How the CRA is Cracking Down on Assignments with HST Tax Expert Mark Purdy

Is the CRA really starting to crack down on condo assignments? What happens if you make a profit on a condo by selling it before the building is complete? How is the HST supposed to be handled when doing an assignment sale? We get the facts from HST expert Mark Purdy.

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Speaker 3:	Welcome to the True Condos Podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur:	It’s my pleasure to welcome back to the show Mark Purdy. Mark Purdy’s a returning guest to this show. If you’ve been listening to the podcast for a while you probably listened to the other interviews that we’ve done with Mark. He’s a great guest. He’s taught a lot of people a lot of great things about HST and the rebate process when you’re buying new condos. Of course his website, for those of you who don’t know, is rentalrebate.ca.
	Mark, welcome back to the show.
Mark Purdy:	Thanks, Andrew. Thanks for having me.
Andrew la Fleur:	It’s great to have you again, and always enjoy talking to you. You’re one of the people in this business who every time I talk to you, I always learn something new. I love that about you.
Mark Purdy:	That’s good.
Andrew la Fleur:	As I said to you earlier Mark, we want to talk today about assignments. I’ve written a lot about assignments, and we’ve done other podcast interviews, we’ve talked to lawyers about assignments, we’ve gotten the sales perspective on assignment, but we haven’t looked specifically at the HST implications on assignments. I wanted to get your input on that specifically as the expert on HST.
	Before we do that I thought I’d give a bit of a preamble for those people who maybe don’t know what an assignment is. Just to recap, an assignment is when you are selling a condo or any property before it actually exists. You’re actually selling your contract to another buyer, you’re not actually selling the property yet because you don’t technically have title to the property yet.
	Usually the way it goes, you buy something pre-construction with a builder, you sign the contract, you give your deposit cheques, and then there’s a few years of waiting until that property is built and the title transfers over to you. In the interim, if you’re selling it before that happens, that is not a typical resale transaction, it’s called an assignment. Some people know it as flipping. You’re flipping your condo. That is what an assignment it.
	Generally, the reason why someone might want to sell an assignment, well, there’s different reasons. Usually it’s circumstances change or a significant profit has occurred and they want to take advantage of that without going though the process of taking title. The reason why somebody might want to buy an assignment, there could be a number of reasons for that. Usually it’s the idea of buying something that is brand new that you can move into very soon or immediately in a building that is typically sold out or very close to being sold out. There’s an opportunity there for a buyer and there’s opportunities there for a seller in doing an assignment as opposed to waiting fr that transaction to close and then selling it after the fact.
	As I’ve said on other episodes, we’ve talked a lot about pros and cons of selling or buying assignments, but we haven’t really dived into the issue around HST, and I haven’t really seen any materials from anyone anywhere talking about this. Wanted to bring in Mark today and talk to you about it, Mark. With that longer preamble than normal, why don’t I hand it over to you, Mark, and open it up to say how does it work with HST, and what are the things that especially a seller of an assignment needs to know?
Mark Purdy:	It’s actually an interesting one. We get several calls a month from people who are looking at buying assignments or looking at selling assignments and trying to understand the HST rules. We get a lot of calls from lawyers, as well, talking about assignments and trying to understand the rules. It is interesting that you called. One of the things that I found out is that when you go into assignments, nobody seems to understand much. I spent a lot of time working with the CRA to understand their interpretation and why they interpret it that way. Let me give you that feedback.
	First of all, like you said, there’s two sides to the assignment. There’s the assignor or the seller, and then there’s the assignee or the buyer. The assignor really is the one who’s at risk in a sale or assignment from an HST perspective. What happens for an assignor, or the seller of the property, the first thing that Revenue Canada has to decide is whether or not when you sell that property you should be considered a builder. What that means is they look at what was your intention when you purchased the property and why are you selling the property. This is your exposure issue.
	Typically though, if you’re assigning a property, selling a property before you take occupancy of it, nine times out of ten they’re going to rule you a builder. If they rule you a builder then you now, like any other builder, are required to collect HST when you sell the property. That’s a big issue, and that’s something that people really, really aren’t prepared for. If we go a little further, there’s a guideline that explains everything from the builder’s perspective as far as HST and assignments go.
