A Short-Term Rental Nearly Cost a Retired Couple Their HST Rebate

The situation

Meera and Bohdan had lived in the same house for over three decades before deciding to downsize. They bought a newly built home in Hamilton for roughly $520,000, closing in the spring, with a plan that looked simple on paper: sell the old house, move into the new one, done. The builder's price included a credit for the GST/HST New Housing Rebate, a program that reduces the tax new home buyers pay when the buyer or a close relation intends to use the property as their primary residence. On this purchase the rebate came to roughly $24,000, applied directly against the purchase price at closing rather than paid out afterward.

The plan did not survive contact with the market. Their old house, listed the same week the new one closed, sat for months without an acceptable offer. Meera and Bohdan were now carrying two properties, and rather than let the new home sit empty, they rented it to a tenant, Iryna, on a short lease while they waited. They intended to give notice and move in themselves the moment the old house sold. It took about four months.

The problem

The New Housing Rebate is not a reward for buying a new home generically — it is tied specifically to the buyer, or a relation of the buyer, using the property as their primary place of residence. Builders routinely credit the rebate against the purchase price at closing on the buyer's assurance that this is the plan, which is exactly what happened here. That convenience comes with a trade-off: if the intended use does not materialize the way the buyer described, the rebate can be clawed back long after the money has already changed hands and been spent.

A different rebate exists for landlords who buy new construction specifically to rent out long-term, called the New Residential Rental Property Rebate. It requires the property to be leased for at least a year and involves its own separate application, filed by the landlord rather than credited by the builder. Meera and Bohdan had not applied for it, and could not simply switch to claiming it later, because renting had never been the plan and their actual lease to Iryna ran only a few months — well short of what that rebate requires.

About a year after closing, Meera and Bohdan received a letter from the Canada Revenue Agency proposing to deny the rebate entirely. The agency's records, drawn from tax filings and provincial rental data, showed the home had been rented to a tenant within weeks of closing, before either owner had lived there for a single night. From the outside, that pattern looks identical to an investor buying a new-build property purely to rent it out — exactly the situation the New Housing Rebate is not meant to cover. If CRA's proposal went unanswered, the couple would owe back the full roughly $24,000, plus interest that had been accumulating since closing, likely bringing the total closer to $27,000.

The stakes were real but not existential — the couple had savings to absorb the amount if it came to that — but it was money they had budgeted around when they agreed to the purchase price, and the letter arrived with a firm deadline to respond.

What we did

1. Pulled the file apart before responding to CRA. Our team's first step was establishing, in writing, exactly what had happened and when — not what Meera and Bohdan remembered, but what the documents showed. That meant the listing history for the old house, the offers that fell through, the tenancy agreement for the new home, and the date the couple actually moved in.
2. Built the timeline CRA needed to see. The rebate does not require instant occupancy on closing day; it requires that the buyer's genuine intention, at the time of purchase, was to use the home as their primary residence, and that they did so within a reasonable period given the circumstances. We assembled a package showing the old house was actively marketed from before closing, that the rental to Iryna was documented as a short, fixed term rather than an open-ended tenancy, and that Meera and Bohdan gave notice and moved in as soon as the old house sold — not months after, but immediately.
3. Addressed the intent question head-on. The strongest evidence was the mismatch between what an investor's paperwork looks like and what this couple's paperwork looked like. An investor typically arranges a full-length lease and never lists the unit for sale or as a personal residence. Here, the lease was short, the tenant had been told from the start that the arrangement was temporary, and the couple's own home search and moving records lined up with a genuine, if delayed, move-in.
4. Responded within the review, not after an assessment. Because the letter was a proposal rather than a final reassessment, we replied during the review window with the full documentary package and a written explanation of why the delay did not change the couple's original intention. Responding before a formal reassessment issued kept the matter at the review stage, where the file could still be resolved on its facts rather than through a more adversarial objection and appeal process afterward.
5. Kept the couple's expectations grounded throughout. We were candid with Meera and Bohdan from the outset that this was a genuinely fact-dependent question — CRA reviews rentals shortly after closing with real skepticism precisely because the New Housing Rebate is a common target for misuse, and a favourable outcome was likely but not guaranteed.

The outcome

CRA accepted the explanation. The review concluded that the couple's original intention to occupy the home as their primary residence was genuine and reasonably delayed by circumstances outside their control, and that the temporary rental did not disqualify the rebate. No repayment was required, and the file was closed without a formal reassessment or the need for a subsequent objection, which meant Meera and Bohdan never had to file the more formal, slower dispute process that a reassessment would have triggered.

The outcome turned less on any single document and more on consistency. Every piece of paper — the listing agreement on the old house, the short-term lease on the new one, the tenant's own understanding of the arrangement, and the date the couple finally moved their belongings in — told the same story. Nothing had to be reconstructed or explained away after the fact, because it had all been kept, more or less by habit, as the events actually happened. That is the quiet lesson buried in most successful rebate reviews: the file that wins is usually the one that was never assembled defensively in the first place, only pulled together and organized when it mattered.

Meera and Bohdan did eventually settle into the new home for good, and the roughly $24,000 rebate they had budgeted the purchase around stayed exactly where they had planned for it to be, without the added interest CRA's letter had threatened to add on top.

What you can learn from this