HST is upon us in 2010

Real Estate in Toronto is about confidence, or you would not commit your hard earned dollars [or future earnings]

[QUOTE]I went to go check out a condo, price was around $450 K then they informed me I had to pay an extra 8% because of the HST they would not cover.

Now thats $36,000 more :eek:

Why don't all the builders just cover this cost! It sort of just pushed me out of the showroom and made me choose something with HST included.

Anybody else have this happen to them?[/QUOTE]

Yes, Its coming. Harmonized Sales Tax.

THE IMPACT OF HST ON CLOSING COSTS: BUYER BEWARE!

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.

John Moher of Fine & Deo practices in all areas of condominium law, real estate and corporate law.

Home Renovation Tax Credit Are you eligible?

As part of the Government of Canada's economic action plan, Canadian home owners will be able to claim a home renovation tax credit ("HRTC") for a portion of the costs associated with renovations to their freehold homes, condominium units and the common elements of condominium corporations.

By way of background, the program provides a 15% non-refundable income tax credit on eligible expenses incurred to renovate eligible dwellings. An expense is eligible if it is incurred in relation to a renovation or alteration of an "eligible dwelling".

Examples of eligible expenses include, among others:

• renovating a kitchen, bathroom, or basement;
• new windows, doors, or flooring;
• building an addition, garage, deck, shed, or fence;
• a new furnace, woodstove, fireplace, water softener, or water heater;
• a new driveway or resurfacing a driveway, re-shingling a roof or painting of a house;
• landscaping – new sod, perennial shrubs and flowers, trees, etc.;
• swimming pools (permanent – in-ground and above-ground);
• fixtures – blinds, shades, shutters, awnings, lights, fans, etc.; and,
• associated costs such as permits, professional services, equipment rentals, and incidental expenses

Examples of ineligible expenses include, among others:

• furniture, appliances, tools, and audio and visual electronics;
• routine repairs, maintenance and cleaning (e.g., furnace cleaning, snow removal, lawn care, pool cleaning, house cleaning); and,
• financing costs.

An "eligible dwelling" must be occupied as a principal residence by the owner, or a family member of the owner, between January 27, 2009 and February 1, 2010. Further, the work performed or goods acquired must be performed or acquired, as the case may be, after January 27, 2009, but before February 1, 2010.

The credit applies to expenditures in excess of $1,000.00, but not more than $10,000.00. Accordingly, the maximum credit available is $1,350.00 ($9,000.00 x 15%).

With respect to common element renovations, the cost of all qualifying common element renovations is multiplied by a unit owner's percentage interest in the common elements. This product, to a maximum of $9,000.00, is then multiplied by 15% to ascertain the credit a unit owner is entitled to claim. On the administrative side, boards and property managers will soon have to create a detailed list outlining the costs incurred by the condominium corporation in relation to all qualifying common element renovations. Further, as with renovations to freehold homes and condominium units, all required supporting documentation outlined on the Canada Revenue Agency's website must be retained by the condominium corporation. This list and supporting documentation, together with schedule "D" to the condominium corporation's declaration, should be delivered to unit owners in February or March of 2010. The key is to provide unit owners with the required information after February 1, 2010, so all qualifying expenditures are included, but well in advance of the April 30, 2010 income tax filing deadline.

In early February, boards should consider consulting an auditor to review the list of costs and supporting documentation to ensure compliance with the requirements of the HRTC program. In cases where it is not clear whether a particular renovation qualifies for HRTC, boards may wish to consult legal counsel for an opinion.

For further information on the HRTC program, please visit the Canada Revenue Agency’s website at www.cra-arc.gc.ca/hrtc.

John Moher is a Solicitor with Fine and Deo Condominium Law Specialists in Vaughan Ontario. John can be reached at 905 760 1800