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My Experience With the New Residential Rental Property Rebate (HST Rebate)

HST Rebate: background info:

I wrote about the HST issue a couple months ago, calling it the “Elephant in the Room” with respect to the pre-construction condo market. I wanted to follow up this post with my own personal experience with dealing with the HST rebates (New Residential Rental Property Rebate-NRRP) when buying a new condo for investment. In short, it was a surprisingly quick and painless process to get back my rebate money once I figured out all the forms and the calculations.

The photo above is of One Park West, or 260 Sackville Street. The building was recently registered and I own a unit in the building which happens to be the Smallest Condo in Toronto. I recently closed on the unit and as an investor-owner had to pay an additional amount for HST on final closing. Here is my story for getting that money back from Revenue Canada:

Note: APS= Agreement of Purchase and Sale

In order to qualify for the rebate, I had to have a tenant in the property and a signed lease for a minimum 1 year (which I did). All in all it only took just 40 days from the time I sent in my application to the time I received my rebate monies back in full. Quite contrary to some of the reports I have heard of it taking as long as a year to get your money back. If you have your paperwork in order and you complete the forms properly this seems to be the result you get. I even was paid some interest on my rebate amount (presumably taking into the account the time I paid it until the time I was paid it back).

HST New Condo Rebate: Additional Learnings

  • Provincial tax (PST) is the biggest portion of the rebate by far
  • Federal tax (GST) is the smaller one
  • Provincial rebate is 100% until Fair Market Value (FMV) hits $450K, then is zero after that
  • Federal rebate is 100% until FMV hits 350K, then reduces down to zero when you hit $450K
  • Therefore if your FMV is less than $350K you should receive 100% of your HST monies back. If your FMV is between $350K-$450K you will receive most of it back. If your FMV is greater than $450K you will receive zero back.

Potential Problems I see with the HST rebate process

  • If the FMV of your condo is $450K you will receive back more than $20K. If the FMV is $451K you will receive zero. What policy maker in Ottawa came up with this scheme??
  • FMV is still a conundrum to me. Who determines it? How is it determined? What happens if the government doesn’t agree with your FMV number?
  • FMV of your unit does not take into account what you will actually ‘net’ on your unit if you sold it at FMV (it does not take into account selling costs).
  • A better system might be to simply add an additional tax on investors who flip their unit after final closing as a percentage of their actual profit. Under the current system, you might both lose money on your sale (due to closing costs when buying and selling), and also have to pay tens of thousands extra in HST just for the ‘right’ to lose money on the transaction. Doesn’t make sense.
  • Is the government in the business of discouraging people from investing in real estate unless that real estate is priced below an arbitrary figure of $450K??
  • FMV is the crux of the calculations used to figure out if you qualify for the rebate. FMV is determined at the time that the HST is paid (at final closing in Ontario). The higher the FMV, the lower the rebate amount. Therefore I observed that it might be better for investors to actually pay the HST amount UP FRONT when buying a pre-construction condo, because this will result in a lower FMV and therefore a higher rebate amount!

Questions about the New Residential Rental Property Rebate (HST rebate)? Wondering if you qualify for the rebate or need help completing the application process with Revenue Canada? Leave a comment below.

October 2012 Edit: It is my understanding that if the FMV is greater than $450K, you will receive the maximum rebate amount up to the value of $450K which is $24K, then any amount over and above the $450K you will be responsible for paying the full HST rebate out of pocket.



67 Responses to “My Experience With the New Residential Rental Property Rebate (HST…”

  1. Robert

    Hi Andrew,

    I checked the CRA website. It does request a lease agreement to claim the rebate, but I doesn’t specify the lease has to be at least one-year. I got a tenant who only wants to sign a lease for 6 months. Can I claim rebate? or I have to find a tenant to sign one-yean lease as minimum?

    Thanks.

  2. Matt

    Andrew,

    Great article thanks!

    My condo agreement says something along the lines of “if the home buyer qualifies for an HST rebate, that rebate is to be given to the vendor”. Is this even legal???