	What’s supposed to happen is this: If I’m the original purchaser of the unit and I buy a property for $300 000 and I put 20% down, or $60 000, and I want to assign the property, first thing I want is I want my $60 000 back. When I get my $60 000 back that’s not considered a return of a deposit, that’s considered a taxable sale. That $60 000 return of your deposit, which is not what it’s considered from CRA’s perspective, is subject to tax, which means you get that $60 000 back. You owe 13%.
	The next thing you want to do in an assignment obviously is make a little bit of money. You’ve held onto this property for a period of time, so you want to try and make some money if you can. That markup is subject to tax as well. Let’s say that we buy a property for $300 000, we hold onto it for three years while it’s being built, then we assign the property for $340 000. There’s a $40 000 markup subject to HST and a $60 000 deposit subject to HST. Now the sellers owes HST on $100 000, roughly $13 000 is HST that they have to come up with. Nobody’s aware of this. This is your exposure.
	What ends up happening is they go along and they close on this assignment and nobody says anything at closing. Six months, a year down the road Revenue Canada calls up and says, “We’d like to have our HST.” The reason they’re looking at assignments is first that, because now they can look and they can say, “You sold this property, you got your $60 000 back. You’ve got your $40 000 markup. That’s $100 000. We want our $13 000 in HST.” That’s the first reason that they’re there.
	The second reasons that they’re there is now they can ask you about capital gains. If you’ve sold an assignment you’ve made money on it. How did you treat the profit? That’s really why Revenue Canada is focusing on assignments, and they are focusing on assignments. I probably get twenty, thirty calls a month from people who have been approached from Revenue Canada with regards to assignments, people who have been sent letters saying, “Can you itemize all the information about all the assignments you’ve done in the last three or four years?” All of those are subject to HST and all of those are subject to capital gains or taxation issues. That’s what’s happening on the seller’s perspective.
	To sell an assignment the things you want to consider are will you be considered a builder? Nine times out of ten you will. Should you be collecting HST? Yes, you should. You should be always collecting 13% on your refund of your deposit and 13% on your markup. The problem is the market doesn’t support that. If you tried to sell an assignment plus HST, no one’s going to buy it, which means you’re going to end up eating that 13%.
	Now let’s shift gears and talk about from a buyer’s perspective. Andrew, if you want to go into more detail on that we can, but let me give you the general statement. On a buyer’s perspective you have to treat things differently, too. When I buy a property I’m entitled to an HST rebate, whether I’m using the new home rebate and I’m applying through the builder, or I’m using it an as investment property. Both are perfectly legit with an assignment property. The issue, though, is if I file for my HST rebate on closing with the builder I’m going to end up leaving money on the table. What ends up happening is the builder can only give me an HST based on their original purchase price.
	Again, if we go back to that example, the original purchaser buys the property for $300 000. They would end up having to pay roughly $24 000 in HST on closing and their eligible rebate would be roughly $24 000. Perfect. When the second purchaser comes along, the assignee, they’re buying the property for $340 000, but the first builder can only give them a rebate based on the original purchase price of $300 000. On closing the person who bought the assignment would have to pay $24 000 and be eligible for a rebate of $24 000, and that’s regardless of whether it’s the new home rebate they’re applying for because it’s a primary residence, or the new residential rental program if they’re an investor. In that case, they’re only eligible for $24 000.
	The issue is they’re leaving money on the table. As we talked about in the seller’s perspective, they have to pay HST on the return of the deposit and they have to pay HST on the markup. In theory, there’s $13 000 of extra HST. What that allows the second buyer, the assignee to do, is they can actually claim a percentage of the HST paid as a result of the assignment, to a maximum of $30 300. What they can do is get more money back than they actually paid on closing. We’re seeing that quite often. People will pay the $24 000 on closing. In this example they would probably get closer to $30 000 back. They can only do it if they apply after the fact, because the legislation is very specific. You can only apply once when it comes to an assignment. You can either apply with the builder if it’s a new home and it’s going to be a new home rebate, you can apply through the builder, not pay $24 000 and get that immediate credit, or you can pay the $24 000 and apply for $30 000 back. That make sense?
Andrew la Fleur:	Clear as mud. I think it made pretty good sense to me, but I’m saying what probably many people who are listening are thinking. That’s obviously the first thing, like you said. You’re getting calls from lawyers, people who are supposed to know this as part of their professional requirements as real estate lawyers. They should know this stuff inside and out. Nobody does.
