A Temporary Tenant Nearly Cost This Couple Their HST Rebate

The situation

Emily, a pharmacist, and Fernanda, a police sergeant, signed an agreement to purchase a pre-construction condominium unit in North Bay for roughly $950,000, with an anticipated completion date about eighteen months out. They planned to sell their existing home and move in together once the building was finished. Like most new-build purchase agreements in Ontario, theirs assigned them the harmonized sales tax, or HST, that applies to newly constructed homes, but credited back an amount called the new housing rebate directly at closing, so long as they signed a statement confirming the unit would be their primary residence.

The federal portion of that rebate phases out on homes priced above a certain threshold, and at $950,000 it did not apply. The provincial portion of the Ontario new housing rebate, however, is capped at a flat amount — roughly $24,000 — regardless of price, and applies whenever the buyer or a close relation genuinely intends to occupy the home as a primary residence. The builder credited that amount against the closing price, which is standard practice, but it comes with a condition: if the Canada Revenue Agency later determines the home was not actually used as intended, it can reassess and require repayment, with interest.

Our team handled the closing. Part of that work is explaining, plainly, what the attestation the buyers are about to sign actually commits them to. Many buyers assume that once the rebate is credited at closing, the matter is settled — that it is simply part of the purchase price, no different from any other adjustment on the statement of adjustments. It is not. The rebate is a benefit tied to a specific, ongoing use of the property, and the CRA can and does verify that use, sometimes years after the fact, by matching addresses on file against tax returns, licences and other government records. We walked Emily and Fernanda through that condition before closing, along with the general principle that a genuine, unavoidable delay in moving in is treated differently from renting the unit out to someone else in the meantime.

At the time, nothing about the file looked unusual — a straightforward attestation, a straightforward closing, and two buyers with every intention of moving in as soon as the building was ready for occupancy.

What changed after closing

About five months after closing, Fernanda was posted to a temporary assignment several hours away, expected to last close to a year. Rather than leave the new condo sitting empty, the couple let a friend, Heather, stay there rent-free while they sorted out their plans, intending to move in themselves once the posting ended.

Fifteen months later, when they finally moved in, Emily updated her mailing address and applied for a change to her driver's licence using the new unit. That triggered a routine CRA data match against the rebate claim filed at closing — the kind of cross-check the agency runs periodically on new housing rebates, comparing the occupancy date implied by the paperwork against other records tied to the buyers. A letter arrived asking the couple to substantiate that the condo had been their primary residence from the point of first occupancy, as the rebate required.

This is where new-home rebate claims most often run into trouble. The rebate is not conditional on the buyer occupying the unit the day the keys change hands — construction timelines and life circumstances shift constantly, and the CRA does not expect immediate occupancy in every case. What it does require is that the buyer or a relation was always the intended occupant, and that any delay was consistent with that intention rather than a change of purpose. A friend living in the unit rent-free for over a year, with the actual buyers registered at a different address the entire time, looks — on paper — indistinguishable from a rental property whose owners simply never meant to live there. The CRA does not read intentions; it reads addresses, leases, utility accounts and timing.

What we did

1. Reviewed the closing file and the original attestation. We confirmed exactly what Emily and Fernanda had signed at closing, and what standard the CRA would apply in assessing whether their later conduct was consistent with it.
2. Gathered contemporaneous evidence of intent. The couple still had records showing their reasoning throughout: the listing history and eventual sale of their previous home, correspondence about Fernanda's temporary posting, and messages with Heather describing the stay as a favour, not a tenancy — Heather had never paid rent, and there was no lease.
3. Distinguished a delay in occupancy from a change in purpose. We prepared a written response to the CRA's letter explaining the sequence of events: the posting, the decision not to leave a new unit sitting empty, and the couple's move-in as soon as the posting ended. The absence of any lease or rent payments from Heather was central to this — a genuine tenancy would have pointed toward a rental property; an unpaid favour during an unplanned absence did not.
4. Flagged the exposure that remained. Even with intent well documented, the CRA can still treat a period during which the buyer was neither occupying the unit nor actively working toward occupying it as inconsistent with the rebate for that stretch of time. We advised the couple honestly that a full waiver of any adjustment was unlikely, and that the realistic goal was to limit the reassessment to the period genuinely in question rather than the whole rebate.
5. Negotiated the scope of the reassessment. We proposed treating only the interval from when Heather moved in to when Emily and Fernanda actually took occupancy as the disputed period, rather than the CRA's initial position, which read the file as if the couple had never intended to live there at all.

The outcome

The CRA accepted that Emily and Fernanda's underlying intent to occupy the condo as their primary residence was genuine and well supported, and did not deny the rebate outright. It did, however, treat the roughly fourteen months Heather occupied the unit as a period inconsistent with owner-occupancy, and reassessed a prorated share of the rebate — a bit under half of the original roughly $24,000 credit — plus interest calculated from the date of the original claim. The couple repaid that portion; the remainder of the rebate stood.

It was not the clean outcome anyone wanted. Had Emily and Fernanda sought advice before letting Heather move in — even a short call about how an empty new-build unit should be handled during an unplanned absence — the arrangement could likely have been structured to avoid the reassessment altogether, for instance by formalizing it as the couple's own temporary secondary use rather than letting an outsider occupy it unpaid and unrecorded for over a year. The favour to a friend, offered without a second thought, ended up costing them several thousand dollars in repayment and interest they would not otherwise have owed.

What limited the damage was that the couple had never actually changed their plans — they always meant to live in the unit, they moved their previous home's sale around it, and Emily could point to a documented, unbroken thread of intent from the day of purchase to the day they finally moved in. That thread is what kept the CRA's reassessment narrow instead of complete.

What you can learn from this