Home Builders: GST Rebates on New Homes
If you are a builder/developer selling a new home in Canada, don’t assume the buyer qualifies for the GST rebate. That’s not always the case. You don’t want to reduce the price by the rebate amount assuming you’ll be able to have it assigned over to you. Sometimes the buyer intends to re-sell the property rather than rent it out or live there himself (or close family). If so, that buyer likely does not qualify for the rebate. You may mistakenly have them assign the rebate to you only to find that the rebate application is rejected. In addition, the buyer might intend to rent the property out rather than live in it. A buyer intending the property to be a rental will still be able to get a similar rebate in most cases, but it can’t be done through the builder. The buyer must pay the builder the full purchase price and GST on closing. Then the buyer must file his/her own application for the rebate. This type of rebate can’t be assigned to the builder/developer.
Remember this is general advice only. It might not apply in your case. The purpose of my article is to alert you to the potential problem so that you can check it out and verify matters yourself. You should call the GST help line to verify this and ask for more information.
Warranties on New Homes Listed for Sale
If you are purchasing a newly constructed home that has been listed for sale by the builder, you should consider requiring the seller to add written warranties to the standard form agreement. Most houses listed for sale are used homes but a portion of them are houses that have just been built by the seller. If you were purchasing a typical used home, your agreement would normally indicate that you are purchasing the property as is. It’s the way almost all standard agreements are written. It’s analagous to purchasing a new vehicle. The seller cannot control what problems might be with the home and they don’t want any ties or potential liabilities with the house once it is sold. Of course they must still fulfill their legal duty to disclose known defects that cannot be reasonably discovered by the purchaser on an inspection of the property. (See my article on disclosure of defects under the realestate page of my website.) However, if the house listed for sale is new and the seller is the builder, the situation can be different.
If you are purchasing a newly constructed home from a builder, the builder should be prepared to offer additional warranties to the purchaser. If the builder does a lot of sales, they may already have a warranty plan if you ask for it. Otherwise you’ll need to discuss it with them and reduce it to writing. Have it incorporated as a schedule to your offer to purchase/sale agreement. Specify what is warranted and what is not. Ask for a warranty with a long enough life to give the house time to settle and for you to find out if there are construction deficiencies. Consider asking the builder for a warranty under the National New Home Warranty Plan as well.
Time is of the Essence
You often see the phrase “time is of the essence” in contracts. You’ll find it in my standard office to purchase form and most realtor forms. It means that whenever there is a deadline for something to be done, everyone will be held strictly to those dates and times. This is especially important for you to remember if you are buying or selling a home without a realtor as no one will be monitoring deadlines for you. For example, if your offer to purchase states that the buyer must have approval of financing by a certain date, it is not sufficient if the financing is approved early the following morning. Similarly, if a buyer or seller does not tender the money (buyer) or transfer (seller) on the possession day, they are in breach of the contract and could possibly lose their deal. There are some exceptions to the “time is of the essence” rule, though. For example, there are cases saying if you do something to let the other party believe that you won’t be strictly holding them to the date to meet their conditions or if you appear to be giving them additional time to come up with their money or transfer on closing, then you have taken “time is of the essence” off the table. In short, one side’s actions may lead the other party to reasonably believe they aren’t going to be held to those timelines. The key is whether the belief was reasonable based on the other side’s actions. If so, the court might not say they have lost their bargain over that. If time is no longer of the essence, you need to put the deadlines back into play again. You will need to make it clear to the other side that time is again of the essence and that you will hold them to their deadlines. If the deadline had already gone by or is about to expire, you may need to be reasonable about the new deadline you impose. What is reasonable depends on all the surrounding circumstances. It is best to give this to the other party in writing to ensure there is no misunderstanding.
Naturally, if you are in this situation, it can leave you feeling anxious and uncertain about whether you have a deal or not. The best policy is to never let a deadline go by unless you have a written extension signed by the other side. Make a checklist and diarize your deadlines. If you are the seller, don’t lull the buyer into believing that the date to meet their financing and other conditions is only a technicality. It may only encourage the other side to not take things seriously, leading to undertainty and possibly disappointment for everyone.
