Protect Yourself from Illegal Building

In Ontario, every new home builder must be registered with Tarion.  In order to be registered with Tarion, a builder must complete a net worth statement and demonstrate adequate construction knowledge.  He may even have to write a test and be able to show Tarion officials a building plan and an agreement of purchase and sale.  The cost to enrol in Tarion is $300 a year, but the approval process can take a little time.  And if the builder is new, he’ll have to put a deposit down for each build so that Tarion has some recourse if something goes wrong.  And then every year, the builder has to renew with Tarion which means filling out another net worth statement and paying another $300 and waiting for approval.  Becoming a registered builder is not expensive and is a simple enough process as long as you know what you’re doing. Why then are so many new homes not under Tarion warranty?

One reason may be that the builder could not possibly become registered because he does not understand the process.  You should definitely stay away from any home offered by that builder.

But what if the builder is just trying to avoid the HST?  If you’re buying a new home with no Tarion warranty, you can assume that the builder/seller will NOT be paying HST.  The seller may have built the home for himself or a family member and may be under the impression that HST is not applicable.  This may be true, but if not, it’s a costly mistake and as a buyer, it is vitally important that you protect yourself from any future HST liability.  The best way to protect yourself is to surround yourself with knowledgeable professionals.  Start with a real estate professional who understands that this is a complex issue and add a real estate lawyer with tax knowledge or a lawyer who knows when to call in a tax lawyer.  Sellers of new homes may also want to consider consulting an accounting professional with a tax speciality because both Capital gains and HST may be applicable.

Here’s a link to a Toronto Star article from 2012 which outlines how a buyer became a builder and liable for the tax when she sold the home she purchased.

http://aaron.ca/columns/2012-09-15.htm

Heather Belsito, Broker

Stonemill Realty Inc., Brokerage

905-847-5900 (office)  heatherbelsito@gmail.com   http://www.patbelsito.com

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