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My Experience With the New Residential Rental Property Rebate (HST Rebate)

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HST Rebate: background info:

I wrote about the HST issue a couple months ago, calling it the “Elephant in the Room” with respect to the pre-construction condo market. I wanted to follow up this post with my own personal experience with dealing with the HST rebates (New Residential Rental Property Rebate-NRRP) when buying a new condo for investment. In short, it was a surprisingly quick and painless process to get back my rebate money once I figured out all the forms and the calculations.

The photo above is of One Park West, or 260 Sackville Street. The building was recently registered and I own a unit in the building which happens to be the Smallest Condo in Toronto. I recently closed on the unit and as an investor-owner had to pay an additional amount for HST on final closing. Here is my story for getting that money back from Revenue Canada:

Note: APS= Agreement of Purchase and Sale

In order to qualify for the rebate, I had to have a tenant in the property and a signed lease for a minimum 1 year (which I did). All in all it only took just 40 days from the time I sent in my application to the time I received my rebate monies back in full. Quite contrary to some of the reports I have heard of it taking as long as a year to get your money back. If you have your paperwork in order and you complete the forms properly this seems to be the result you get. I even was paid some interest on my rebate amount (presumably taking into the account the time I paid it until the time I was paid it back).

HST New Condo Rebate: Additional Learnings

  • Provincial tax (PST) is the biggest portion of the rebate by far
  • Federal tax (GST) is the smaller one
  • Provincial rebate is 100% until Fair Market Value (FMV) hits $450K, then is zero after that
  • Federal rebate is 100% until FMV hits 350K, then reduces down to zero when you hit $450K
  • Therefore if your FMV is less than $350K you should receive 100% of your HST monies back. If your FMV is between $350K-$450K you will receive most of it back. If your FMV is greater than $450K you will receive zero back.

Potential Problems I see with the HST rebate process

  • If the FMV of your condo is $450K you will receive back more than $20K. If the FMV is $451K you will receive zero. What policy maker in Ottawa came up with this scheme??
  • FMV is still a conundrum to me. Who determines it? How is it determined? What happens if the government doesn’t agree with your FMV number?
  • FMV of your unit does not take into account what you will actually ‘net’ on your unit if you sold it at FMV (it does not take into account selling costs).
  • A better system might be to simply add an additional tax on investors who flip their unit after final closing as a percentage of their actual profit. Under the current system, you might both lose money on your sale (due to closing costs when buying and selling), and also have to pay tens of thousands extra in HST just for the ‘right’ to lose money on the transaction. Doesn’t make sense.
  • Is the government in the business of discouraging people from investing in real estate unless that real estate is priced below an arbitrary figure of $450K??
  • FMV is the crux of the calculations used to figure out if you qualify for the rebate. FMV is determined at the time that the HST is paid (at final closing in Ontario). The higher the FMV, the lower the rebate amount. Therefore I observed that it might be better for investors to actually pay the HST amount UP FRONT when buying a pre-construction condo, because this will result in a lower FMV and therefore a higher rebate amount!

Questions about the New Residential Rental Property Rebate (HST rebate)? Wondering if you qualify for the rebate or need help completing the application process with Revenue Canada? Leave a comment below.

October 2012 Edit: It is my understanding that if the FMV is greater than $450K, you will receive the maximum rebate amount up to the value of $450K which is $24K, then any amount over and above the $450K you will be responsible for paying the full HST rebate out of pocket.