Mark Purdy:	I agree to a certain extent, Andrew. On the other hand I don’t know if I do. One of the issues is we’re going to real estate lawyers who are real estate lawyers, they’re not taxation lawyers, and really, this is a taxation issue. That’s why there’s a disconnect. Often times the real estate lawyer understands the rules but they don’t understand the tax implications.
Andrew la Fleur:	Valid point. This whole conversation does outline and underline that it is a somewhat complicated issue, especially for the layman to understand. You’ve given us a great explanation from the buying and the selling side of how it should work, but as you also alluded to, in practice it doesn’t work like this at all. Why don’t you tell us how in practice it actually works?
Mark Purdy:	Understand that the rules about assignments and HST pre-dated HST. This was the situation with GST as well. If you did an assignment you were considered a builder, and you were supposed to pay GST, and you were supposed to pay GST on the return of your deposit, and you were supposed to pay GST on the markup of your product. Again, treating as a distributor of a product, so any income or any money you get as a result of that you’re supposed to pay GST on or HST as it is today. It hasn’t been done.
	Probably the easiest reason for that is in the past nobody really knew how to track when an assignment happened. If you go back six years, Revenue Canada didn’t really know, but now they do. That’s thanks to FINTRAC. Now what happens is when I put a deposit down on a property my name, my Social Insurance Number is associated with that deposit, and it stays with that deposit and that property all the way through. Then all of a sudden somebody else closes on it, so it becomes glaringly obvious to Revenue Canada something happened.
Andrew la Fleur:	Revenue Canada now has a tool to track if there’s differences between original buyer and actual closing on the property buyer.
Mark Purdy:	Yeah, and that’s really their only tool. They can’t do it by trolling the internet. We can go through the internet, we can find someone who’s assigning a property, but they never talk about the address. It could be really difficult for Revenue Canada in the past to track someone down, but now with FINTRAC it’s very easy.
	Andrew put a deposit on this property, Mark closed on the property. What happened? Had to be an assignment. If it was an assignment why didn’t we get our piece? Of course, that’s what they start with. They start with okay, if there was an assignment that happened here, Andrew obviously got his money back. If he got his deposit back we’re entitled to our 13%. Andrew, where’s my 13%? That leads to the second question, did you make any profit on this? Great, we want our 13% of that, which of course leads to the third question, what about our capital gains on the profit? The next question is how often have you done this? If you’ve done it too often maybe we’re no longer looking at capital gains on the profit, but we’re looking and saying you’re in the business of, now we want full tax. [inaudible 00:16:23] why Revenue Canada is looking at it.
	We’ve had clients who come to us, one of their assignments got flagged by Revenue Canada. Not a big deal, they ended up owing about $13 000, but when they went back in history they realized that this person had been assigning properties every year for the past four years. He was assigning two or three properties every year and making good money at it, but he was capital gains as if it was just capital gains. Not only does Revenue Canada get to go back and recoup all of the HST for all of those transactions, and I think there was nine transactions, but they also get to go back and say, “Now let’s look at taxation on the profit.” It’s huge. Of course, as the seller of the property you have no ides it’s coming until it happens, and that could be a year and a half, two years down the road. You don’t own the property by then.
Andrew la Fleur:	For anybody who’s listening who has done assignments and they haven’t got that nasty call from the CRA, is there a statute of limitations, so to speak, on these? If it’s past two years CRA cannot recover that, or is it that they could recover it from ten years ago? How does that work, do you know?
Mark Purdy:	I haven’t heard an answer on that. I’ve asked that question a couple times. What I do know, though, is that the statute on HST is seven years. In theory, they can go back seven years. Will they go back seven years? Probably not. Having said that, if they go back two years and they find out that Andrew, and I know you haven’t done this, Andrew, but they find out [inaudible 00:18:03] assigned four properties in the past two years, they’re going to keep digging.
Andrew la Fleur:	Right, where there’s smoke, there’s fire.
Mark Purdy:	Where there’s smoke, there’s fire, and they want to come up with a history. Of course, not only do they get their HST back and they get their tax back, or capital gains, whichever it is, but they also charge interest and penalties. [inaudible 00:18:26] nobody found out in the beginning, should this be taxable? Really, as a go forward, what should you be doing if you’re doing an assignment?
