Dear Ross, last year I took occupancy of my new condo in June, but the actual sale did not close till February of this year. (I understand this is fairly common) I decided to stay in my own apartment and rented the new condo out. When I went to apply for a mortgage my lawyer told me I will have to pay an additional $24,000 on top of the purchase price – because I did not move into my condo, but rather I rented it out. Surely this isn’t correct? Help! VS, Toronto.

The HST on a new home or condo purchase is normally paid by the builder and included in your purchase price. Typically, the price in a builder offer assumes the purchaser is eligible for a rebate of part of the HST, and the rebate is assigned back to the builder per the purchase agreement.

In order to qualify for the HST rebate, the house or condominium must be acquired for use as the primary place of residence of the titled purchaser or his or her relative. (See box below) If you moved into the unit as your principal residence, the builder credits you their HST rebate upon closing.

However, If you bought a brand new condo from a builder as a rental property and never moved in yourself, you do not qualify for the traditional New Housing Rebate as you (or an immediate family member) did not take occupancy of that unit.  CRA will demand that you will pay  the HST on the unit PRIOR to closing your purchase. This can be as much as $24,000. This problem also arises in some cases where the buyer does move in, but sells the property fairly soon after.

Bob Aaron is a Toronto real estate lawyer and chair of the Tarion consumer advisory council. He can be reached at . On December 5, 2013 he wrote an article in the Toronto Star on this topic. He said…..

“Buyers who take title along with spouses, parents, grandparents or siblings for mortgage purposes are not disqualified from receiving the HST rebate. But aunts, uncles, cousins, nephews or nieces, friends and business associates who sign on — even for a small percentage — just to satisfy the lender’s requirements, will disqualify the buyer from receiving the entire HST rebate.

In these situations, buyers who have received past rebates but failed to qualify for them should not be surprised to receive a very unwelcome letter from the CRA audit team. This situation is unfair and illogical. It’s time for the federal government to change the rules.”

I have heard several stories recently of people whose occupancy is being challenged by CRA, even though they did in fact move into their new property upon completion. It seems the government expects you live in this property for at least eighteen months, otherwise the whole thing smells fishy. So if you sell the property quickly, or rent it out too quickly, you are at risk.

Of course, your personal circumstances may pose a legitimate reason why you could not stay so long – and if you are challenged, you should prepare a well reasoned brief as to why you are eligible for the New Housing Rebate.

On the bright side, there is a HST rebate program for new building landlords – it takes some time to apply and receive your rebate, so you will need to have your own builder HST ready for closing your purchase. Here, you can learn about the New Residential Rental Property Rebate.

Related Article: HST Rebate for new condo landlord

Anyway, there is no such thing as a free lunch. Lots of people have tried to get in on the wave of escalating real estate prices, and figured they could put a little money down and watch it grow as they wait for their condo to complete. And they fully intend to either flip it or rent it out. Both scenarios will cause you grief with CRA. Be careful out there folks.

Ross Taylor is a credit specialist and mortgage agent who blogs frequently at ASKROSS.  If you have any questions about anything financial, send him an email at, he answers every one.

Tip of the Day

If the bank doesn’t want to speak with you… if alternate lenders are not interested… if all seems hopeless but selling your home isn’t an option… a private mortgage may be your only hope

— Money Matter № 168