HST Rebate and Pre-Construction
So you've made the decision to invest in a pre-construction property and not quite sure how the HST works. We know that the HST is included in the purchase price. Let's discuss the process of redeeming the rebate and how different scenarios might affect your eligibility.
Your Intentions: Live in? Rent Out?
Why might the builder and lawyer care about your intention with this property?
It's simple: the builder includes the HST in the price because they know that the government rebates a portion of it back to the purchaser. In the agreement or purchase and sale, the builder specifies that the buyer needs to sign the paperwork to apply for the HST rebate, and assign the rebate back to the builder. So, the price you paid was all-in with HST. Now, the money coming back from the HST rebate goes to the builder, and not the buyer, based on the agreement you signed with the builder.
The buyer or their immediate family needs to live in the unit as a primary residence in order for the builder to apply for the HST rebate.
What happens if I don't want to live there?
The builder will charge you as the buyer on closing for the HST rebate and then it will be up to you to apply to the CRA after closing to receive the HST rebate back. So, in the case that you bought the house or condominium unit as a rental investment, you would need to sign a 1 year lease minimum with a tenant and apply for the rebate after closing.
Considering flipping it after closing? You would be disqualified from eligibility to receive back the HST rebate (depending on the timing of when you sold the property and the use of it before the sale). There would be more intricacies and complications if you purchased the property by way of an assignment deal.
HST rebates aren't always as simple as they may seem. It's important to consult with a qualified real estate lawyer to discuss your options and explain these scenarios in more detail.