	There’s lots of reasons to do assignments, but the first thing you should probably do, if you can’t charge HST on the transaction, which most times you can’t, you should at least be circling that little line that talks about the seller’s lawyer will determine whether or not this sale is subject to HST. Then you should be going to your lawyer as the seller and you should be saying, “Can you get on the line with Revenue Canada and find out whether or not the sale is subject to HST, and whether or not I’m going to have to pay HST on closing. If I do, let’s get it dealt with today.
Andrew la Fleur:	Is that referring to the nine out of ten times it is? What would be the one out of ten times that it isn’t?
Mark Purdy:	One out of ten times it comes back to that whole frustrated intent thing. It’s hard to imagine an assignment that doesn’t fit into the rules of this is a taxable event. Let’s imagine I buy a property, and again, most people who do assignments buy more than one, but I buy a property with the intention of living there. Five years down the road we’re getting closer to closing on it. I’ve been transferred out of the country, and I’m not going to be able to live in that property. I can probably assign the property comfortably without having to pay HST on the sale. It probably won’t be a taxable event.
	Really, the best first approach is to call Revenue Canada, there’s a specific number for HST rulings, and ask the question and say, “Here’s the situation. If I sold the property because of these reasons would it be taxable?” They’re going to tell you. They can even send it to you in writing, and now it’s an act. It’s part of the law. You’ve had a ruling, no one’s going to question it anymore, and now you can comfortably sell that property. Really, that’s what you should be doing.
	If you’re not doing that, then you should at least be preparing that you might have to pay all this money. We talked about a very simple example of $300 000, but I know where you are, Andrew, that the average deposit isn’t $60 000. There’s deposits where you’re looking at $250 000, $300 000 in deposits. If you have to pay $39 000 in HST just to get your deposit back, you’re not very happy.
Andrew la Fleur:	That money that the seller should be paying the HST on the recovered deposits and on any profit, is there a way for them to recover that money, or that’s just gone?
Mark Purdy:	They can recover a portion of that money, but a very small percentage. Technically, let’s go to the same example, the $300 000 property. There’s $60 000 in deposit that’s being recovered and $40 000 in profit that’s being recovered, so in theory you have $100 000 that’s subject to HST. We’re going to say it’s $13 000. It’s not because it’s built into the price, but let’s say it’s $13 000 for argument’s sake. The portion that’s recoverable of that $13 000 is any HST that you had to pay in order to sell the assignment.
	For instance, they hired a realtor, and the realtor made $10 000 in commissions. Of course, those commissions are subject to HST at 13%, so that’s $1300 that’s paid to the realtor. $1300 would come off of the $13 000 that you owe to Revenue Canada. Maybe you paid legal fees and there was a couple hundred dollars in HST there. You might be able to recover some of that HST if you had the forethought to do it.
Andrew la Fleur:	Right, but just marginal amounts.
Mark Purdy:	It’s a marginal amount. You might get 5% or 10% of it back.
Andrew la Fleur:	Obviously hundreds, probably thousands of assignments have taken place in Toronto over the past let’s say two or three years. Very, very, small number if any of them have actually gone through and done it right as according to procedure as you outlined, declaring yourself a builder, collecting the HST, and so on. In the field, on the ground, nobody’s actually doing this. Are you basically saying that … I should also just add so no one’s doing it, and probably 98% of people are not getting any calls from the CRA yet, are you basically saying that that is changing, or that is about to change and that more and more people who have done assignments in the past year or two, or who are about to do an assignment, and who are not going to be doing it the way you described, they’re going to be getting these letters and calls from the CRA and having to pay this HST?
Mark Purdy:	Mm-hmm (affirmative). Yeah, they are, and they’re starting to get them in droves. If I look back six months ago, we knew a lot about the assignments at that point but we’d never actually filled in applications for people who did assignments, the assignors. Now, we’re probably doing two or three a month, which is huge. As Revenue Canada puts more feet on the ground, if you like, my guess is that we’re going to see hundreds if not thousands of assignments being reviewed this year alone in Toronto. That really is the bulk of where it’s happening, is in the Toronto marketplace. It’s happening in some of the other communities as well, but my understanding is that they’ve got several auditors on the floor, they’ve got a whole team devoted to this.
	Not only do they get to collect that HST, but then there’s the taxation. It’s a huge opportunity. In the instances where I’ve looked at or people have approached me, on average the client who’s coming to me and saying, “I got a call from Revenue Canada and this is the issue with my assignment,” on average Revenue Canada is collecting $150 000, including the HST and the capital gains or the taxation from the client. If you’re Revenue Canada and you find one person you get to collect $150 000. It doesn’t take you very long before you get more people out there asking the same question.
