GST Rebates and Renting
Hello, David your friendly real estate lawyer here!
Today’s topic deals with the implications of renting out your new property. The short of it is that if you plan to rent out a new property you are about to purchase (or have purchased), you may not qualify for a built-in rebate in price from the developer. Interesting? Keep reading.
When you purchase a property from a developer, you pay GST. Generally, you get a rebate from the developer (approximately 2.5% on units valued at $350,000 or less, before taxes). Developers credit the rebate to you, up front, reducing the purchase price. To get this rebate, the condition is that on closing, you or a “relation” must live in the unit as the primary place of residence.
Before closing, you sign a “statutory declaration”, swearing you qualify for the rebate. If the developer’s lawyer requests proof of who is living at the unit and it is not a qualified person, the declaration can be refused. If refused, you will have to pay the rest of the GST, before the deal is closed. This affects you financially (can cost thousands of dollars) and moreover, your mortgage company may refuse to fund the mortgage, because the purchase price has now changed.
There is some hope though. Under a separate federal program (the New Residential Rental Property Rebate), you may be able to apply for GST relief (e.g. if you enter into a long-term lease for at least one year). You must apply for this yourself.
For any real estate matters, contact me, David Feld the Real Estate Lawyer at (416) 203-6347. Feel free to visit my website at www.feldkalia.com. For quickest response time, email me at david@feldkalia.com.
