There was an article by Bob Aaron in The Star that may be of importance to new home buyers already under contract while their homes have not closed yet

Buyer beware if you want that GST rebate

http://www.thestar.com/article/272441


With the GST falling again – from 6 per cent to 5 per cent – buyers of new homes should be warned about a practice some builders have employed to scoop the purchasers' transitional rebates.

May 2, 2006 was the last date when the old 7 per cent GST applied to the price of new homes. Anyone buying a new home from a builder between May 2 and July 1 last year, and taking possession and ownership on or after July 1, 2006, became eligible for a transitional GST rebate equivalent to 1 per cent of the net GST on the price of a home.

After closing, buyers entitled to the rebate may apply for reimbursement of the rebate directly to the Canada Revenue Agency.

Unless, of course, the builder has found a way to snatch it back.

Lately, I have had a number of phone calls that go something like this: "My builder is so late in finishing the home/condo that he is entitled to cancel the deal. He will only extend the closing if I sign over the transitional rebate. Do I have to do it?"

My reply is that if they fail to sign over the rebate, they risk losing the new home, and there is no consumer legislation out there to protect them.

Last month, the Star received an email complaining about the same thing:

"There's a sleazy practice being perpetrated by at least one big home builder I know of, and you might know of a way to call it to others' attention, before they get swindled like my colleague did," the reader wrote.

"The builder in question and their lawyers decided that they would like to keep that 1 per cent, and here's how they are doing it: they are inserting this paragraph below in all kinds of documents, hoping the unsuspecting buyer will miss it.

"`Notwithstanding anything to the contrary in this Agreement of Purchase and Sale the Purchaser and Vendor agree that the benefit of any reduction or rebate of GST that resulted from the May 2006 or any subsequent Federal Budget shall be the property of the Vendor and the Purchaser shall execute any further documents required by the Vendor to effect the foregoing.'"

"This first appeared in a document of acknowledgment that the delivery date of the home was being extended," the emailer wrote, adding that the the purchaser caught it and told the builder the new wording was unacceptable.

He says his colleague was then confronted with the same paragragh weeks later, as part of a special offer (from the builder) for a discount on cable television service. "So basically when you signed and accepted the good deal on cable, if you didn't read it fully, you were duped into tendering your GST Transitional Rebate to the builder."

But it didn't end there, the emailer says. Weeks later, the clause was found again, this time in paperwork for the final pre-delivery inspection.

The same thing happened to two clients of mine whose townhouse deal closed on Oct. 25. When I pointed out that they were being charged GST at 6 per cent and therefore couldn't claim the transitional rebate, the builder's lawyer faxed me an amendment to the offer which my clients had signed but I hadn't seen.

The clients' original offer was signed May 2, 2006, so they would normally have been eligible for the GST rebate of $1,878.05 on a purchase of $318,366,58. But on June 10, 2006, they were called in to the sales office to sign an amendment to the agreement that needlessly acknowledged that the conditions had been waived.

The amendment also stated that "notwithstanding the dates of original signatures on the Agreement of Purchase and Sale, the effective date of this Agreement is the date hereof."

Without knowing it, the purchasers had changed the date on their agreement from May 2, 2006 – which had entitled them to the rebate – to June 10, which did not.

As a result, the net price of the townhouse to the builder (after GST) was $306,593.39 instead of $304,715.31.

The builder scooped the GST rebate of $1,878.08 and the clients unknowingly lost it.

A word to the wise: Never sign anything which hands a transitional GST rebate over to the builder, or changes the date on an agreement.

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Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK

Quote:

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Originally posted by Rajeev Narula

There was an article by Bob Aaron in The Star that may be of importance to new home buyers already under contract while their homes have not closed yet

Buyer beware if you want that GST rebate

http://www.thestar.com/article/272441


With the GST falling again – from 6 per cent to 5 per cent – buyers of new homes should be warned about a practice some builders have employed to scoop the purchasers' transitional rebates.

May 2, 2006 was the last date when the old 7 per cent GST applied to the price of new homes. Anyone buying a new home from a builder between May 2 and July 1 last year, and taking possession and ownership on or after July 1, 2006, became eligible for a transitional GST rebate equivalent to 1 per cent of the net GST on the price of a home.

After closing, buyers entitled to the rebate may apply for reimbursement of the rebate directly to the Canada Revenue Agency.

Unless, of course, the builder has found a way to snatch it back.

Lately, I have had a number of phone calls that go something like this: "My builder is so late in finishing the home/condo that he is entitled to cancel the deal. He will only extend the closing if I sign over the transitional rebate. Do I have to do it?"

My reply is that if they fail to sign over the rebate, they risk losing the new home, and there is no consumer legislation out there to protect them.

Last month, the Star received an email complaining about the same thing:

"There's a sleazy practice being perpetrated by at least one big home builder I know of, and you might know of a way to call it to others' attention, before they get swindled like my colleague did," the reader wrote.

"The builder in question and their lawyers decided that they would like to keep that 1 per cent, and here's how they are doing it: they are inserting this paragraph below in all kinds of documents, hoping the unsuspecting buyer will miss it.

"`Notwithstanding anything to the contrary in this Agreement of Purchase and Sale the Purchaser and Vendor agree that the benefit of any reduction or rebate of GST that resulted from the May 2006 or any subsequent Federal Budget shall be the property of the Vendor and the Purchaser shall execute any further documents required by the Vendor to effect the foregoing.'"

"This first appeared in a document of acknowledgment that the delivery date of the home was being extended," the emailer wrote, adding that the the purchaser caught it and told the builder the new wording was unacceptable.