	Like I said, to protect yourself as the seller of an assignment you have to first ask the question, “If I sell this, would this be taxable? If this is taxable, can I charge the HST? Will the market allow me to do that? If not, how do I mitigate the risk? Do I put the money aside, do I send the money off to Revenue Canada in advance?” Of course keeping in mind that if you don’t send it to them in advance it’s subject to tax, subject to interest, subject to penalties.
	Obviously, the first approach is talk to your realtor. Can we sell this property plus HST?
Andrew la Fleur:	Right, market value.
Mark Purdy:	Can we sell this property, and let’s talk to our lawyer, let’s get a ruling. Let’s find out if this is going to be subject to HST. If it is, let’s make sure that we submit the HST on time so that we’re not getting penalized even more. There’s nothing worse than getting this later.
	From the assignee’s perspective, in most cases you’re going to buy this property and you’re going to pay HST on closing. If it’s an assignment I would always say pay HST on closing to the builder, whether it’s going to be your primary residence or an investment, because nine times out of ten, same percentage, you’re going to get more money in HST back than you had to pay. If you had to pay $24 and you get $30 back, that’s a deal. You just made $6000. That’s free money.
	The exposure, though, for the assignee, for the person who bought it, what happens when you’re dealing with an international seller? This is going to become a problem. It hasn’t yet [inaudible 00:27:23] …
Andrew la Fleur:	Right, the non-resident buyer.
Mark Purdy:	We go back to that same situation. Andrew is selling the property, but Andrew lives in the States. He’s assigning the property to me. I buy the property. After the fact Revenue Canada determines this is a taxable sale. If they can’t find Andrew to get the HST, they’re coming to me.
Andrew la Fleur:	Is that possible?
Mark Purdy:	Perfectly possible.
Andrew la Fleur:	It can shift to the buyer?
Mark Purdy:	It can shift to the buyer because someone has to pay Revenue Canada. Revenue Canada is entitled to this HST, and if I can’t find the builder, which is Andrew in this case, [inaudible 00:28:12], if I can’t find him I’m going to go to the other person. Revenue Canada comes to me and says, “Hey Mark, sorry to say this, but you owe us $39 000 on the purchase of that assignment because that was a taxable sale.” I now have to come up with the HST, whatever it was, $13 000 I think was the number. I have to pay this $13 000, and now it’s on me to find Andrew to get my $13 000 back. How well is that going to go over?
Andrew la Fleur:	Definitely don’t buy an assignment from a non resident seller. [inaudible 00:28:50].
Mark Purdy:	If you’re considering it, if I was the buyer in this case and I knew that the person selling the assignment was a non resident of Canada, then I would talk to my lawyer. I would say to my lawyer, “Can you determine with Revenue Canada whether the sale of this product is subject to HST?” If it is, and we know this as the buyer, we know that the sale is subject to HST, we can now put a hold on that money so that it’s submitted to Revenue Canada. We can force the other lawyer. The other lawyer, they’re just going to follow the rules. If they buyer’s lawyer says, “We’ve determined that the sale of this property is subject to HST,” and you confirm, the seller’s lawyer is going to do a hols back and they’re going to confirm. If they confirm that yes, it is subject to HST, that HST is going to go off to Revenue Canada. Now as the buyer in this case, you’re protected.
Andrew la Fleur:	Great advice for the buyer, absolutely. Going back on the sell side, is there any way to structure an assignment that you have seen or that you can think of, that would avoid all this altogether? There’s different ways that you can do assignments. Assignment on the day of closing, I’m thinking of, or just different ways that you could structure it. Is there some loophole or something that you could avoid this entire scenario?
Mark Purdy:	There are some rumors of ways that would work. One way that would work is a mutual release by the builder, and this isn’t going to happen very often. In this case what would happen is Andrew would buy the property originally. He wants to assign the property, but in order to not have to deal with this whole HST he goes to the builder and says, “Look Mr. builder, I have a client who wants to buy property. Can you release me from my obligation and sell the property to them?” Obviously the downside to this is Andrew’s not making any money. He’s going to get his deposit back and his deposit is going to come from the builder, in which case it’s not subject to HST, so that’s okay because it’s a return of a deposit. The purchaser then gets to buy the property at that agreed upon price, and Andrew doesn’t have to deal with the HST issue. Obviously, Andrew’s not going to make any money, so that might not be a great way for Andrew to go.
