The Condo market still seems to be going strong and many people are buying condominiums or new homes for the purposes of investment; either to “flip”, or resell the unit, or to rent it out. What they don’t realize, however, is that most condominium and new home agreements contain a provision requiring that the purchaser be buying the property for his/her own use.
This is because the builder will receive a rebate of the HST on the transaction from the government provided that the property was purchased for the purchaser’s own residential use. If the rebate is denied to the builder because the purchaser did not use the property as his/her residence, or as a residence for a family member in certain circumstances, the builder can charge the purchaser with the amount of the expected rebate and can sometimes lien the property for the amount claimed. There are some circumstances where an investor will be eligible for a similar rebate. The amount of the rebate can vary and there are a number of conditions, mainly that G.S.T. was paid without a rebate being obtained and that the first tenant is reasonably expected to occupy the unit as his/her primary place of residence for at least a year. Because there are other conditions, and this can get complicated, we recommend going over this in detail with a lawyer.
People sometimes try sell before closing to profit or try to avoid this. This often appears as “selling interest in Agreement” on the MLS. However, most new home or Condo agreements strictly prohibit dealing with an interest in the Agreement in any way before closing without the vendor’s consent, which is often denied. We have also seen Agreements which allow the vendor to charge the purchaser of a new Condo $3000.00 for each instance of listing or even advertising a property. If you see, or are considering, this kind of offer be extra careful, and have the Agreement reviewed by a lawyer.