Buying a New Home From a Bankrupt Builder: GST/HST Rebate Issues in Canada

A builder that becomes insolvent can leave buyers with many worries. One of them is whether the GST/HST new housing rebate is still available and whether the tax you paid at closing is still safe.

The rebate rules give you a way to claim directly from CRA when the builder does not handle it. Other consequences of a builder's insolvency depend on the facts, so this article explains the rebate side and flags where to get advice.

This article covers Canadian federal tax law, which applies in every province.

The rebate does not depend on the builder paying it

A builder may pay the rebate to you or credit it against the price, and if it does, you do not send the application. The builder files it with its return.

If the builder does not pay or credit the rebate, you generally have up to two years from the date ownership was transferred to claim it on Form GST190. For houses on leased land, the two years run from the date possession was transferred. An insolvent builder is therefore not a reason to wait for them to act.

Conditions you still need to meet

• The builder sold you a new single unit residential complex or condominium unit as your or a relation's primary place of residence.
• Total consideration is under $450,000.
• You have paid all applicable tax, and ownership transferred after substantial completion.
• The first occupant is you or a relation, or you make an exempt sale before anyone occupies it.

If you bought from a builder and an unfinished or delayed project changed who occupied the home or when ownership transferred, those facts affect these conditions. A lawyer can review your timeline.

Missing the deadline

CRA says it will consider a late-filed rebate request only for owner-built homes in extraordinary circumstances. That does not apply if you purchased the house from a builder, so a missed two-year deadline on a builder purchase generally means the rebate is lost. If you are dealing with a builder in difficulty, file your own claim rather than wait for a resolution.

Assignments and who can pay the rebate

Only the builder who sells the house can pay or credit the rebate. An assignor who sold you the purchase agreement cannot, so an assignee must claim directly from CRA on Form GST190.

Where an agreement is assigned to you there may be two builders, and you may pay GST/HST to the original builder and to the assignor for the interest transferred. Keep a record of each payment.

If you received a rebate you were not entitled to, you must repay it. If a builder paid or credited one that it knew or ought to have known you were not entitled to, the builder and the individual are jointly and severally liable to repay it.

What to do next

For a builder purchase under Types 1A or 2, Form GST190 asks for the GST or federal HST paid on the house, the purchase price paid to the builder excluding tax, and the calculated rebate. Send the form with a copy of the statement of adjustments, and Form RC7190-ON if you are claiming an Ontario rebate.

• Note the date ownership transferred and count two years from it.
• Gather your statement of adjustments and proof of the tax you paid.
• Complete Form GST190 yourself if the builder has not paid or credited the rebate.
• Send it to the Sudbury Tax Centre if the property is in Sudbury/Nickel Belt, Toronto (Centre, East, West, North) or Barrie, and otherwise to the Prince Edward Island Tax Centre.
• Keep the worksheet RC7190-WS and records for six years, but do not send the worksheet.
• Ask a lawyer or accountant whether the tax you paid the builder raises separate issues.

Frequently asked questions