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Real Estate News: Assignee-Purchasers: Eligibility for a GST/HST New Housing Rebate Where a Purchase and Sale Agreement is Assigned

By Greg Mallia, Regency Law Group

October 2020

A frequent question among new housing purchasers is how the GST/HST (“HST”) new housing rebate applies to the sale of the new home. Generally, the purchaser enjoys a rebate of a portion of HST payable on the purchase of a newly built home if he or she intends to occupy the property as a principal residence.

Where the agreement of purchase and sale for new housing is assigned, the assignee-purchaser remains eligible for a rebate of HST; however, how and when the rebate application is made could mean a difference of thousands of dollars in tax savings to your client, depending on the circumstances.

The excerpt below is taken from the Canada Revenue Agency’s publication on new housing rebates of HST when the Agreement of Purchase and Sale is assigned.

If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence.

Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).

The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.

Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.

Where an agreement of purchase and sale is assigned, only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house. In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

This poses an interesting quandary for assignee-purchasers of newly built homes who desire the full benefit of the HST rebate that is available.

To maximize the amount of the rebate, payment of the full purchase price including HST must be made to the builder on closing. As builders commonly include the net HST only in the purchase price (under the condition the purchaser occupies the property as a principal residence), this means an increase of tens of thousands of dollars to the purchase price that the assignee-purchaser may not have budgeted for on closing.

The common result is that the assignee-purchaser loses the ability to include in their application for the HST rebate the portion of HST paid on the purchase price to the assignor-purchaser for the assignment.

Many purchasers are unaware of the HST rebate implications when entering into agreements of purchase and sale and assignments for new housing. If your assignee-purchaser client has flexibility with financing, the payment of the HST in full on closing will allow the client to apply for the full amount of the HST rebate that is available, subject to meeting the other eligibility qualifiers that are required by CRA.

One of the founding Partners of Regency Law Group, Gregory Mallia drives a diverse practice that is centered around real estate and litigation.

He can be reached at:
Regency Law Group
25 Main Street West, Suite 2010,
Hamilton, ON
L8P 1H1
Phone: 905-383-0500
Email: gmallia@regencylawgroup.ca