If you are buying a newly constructed or substantially renovated home, you need to consider the impact of the HST, as this new tax and associated transitional rules could have a significant impact on your closing costs.
Will your agreement of purchase and sale be “grandparented”?
Newly constructed or substantially renovated homes where the agreement of purchase and sale was entered into on or before June 18, 2009 will not be subject to the 8% provincial portion of the HST where both ownership and possession of the homes are transferred after June 2010.
Assuming certain conditions are met, grandparented agreements of purchase and sale that are assigned to third parties will generally retain their grandparented status.
The New Housing Rebate
According to the Ontario Ministry of Revenue’s publication titled “Additional Information for Homebuyers and the Housing Industry”, the new housing rebate ensures that new homes with a purchase price up to $400,000.00 would not be subject to an additional tax amount compared to the RST currently embedded in the prices of new homes.
The plan is to rebate 75% of the provincial component of HST paid for new housing to be occupied by the purchaser, or a member of the purchaser’s immediate family, as a primary place of residence, up to a maximum rebate amount of $24,000.00.
What can you do to prepare yourself for the impact of HST on your particular purchase transaction?
It would not be wise to wait until the eve of closing to turn your mind to the impact of HST on your purchase transaction. I recommend every purchaser review their agreement of purchase and sale with a lawyer as early as possible in the process, ideally before you sign on the dotted line.
Even if you are already bound by an agreement of purchase and sale, your lawyer will be able to tell you how the HST will affect your particular purchase transaction. You do not want to find out a few days before closing that you do not qualify for the new housing rebate and that you have to come up with an extra $24,000.00 to close the transaction! The costs associated with consulting a lawyer early in the process pale in comparison to the emotional and psychological costs associated losing your mind two days before the closing of what may turn out to be the single biggest investment you will ever make.
For further information regarding the HST, please click here.