REASONS FOR JUDGMENT
Jorré D.J.
I.
INTRODUCTION
[1]
This is a New Housing Rebate case.
[2]
The Appellant applied for a GST/HST New Housing Rebate in respect of a condominium he purchased on Bastion Street in Toronto. The Respondent denied the application.
[3]
The Appellant, Meng Zhang, a real estate broker, and Si Yuan Chen testified. Si Yuan Chen is the Appellant’s spouse.
[4]
At the hearing, the principle position of the Respondent was based on her conclusion that the Appellant had not bought the condominium from a builder but rather from Meng Zhang who was not a builder. I will come back to this as well as the rest of the Respondent’s argument.
[5]
On 22 May 2011, Meng Zhang, the Assignor, signed an agreement of purchase and sale with a builder, West Harbor City (III) Residences Corp., in respect of the condominium in issue. At that time, the tentative possession date for the new condominium was the 30th day of November 2013; that date was postponed substantially. The purchase price was $326,900 inclusive of net HST, (i.e. after deducting the amount of the expected HST rebate from the total of the selling price and HST).
[6]
On 1 March 2014, the Assignor and the Appellant signed an assignment agreement with respect to the condominium in question.
[7]
Originally the Assignor bought the property as an investment with the thought that she might give it to here son at a later date.
[8]
The Assignor made no profit on the assignment agreement.
[9]
The Appellant’s uncle, Mr. Ching, was the Assignor’s best friend. Around the beginning of 2014 Mr. Ching referred the Appellant to her and the Appellant started to work for her as an assistant; the Appellant left that employment in 2015.
[10]
Mr. Ching lived in a unit in the same building as the condo in issue and the Appellant sought to live in the same building as his uncle. The Assignor then entered into the assignment agreement with the Appellant.
[11]
While working for the Assignor, the Appellant met Si Yuan Chen, who also worked in the same office.
[12]
Pursuant to the assignment agreement the Appellant paid $49,035 to the Assignor. This amount was equal to the payments made by the Assignor up to the date of the assignment agreement pursuant to the agreement of purchase and sale.
[13]
The agreement of purchase and sale signed by the Assignor contained certain restrictions on assignment, including that the terms of any assignment conform to the vendor’s standard form of assignment and that the purchaser could only exercise her right to assign the agreement once by giving notice to the vendor on or before one of two dates.
[14]
The purchaser did not give timely notice to the vendor of the assignment as required by the purchase agreement.
[15]
In addition to the lack of timely notice, the Respondent argued that the 1 March 2014 assignment agreement did not comply with the purchase agreement insofar as the assignment agreement did not conform to the other conditions set out in the purchase agreement with respect to any assignment of the purchase agreement. As explained below I do not need to reach a conclusion on this question and I decline to do so.
[16]
The Appellant moved into the condominium at the beginning of May 2014 shortly after the 28 April 2014 interim occupancy date of the unit.
[17]
After he signed the assignment agreement, the Appellant made all payments to the vendor required pursuant to the agreement of purchase and sale.
[18]
While the evidence is limited, it is clear that in March 2015, prior to the closing, there was communication between the vendor of the condominium, the Assignor and the Appellant or their representatives. This resulted in an exchange of emails on 19 March 2015 indicating that the builder accepted a direction that title to real estate was to be in the name of the Appellant. I note that the direction came from an individual at the Appellant’s law firm.
[19]
The Respondent says that the assignment agreement was invalid, at least in the sense that it did not bind the vendor, West Harbor City (III) Residences Corp., because it did not conform to the requirements of the agreement of purchase and sale and because there was no timely notice of the assignment to the vendor.
[20]
However, I see little in the evidence that would support a conclusion that the Appellant bought the condominium from the Assignee. While there is a statement of adjustment as of 26 March 2015 with the Assignee’s name shown as the purchaser, I see nothing else in the evidence to indicate that the Assignee actually completed the purchase.
[21]
On the contrary, the reporting letter from the Appellant’s lawyer for the real estate purchase dated 9 April 2015 refers to the Appellant’s purchase from West Harbor City (III) Residences Corp and the extract from the land registry shows the transfer of title as being from West Harbor City (III) Residences Corp. to the Appellant.
[22]
I infer that there was no sale from West Harbor City (III) Residences Corp to the Assignor.
[23]
Given that there was no sale from West Harbor to the Assignor, given that the Appellant made all the payments due to West Harbour under the purchase agreement arising after he signed the assignment agreement, including the monthly payments due after interim occupancy began, given the 19 March 2015 emails showing acceptance by West Harbor of a direction coming from the office of the Appellant’s lawyer that title would be in the Appellant’s name and given the land registry records showing the transfer from West Harbor to the Appellant, it is clear from its conduct that the vendor, West Harbor, waived any unfulfilled conditions regarding the assignment, accepted the assignment and sold the property to the Appellant.
[24]
As a consequence, the Appellant took over from the Assignor and became the purchaser from the vendor, West Harbour, under the agreement of purchase and sale of 22 May 2011.
[25]
Accordingly, the first requirement for a rebate was met. There was a purchase from a builder.
[26]
The Appellant paid the $326,900 for the condominium, the purchase price set out in the agreement of purchase and sale.
[27]
As previously stated this price includes net HST after taking account of the Vendor crediting the Appellant with the New Housing Rebate.
[28]
In addition to the condition set out in paragraph 254(2)(a) of the Excise Tax Act the Respondent argued that several other conditions in subsection 254(2) were not met by the Appellant.
[29]
Turning to other arguments, the Respondent also submitted that the Appellant does not meet the requirements of paragraphs 254(2)(b), (d), (f) and (g) of the Excise Tax Act.
[30]
I am satisfied that the Appellant acquired the condominium for use as his primary place of residence at the time he became liable under the agreement of purchase and sale on the 1st of March 2014, the day he signed the assignment agreement. He moved into the condominium as soon as it was available for interim occupancy, two months after he signed the assignment agreement.
[31]
With respect to the conditions in paragraphs (f) and (g) it is clear that they are met, given that the Appellant was the first occupant of the condominium and that there was no occupant of the unit before him.
[32]
Finally, with respect to the condition in (d), we must take account of two matters. First, the Appellant, because of the assignment agreement and the acceptance of that assignment by the vendor, became the purchaser under the agreement of purchase and sale. That agreement stipulated that the purchaser would pay the HST on the sale less the amount of the New Housing Rebate that would be credited to him by the vendor.
[33]
Secondly, while paragraph 254(2)(d) requires payment of the whole of the HST, one must also take account of subsection 254(4) which modifies subsection (2) in certain ways. In particular, as a result of paragraph 254(4)(b), the HST must not necessarily have been paid; it need only have been paid or be payable. That is the case here and so the condition has been met.
[34]
Accordingly, all the conditions have been met and the Appellant is eligible to received the HST New Housing Rebate.
[35]
As a practical matter, given that the evidence shows that the Appellant has already received the benefit of the Rebate insofar as the vendor, West Harbor, credited it to him, the practical effect for the Appellant is that he will not have to pay back the New Housing Rebate. Of course if, he has already paid the rebate back after he received the assessment then the Appellant will be entitled to have it repaid to him.
[36]
To conclude, the appeal is allowed and the matter is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to the GST/HST New Housing Rebate.
Signed at Ottawa, Canada, this 9th day of October 2020.
“G. Jorré”
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