Beginning in July of 2010, the Government of Canada introduced the HST Rebates to offset the newly combined harmonized sales tax and goods and services tax on new build investment properties. This new sales tax was a combination of the provincial and federal sales taxes paid on nearly all goods. The Rebate is available to individuals who have purchased a preconstruction investment property, provided they meet all conditions for 1 of two rebate programs. Closing costs associated with a real estate purchase may include land transfer tax, legal fees, and levies on new builds. It is important to communicate clearly with your builder or contractor what the primary intended use of your residence will be. In many circumstances, the Agreement of Purchase of Sale from the builder assumes that the purchase will be using the property as a primary residence – in which case, the builder will pay the HST and receive your property’s HST New Housing Rebate in lieu of you owing anything on final closing. In this case, a new build property being used as a primary residence by the purchaser or the purchaser’s immediate family, signing over the rebate to the builder means that purchaser is not responsible for the HST on final closing.  However, investors who purchase a new build investment property or condo are responsible for a component of the HST, determined by purchase price, on final closing.  Investors also qualify for the HST Rebate through the program called the New Residential Rental Rebate Program.

 

 

The qualification process for the New HST Housing Rebates can make matters very confusing for investors. When HST was introduced, the government recognized the increased burden that this would put on investors and introduced a rebate system reimburse investors. The purchase price of a newly constructed property is subject to HST. The Ontario HST rebate for new properties is available to anyone in the province who purchases a new property or condo from a builder, or who hires a builder to construct a new house. When purchasing a new residence for investment purposes, the Ontario New Residential Rental Property Rebate can only be applied for by the buyer after closing and never by the vendor. While a rebate can only be applied for after closing, this additional financial burden can leave investors in financial distress, the portion of HST due on closing can range anywhere from $16,000-$29,000.

 

 

It takes on average, three to five years for a condo to be built and closed. Closing a new build investment property for a non-owner occupied residence is expensive. Failure to pay the required HST due on final closing may jeopardize the owner’s deposit and can result in litigation from the builder for breach of contract. If you’re looking to invest in a property to generate income, but do not have the additional cash on hand for final closing, there are companies willing to help. The first waive of investment condos are closing since the new HST rules took effect in 2010 and many investors are left unsure about the amount of HST due on the date of closing until about five days prior when their solicitor notifies them, leaving them with very little time to come up with a solution. Since banks do not lend for HST tax purposes, companies like HST Relief: Rebates & Loans have had to step in and give financial aid to those purchasers to close their investment properties. HST Relief can help investors feel comfortable about the purchasing process, as they not only will lend you the necessary cash, but they also file and collect your rebate from the CRA, helping to make the process as stress-free as possible. Filing incorrectly may cause an investor to forfeit their rebate.