find out what you really have to pay (still somewhat unknown, but they'll give you a typical estimate). You can backout of the purchase agreement during that time.

In addition to the potential HST, there will be other closing costs which are not in that price (unexpected costs for the builder which they push down, title insurance, lawyer fees, etc.) which can be another 2% of the purchase price.

Ask your bank after your lawyer gives you an estimate if you can mortgage the total price (including closing costs). They often will stick to the advertised price as being 100%.

Now you can decide if you want to go through with the purchase or not. If you want to cancel the agreement, make sure your lawyer knows that and gets a copy of the page you sign to break it.