  3. Andrew la Fleur

    @Matt
    They take the rebate and pass it along to the government on your behalf. that’s what that means. it’s a wash when the home buyer is claiming primary residence status. they do it for you so that you don’t have to get involved.

  4. Andrew la Fleur

    @Robert
    I’m pretty sure it has to be a 12 month lease.

  5. MIke

    Hi Andrew,

    Can you please clarify the FMV?
    Who determines it? How is it determined? What happens if the government doesn’t agree with your FMV number?

    As you mentioned, this is the key point.
    I bought a newly built Condo in Nov 2011 for $289K. I am closing in Dec. 2013. What is the FMV on this condo now? I am thinking of taking 4% appreciation year over year.. is this fair??

    Many thanks

    Mike.

  6. Andrew la Fleur

    @mike,
    what i’m hearing lately from David Feld is that when they submit their applications to CRA for their clients, they just leave the FMV as the purchase price and let the CRA decide if they agree with it or not.

  7. Vanessa

    First, I would like ti say that I like your web site and really appreciate your effort in helping all of us! THANK YOU!!
    I have a couple questions and would appreciate if you can help me. We bought a condo in 2009 and “the purchase price already includes a component equivalent to the federal goods and svcs tax less the new housing rebate”. Since our price includes only GST minus rebate, how much more tax we have to pay on the title transfer date and if that new portion of the tax will include any rebate.

  8. Colin Woodyard

    Great website. Can it be a copy of the lease or does it have to be the original lease document?


  9. Thanks for the great article Andrew. As I’m closing on my own condo would love to know the exact forms you used for your investment condo. Ontario and Federal.

    Cheers.

  10. Silver

    Hi Andrew, the calculation of FMV is confusing. It says excluding GST/HST. During the closing of my new rental townhouse, the builder asked me to sign the rebate form for them. Can we use that as a reference to put the FMV? Do you have any details of that calculations? Thanks.

  11. Dianne

    Hi Andrew,
    I bought a house with my son and a friend. My son was going to live in it but after closing decided not to. The HST was not paid on closing, so later I got a bill for the HST and interest.
    I then filled out the HST rental form and attached a copy of the lease for the property.
    The only rebated the HST, not the interest they had charged.
    Do I have a remedy to go after the interest they charged — as the intent changed after closing.
    thank you,

  12. Andrew la Fleur

    @dianne
    Not sure if you have a claim there for the interest. CRA is a mysterious organization. Contact them for a ruling.

  13. Lav

    Hi Andrew,

    Just reading the clause in my purchase agreement about the HST rebate and that the vendor wants us to warrant that we are moving into the home although it will be a rental property. There is also something on the line that the HST rebate is transferred to the vendor. Can we still claim the HST rebate.

    Thanks,
    Lavaniya

  14. Andrew la Fleur

    Lav,
    if you rent it out, you pay the HST rebate on closing, then you go and apply to get it back.

  15. JP

    Hi Andrew lets see if you can help me. I bought a condo in 2010 & final closeing was may 2014. I got HST rebate and I start to live in condo. 3 months later I found out that I have to go for heart surgery and my parents offer me to move in with them because my wife is 8 months pregnant also. We decided to sign lease agreement with del rental for 1 year to find me tenant for few months. They require to sign 1 year contract with them which I did. As soon as I sign contract builder send me bill to repay HST rebate. I cancel contract as soon as I got bill. Del rental never rented out as of yet and I decided to continue living at my condo. Now builder still harassing me to repay saying my intention was to rent condo which is not true. What should I do?

  16. Andrew la Fleur

    JP
    that’s a tough situation!

    Builder’s are cracking down because the CRA is forcing them to.

    If you have never rented it out and you continue to live there as your principle residence then there is no HST to repay.

  17. RK

    Helpful article. I would like to add that the provincial portion of the rebate can still be claimed even if the value is over 450k, only the federal portion becomes 0. The provincial portion is calculated as 75% of the provincial portion of the HST… so 75% x amount of HST x 8/13 (Ontario) upto a maximum of $24k.

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