CRA states that the passing of legal title directly from the developer to the builder’s individual purchaser does not oust the Ontario new housing rebate

ETA s. 254(4)(a) and the Ontario equivalent require that in order for a taxable supply by a builder of a new house or condo unit to generate the new housing rebate, there must inter alia be a “sale” of the home to the purchaser. “Sale” is defined in ETA s. 123(1) as “any transfer of the ownership of the property and a transfer of the possession of the property under an agreement to transfer the ownership of the property.”

CRA considers that in this context, “the word ‘ownership’ generally refers to the legal ownership (that is, ‘titled’ ownership in the case of the underlying real property), rather than equitable ownership of the property.” That’s the bad news.

However, CRA commented favourably on a situation where legal title bypassed the builder. A developer, which was the full legal owner of land, agreed with a builder that the builder would both build new homes and condo units on the land and agree to sell those houses or units to the individual purchasers. At closing (and registration of the condo units), beneficial ownership of the built lots or units would be transferred from the developer to the builder and, moments later (on the “Subsequent Closing”), from the builder to the individual purchaser. However, at the direction of the builder, registered title was transferred directly from the developer to the individual purchaser.

After indicating that “one could argue that the Developer holds legal ownership for the benefit of the Builder and is required to transfer legal ownership … to any third party at the Builder’s request (for example, to the Home Buyer …)” CRA stated:

[P]rovided that legal ownership is transferred from the Developer, at the Builder’s direction at Subsequent Closing, to the Home Buyer who is the particular individual with whom the Builder has entered into the Home Buyer Agreement, the CRA will … regard the Builder as having transferred ownership of the House or Unit … to the Home Buyer … .

Therefore … provided that all of the other conditions … are met, the Builder may pay or credit the Rebate to the Home Buyer.

Neal Armstrong. Summary of 28 February 2019 CBA Roundtable, Q.27 under ETA s. 254(4)(a).