He says his colleague was then confronted with the same paragragh weeks later, as part of a special offer (from the builder) for a discount on cable television service. "So basically when you signed and accepted the good deal on cable, if you didn't read it fully, you were duped into tendering your GST Transitional Rebate to the builder."

But it didn't end there, the emailer says. Weeks later, the clause was found again, this time in paperwork for the final pre-delivery inspection.

The same thing happened to two clients of mine whose townhouse deal closed on Oct. 25. When I pointed out that they were being charged GST at 6 per cent and therefore couldn't claim the transitional rebate, the builder's lawyer faxed me an amendment to the offer which my clients had signed but I hadn't seen.

The clients' original offer was signed May 2, 2006, so they would normally have been eligible for the GST rebate of $1,878.05 on a purchase of $318,366,58. But on June 10, 2006, they were called in to the sales office to sign an amendment to the agreement that needlessly acknowledged that the conditions had been waived.

The amendment also stated that "notwithstanding the dates of original signatures on the Agreement of Purchase and Sale, the effective date of this Agreement is the date hereof."

Without knowing it, the purchasers had changed the date on their agreement from May 2, 2006 – which had entitled them to the rebate – to June 10, which did not.

As a result, the net price of the townhouse to the builder (after GST) was $306,593.39 instead of $304,715.31.

The builder scooped the GST rebate of $1,878.08 and the clients unknowingly lost it.

A word to the wise: Never sign anything which hands a transitional GST rebate over to the builder, or changes the date on an agreement.

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Hi Rajeev,

Thx for this very important information,
somehow I am not able to interprete this correctly.
So if I buy a "New" home say for CAD $ 3,50,000
how much I should be benefited as GST rebate ( under current rates) ? or I would less as the benefit goes to the builder.

Here are my questions.

1. Firt thing is one should read the agreement ( top to bottom ) to see if
that " " paragraph is inserted. if we miss it then what is the max extenet of the damage ?

2. What if it is inserted, can we challenge that with the builder?

3. Is there anything that prevents us from getting that paragraph Off of the agreement? - I guess the only option then would be to walk out of the deal/agreement before entering/signing. - please correct me here.

4. Can we later file a claim on this ? if so with whom ?

Thanks for all answers in advance.

Guys,

This is simple, but looks complicated the way the article explains it.

Firstly, this topic is about new builder homes and condos only. Resale homes are exempted from GST in Ontario (you may already know this).

Then there are 2 rebates- GST new housing rebate (for homes below $450,000) and the GST transitional rebate.

Bob Aaron is talking about the difference of GST transitional rebate that should go into the buyers' pocket rather than the builders', when the GST was reduced in July 2006 from 7% to 6% and now from 6% to 5%, beginning Jan 2008.

The new housing GST rebate (36% of six percent GST paid) is available to individuals buying/building a new home/condominium. The maximum rebate available is $7,560 or home price of maximum $350,000 qualifies for rebate.

$350,000 X 6% X 36%= $7560

Either the home buyer or the builder can qualify for the above rebate. In most of the cases the home builder applies for the rebate and credits the same directly to the home buyer or reduces the home price equivalent to the rebate amount.

For other conditions check Revenue Canada website.

Quote:

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Example in the article:

The clients' original offer was signed May 2, 2006, so they would normally have been eligible for the GST rebate of $1,878.05 on a purchase of $318,366.58. But on June 10, 2006, they were called in to the sales office to sign an amendment to the agreement that needlessly acknowledged that the conditions had been waived.

The amendment also stated that "notwithstanding the dates of original signatures on the Agreement of Purchase and Sale, the effective date of this Agreement is the date hereof."

Without knowing it, the purchasers had changed the date on their agreement from May 2, 2006 – which had entitled them to the rebate – to June 10, which did not.

As a result, the net price of the townhouse to the builder (after GST) was $306,593.39 instead of $304,715.31.

The builder scooped the GST rebate of $1,878.08 and the clients unknowingly lost it.

A word to the wise: Never sign anything which hands a transitional GST rebate over to the builder, or changes the date on an agreement

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Amit Kalia, Broker, REALTOR®
RE/MAX Real Estate Centre., Brokerage
independently owned & operated
100 City Centre Dr, Unit 1-702
Mississauga, ON L5B 2C9
Phone No.: 905-339-5111
Website: https://www.realestate-ontario.com/
Condo Blog: https://condopundit.com/blog/

Quote:

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Originally posted by amit kalia

"Never sign anything with your builder, without your lawyer's approval".


Regards,

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Quote:

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Hi Amit,

Thanks for the detailed explanation and I will not dwelve into the complex mathematics puzzle you posted. However, can you advise what the lawyer can do if the builder is holding the ownership rights of the new home and wont give it to if you DO NOT want to sign on the waiver? Is it still possible to have the new home AND the rebate difference?

Hiren

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-----------------------------------------------------------------
Amit Kalia, Broker, REALTOR®
RE/MAX Real Estate Centre., Brokerage
independently owned & operated
100 City Centre Dr, Unit 1-702
Mississauga, ON L5B 2C9
Phone No.: 905-339-5111
Website: https://www.realestate-ontario.com/
Condo Blog: https://condopundit.com/blog/

Thanks Amit,
I hope some RE Lawyer sheds some light on this issue. Or any of our professionals working in this industry can get a reply from any of the lawyers they work with everyday and post the result for the benefit of the general public.

Regarding your riddle, I am sure the author was just punching in some random numbers not expecting anyone to think about it...

Hiren