	Since we’re talking about assignments, one of the other ones that I want to talk about quickly is one of the things we’ve seen a lot lately is where builders have offered free assignments to anybody related. Again, we want to be very well aware of that. It truly still is an assignment. If Andrew buys a property and just before closing he wants to assign it do his mom, his dad, his brother, and the builder’s perfectly fine with that, that’s great. You first of all need to get the right paperwork. You need to get an amendment or an assignment of the sale. You can’t just do a change of title using a direction of title on closing. If you do that neither Andrew nor the brother is entitled to the rebate.
	If Andrew’s buying the property and just before closing he wants to put it in the name of his brother, he wants to put it in the name of his company …
Andrew la Fleur:	Happens all the time.
Mark Purdy:	Happens all the time. In a situation like that using a direction of title, neither Andrew nor the person whose name it was put in is entitled to the rebate. They still have to pay the HST, but neither party is eligible to get a rebate. That’s happening a lot, and that’s because of the whole free assignment thing. That’s what’s driving this is the free assignment, and then of course everybody says, “Just do a direction of title on closing.” What we truly need is we need a real amendment, real assignment. That assignment has to transfer over the rights and the responsibilities of the original purchase and sale agreement, because with the rights and the responsibilities are also the rights and the responsibilities to the HST. That’s important.
Andrew la Fleur:	What about just a name change amendment? Delete purchaser one name, insert purchaser two name, is that the same thing?
Mark Purdy:	Sure, as long as it’s legal and signed by the builders, signed by all the parties involved, that’s perfectly fine.
Andrew la Fleur:	You’re saying that just the direction of title method where …
Mark Purdy:	Direction of title just changes the name on closing, but it doesn’t [inaudible 00:33:56] rights and responsibilities of the purchaser.
Andrew la Fleur:	Of the actual contract, interesting. That is the way it’s always done, or typically done.
Mark Purdy:	Simple process, and there’s nothing wrong with it in resale. In resale it happens all the time. I buy a property, I put it in my hotel’s name, I’m closing, no big deal. Really, there is a tax issue there, but that’s a different story. Legally there’s no issue of me putting it in somebody else’s name. From an HST perspective I can’t do it because if I do, I’m exposed to losing my rebate. I still have to pay, but now nobody’s entitled to get it back.
	We’ve carried on with that same thing about that free assignment. Let’s say that Andrew decides to assign the property to his brother on closing and he does all the right paperwork, he gets an actual assignment document and he gets it signed by the builder, and by Andrew, and by everybody else that has to sign that, and now we’ve got it changed. As far as the purchase and sale agreement goes, there’s still a question about taxation. If Andrew assigns it to his brother is Andrew’s brother going to give him back his deposit? If so, that deposit being returned is subject to HST.
Andrew la Fleur:	Yeah, it’s getting into the same thing.
Mark Purdy:	Or, what about the other way. Let’s say that Andrew decides to assign the property to his brother. He’s not getting his deposit back and he’s not getting any markup. There’s a taxation issue here because now Andrew’s brother is getting enhanced value. I bought the property for $300 000, I put $60 000 down, property’s worth $300 000, but you’re only going to have to pay $240 000 on closing. I’ve just now transferred $60 000 in value to my bother. That’s a tax issue.
	What if that’ property’s appreciated? What if that property has appreciated and it’s now worth $350 000? Now I’ve transferred $110 000 in value to my brother. Effectively I’ve evaded tax on that profit. Can’t do that either. You have to be aware of that. If you’re doing that free assignment you have to be aware that again, Revenue Canada is going to look at that. They’re going to look at the fact that you put the deposit down and Bob closed on it. They’re entitled to a percentage. HST, whether you’ve got $100 000 in extra capital or extra appreciation that you didn’t pay anything on, we want our money. You really, really want to be aware of it when you’re doing these assignments.
Andrew la Fleur:	Great advice for what not to do in terms of direction of title. You want to always make sure that you’ve done that, if you’re transferring to a family member or whatever you want to make sure that [inaudible 00:37:02] paperwork correct right from the start.
