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Jun 23, 2015
Services: Real Estate Law

The HST New Housing Rebate: When is it Available?

The HST New Housing Rebate: When is it Available?

Purchasing a new home should be a happy, occasion; home ownership is associated with independence, freedom, and investment. At the same time that the Ontario government started to charge HST on the purchase of new homes, it also introduced the HST New Housing Rebate in order to ease the increased financial burden on buyers.

Buyers claiming the HST rebate need to be careful to ensure that they qualify for the rebate. If new home Buyers want to claim the rebate they must adhere to a strict list of conditions. In recent times, Buyers that improperly claimed the rebate had the Canada Revenue Agency knocking on their door demanding that the rebate be paid back.

This post will deal with one of the rebate conditions imposed by the CRA: that the Purchaser(s) or their relation must occupy the home as their primary residence.

Caveat “Co”-Emptor

A common situation arises where a home buyer cannot qualify for a mortgage on their own, so a family member, friend, or business associate is placed on title to help facilitate bank financing. Home buyers who find themselves in this situation need to be extra careful if they are claiming the HST rebate.

In order to qualify for the HST rebate a buyer must intend for themselves, or their relations, to occupy the home as their primary residence. When co-buyers are involved, every individual placed on title must adhere to the conditions, or else no buyer is eligible for the HST rebate. 

The CRA strictly defines what constitutes a relation. A relation includes spouses, parents, grandparents, or siblings. It does NOT include: uncles, aunts, cousins, nephews, nieces, close friends, or business associates.

So what does this mean? It means that if you are buying a newly built home and claiming the HST rebate, you or the aforementioned “Relatives” must occupy the home as a primary residence upon closing. You are not entitled to the HST rebate if you buy a newly built home and someone other than an approved “Relation” uses it as their primary residence. A recent case dealt with the situation where an uncle went on title to the property in order to enable his nephew to qualify for a mortgage. Because an uncle does not fall within the definition of a “Relation” for CRA purposes, the whole of the rebate was disallowed.

What does “Primary Residence” mean?

Under the law, “Primary Residence” has no precise definition. An individual’s primary residence is factually specific and determined by looking at all the factors surrounding the individual.

In order for a home to qualify as an individual’s primary residence, there are a number of factors the CRA will look at. Primary residence implies a level of permanence, and an individual can only have one primary residence. Some of the factors the CRA will consider when determining an individual’s primary residence include: the amount of time an individual stays at the residence, whether the residence is being used for mailing purposes, whether the occupier votes in the residence’s jurisdiction, whether the occupier’s children go to school in the area, and whether the occupier owns other residences.

Our Advice

If you are buying a new home, or extensively renovating an existing dwelling, be careful about claiming the HST rebate. When you claim the HST rebate, it must be your intention that everyone on title, or their “Relation”, plans to occupy the home as their primary residence.

The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.