Articles & Information

Harmonized Sales Tax and Real Estate Transactions

Does HST apply to real estate transactions? The answer is yes, but with an important exception.

The general premise of the legislation that established the HST is that real estate transactions are subject to the imposition of HST. There is an important exception for what amounts to most sales/purchases of used residential houses and used residential complexes, where the purchase is not from the builder. — these types of transactions are usually exempt from HST. However, new homes purchased from a builder are subject to HST, and purchasers should therefore insert a clause in new home purchase agreements that establishes that the purchase price stated in the agreement "includes all applicable HST"

Commercial purchase and sale transactions are subject to HST in virtually every instance and commercial agreements generally require the purchaser to pay the HST on closing, although there is some ability with a properly worded agreement to postpone the reporting and payment of HST by the purchaser in circumstances where the purchaser and vendor are HST registrants. Commercial property purchasers should discuss the HST implications — for applicability, reporting and remittance — with their accountant prior to entering into an agreement of purchase and sale.

Vendors and Purchaser should be wary of the potential for the imposition of HST for some substantially renovated, used residences and used residential complexes where the substantial renovations were completed as part of the business of the vendor.

HST also applies to legal fees and many disbursements. Vendors of real property should also be aware that HST applies to real estate commission.

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