Mark Purdy:	If you want to do that, let’s say that Andrew originally put a purchase and sale together with his name on it and he wants to put it in his business’ name, he needs to do an amendment. You can add your name to the purchase and sale agreement. Now it’s in the name of Andrew and ABC company. Now on closing, you can close it in the name of ABC company. It’s acceptable. What’s important there is the name on the closing document is somehow associated with the rights and responsibilities of the purchase and sale agreement. If you know you want to do that, you want to put it into your company’s name, add your company to the purchase and sale agreement via an amendment. Then you can close in your company’s name, then your company’s entitled to the rebate. Does that make sense?
Andrew la Fleur:	Yeah. Okay Mark, we’re up against the clock here. It’s been a great conversation as usual, we covered a lot of different things. I’m sure we could keep going for …
Mark Purdy:	Yes, unfortunately we could.
Andrew la Fleur:	Another couple of hours with all things HST as always.
Mark Purdy:	The thing with HST, obviously, is if you’re selling a property, you always want to have HST not included in the transaction, if you can. That way if it is subject to HST the buyer is going to have to pay it. Most important is have your lawyer do a ruling. Have your lawyer determine whether or not this sale is subject to HST, when you’re selling an assignment. If you’re doing it from a buyer’s perspective, really you should be doing the same thing. You should be going to your lawyer and saying, “Is this purchase going to be subject to HST?” Because that way you’re covering yourself.
Andrew la Fleur:	From the seller perspective you want to say, essentially, in the contract that the buyer is responsible for the HST if …
Mark Purdy:	With HST, I want the buyer to pay it.
Andrew la Fleur:	Yeah, and then vice versa if you’re the buyer.
Mark Purdy:	If you’re selling it and you can’t get the buyer to pay it because of the market conditions, at least you know going in. It’s a whole different deal when you’re selling a property for $340 000 and you think you’re making $40 000 in profit. That’s one perspective, but when afterward you find out that you lost $13 000 in HST off the top, it’s a whole different perspective. [inaudible 00:39:43] the property at that point because now saying before real estate costs and everything else, I’m only making $27 000 if I sell this property. At least if you know that going in then you go, “I’m only making $27 000. Do I still want to go ahead with the transaction?” If you believe you’re making 40 and then afterward you find out that no, truly you only made 27, and then from that 27 you took off 14 to your realtor, and then you took off 3 to your lawyer, and then you took off … You’re not making any money. It’s a whole different outcome.
Andrew la Fleur:	Exactly. Obviously at that point you say you might as well close on the property, rent it out for a year, and then sell it and avoid the whole mess.
Mark Purdy:	Yeah, potentially. I know one of the things when I talk to people, when they ask me questions, typically before they get into an assignment situation, that’s probably the conversation. Let’s look at all your costs. If it’s going to cost you $13 000 in assignment, but it saves you having to pay $12 000 in land transfer tax, maybe that’s worthwhile. Closing a property in Toronto is a little more expensive than closing a property in other cities. If you can look at all the math beforehand, then you can make an informed decision. Like I say, it’s one thing thinking you’re going to make $40 000 and finding out you only made 2. It’s something different looking and saying, okay, I’m actually going to make 5, not $40 000. At least you know going in.
Andrew la Fleur:	Absolutely.
Mark Purdy:	That’s how you make an informed decision. You ask all the questions up front. What would it cost if I didn’t do this? If I just closed on the property and rented it out, maybe you’re further behind. Maybe it’s better to sell it through an assignment but at least recognize that you’re not going to make the $40 000 that you thought, you’re only going to make 10.
Andrew la Fleur:	Know the facts, have the correct numbers up front, and that’s the only way to make an informed decision.
Mark Purdy:	Obviously that requires a little bit of planning.
Andrew la Fleur:	Yes. Mark, thank you so much for your expertise again today.
Mark Purdy:	Feel free, like I said in the past, if anybody has questions or concerns you can reach out to Andrew, obviously, or you can reach out to me. I’m always there to give advice.
Andrew la Fleur:	Great. I appreciate that about you too, Mark. Many of my clients have called you and they really appreciate that too. Mark, if people want to reach you rentalrebate.ca, is that the best place to go?
Mark Purdy:	That’s the best place to go. That’s the easiest place to find me.
Andrew la Fleur:	Great, rentalrebate.ca. Okay Mark, thank you so much, and we’ll talk to you again soon.
Mark Purdy:	Sounds good, bye-bye
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