By: Jayson Schwarz LLM
It is the week before your closing on your newly constructed home. Your lawyer has just reached out to you and explained the money you need to bring in. All of this is set out in the statement of adjustments (“s/a”) received from the builder’s lawyer. in that s/a are the numbers relating to real estate taxes and HST. my goodness it looks confusing……
As buyer, you are responsible for property taxes from the day of closing and the prior owner (the builder) is responsible for property taxes up to the day before closing. When closing on a new build condominium or freehold property, you should always be aware that at the time of closing, the taxing authority has not yet assessed your property, so there is no tax being billed or collected on your new home. Months will pass before roll numbers are created for each new property. When the roll numbers are issued to the local municipality, a tax bill will be issued. These tax bills include property tax charges back to the creation date of the new property so you will receive what are called omit or supplementary tax bills. These charges can often include 12 to 18 months’ worth of tax obligations. You will also receive a tax bill for the current cycle as well. At closing, the builder will make an educated guess on the current and future tax situation and adjust accordingly.
Remember when you later get your assessment and true tax bill that you may be entitled to an adjustment from the builder!!!
The HST situation is confusing from the start. First if you or a member of your immediate family is going to live in the home you are entitled to the HST rebate. If you intend to rent you are not entitled to it on closing but apply to get it back with your tax return. Then of course there is the issue of assignments. If you have assigned your agreement, make sure it is in the assignment agreement that the buyer of your unit understands he or she will not qualify for the rebate, firstly on closing and has to get it back later and moreover you will have an obligation to collect HST on the increase in value and possibly on the deposit, from the assignment buyer and remit to CRA. Further in pre-construction condominium assignments with occupancy closings, an assignee must confirm whether the unit has ever been occupied. If a unit has been occupied then the assignee may not be eligible for the Rebate; make sure this is handled in the assignment offer. Finally don’t forget that HST may be levied on all of the appliances and other chattels that come with the property.
The moral of the story is that you really should retain an experienced lawyer to help you through these issues whether buying or selling. Realtors are great but it is your lawyer whom will take the time to review everything properly, answer any questions and ensure you are protected.
Jayson Schwarz LLM is the senior partner at Schwarz Law Partners LLP, a real estate and business law firm.
Perhaps the most difficult part of writing these articles relates not the actual writing, but thinking of a topic to address. So help us!!! Mail, deliver or fax letters to the magazine or to us, use the web site (www.schwarzlaw.ca), email (info@schwarzlaw.ca) and give us your questions, concerns, critiques and quandaries. I will try to deal with them in print or electronic form.
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