Important Changes for Assignment Transactions: Proposed Change Effective May 7, 2022.
The Federal government is targeting assignment transactions in an effort to decrease speculative trading noting that “homes should be for people to live in, not commodities to be traded and profited upon by housing speculators”.
For assignment agreements entered into prior to May 7, 2022, if the original purchaser was able to demonstrate an intention to live in the property at the time of signing the agreement to purchase the property with the builder (i.e. original purchaser was an end-user), the original purchaser was exempt from the requirement to pay 13% HST on closing. However, if the original purchaser intended to assign the unit prior to closing or to lease the unit to a third party (i.e. original purchaser was an investor), HST was payable.
Budget 2022 proposes that effective May 7, 2022, all assignments of newly constructed or substantially renovated residential housing are taxable for HST purposes. Note that this represents no change for investment-oriented purchasers as HST was already payable in this situation.
Have a question about assignments or need assistance in planning for your future assignment transaction? We would be pleased to review with you. This post was written by Slonee Malhotra, a qualified real estate lawyer with SorbaraLAW.