Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 193361r
Business Number: N/A
December 1, 2020
Dear [Client]:
Subject: GST/HST INTERPRETATION
Supply of residential lots
Thank you for your [correspondence] of [mm/dd/yyyy] regarding the application of the goods and services tax/harmonized sales tax (GST/HST) to the supply of residential lots. We apologize for the delay in responding to you.
Previously, we provided you with an interpretation, dated [mm/dd/yyyy] under case number 193361. As a result of your [correspondence] of [mm/dd/yyyy] we wish to revise our previous interpretation. This revised response replaces and supersedes the interpretation dated [mm/dd/yyyy].
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Briefly, we understand that […][the corporation] has a head lease with […] for […] land situated […]. [The corporation] subdivides said land into residential lots that are registered in […](the Registry). [The corporation] subleases said residential lots to persons who install manufactured homes on the lots. We understand that these manufactured homes are considered to be “mobile homes,” as defined in subsection 123(1).
[…]
RULINGS REQUESTED
1. Within the definition of “residential complex” under subsection 123(1), the property is always referred to as “land” that would be occupied as a place of residence for individuals. Is the “land” under that definition a distinct legally registered property or parcel in a provincial land title registry or the Registry? Do the “sites” referred to in paragraphs (a), (b), (c) and (d) of the definition of “residential trailer park” in subsection 123(1) have the same definition as that of “land” under the definition of “residential complex” in subsection 123(1)?
2. In the Federal Court of Appeal case Hidden Valley Golf Resort Association v. The Queen, it was stated that a sublease of land was a supply of real property that was a residential complex because the developer is granting subleases. Would the corporation also be considered to be supplying a “residential complex” because it is granting subleases of residential lots?
3. Is the sublease of a residential lot registered in the Registry “real property” as defined in subsection 123(1)?
4. If the head leased land is subdivided and residential lots are created by registering them in the Registry, and subsequently subleases of the residential lots are granted, does this not mean that a “residential complex,” as defined in subsection 123(1), has been created and therefore, the corporation’s development is not a “residential trailer park” as defined in subsection 123(1)?
5. If a developer places mobile homes constructed under the A277 and Z240 codes (and considered to be a “mobile home” as defined in subsection 123(1)) on residential lots, does a “residential complex” become a “residential trailer park” with sites that do not have a legal description or are not registered in any land registry?
The CRA issues both rulings and interpretations. An interpretation sets out the CRA’s view of how the legislation applies to a generic fact situation. […]
INTERPRETATIONS GIVEN
Interpretation 1
Generally, a “residential complex,” as defined in subsection 123(1), is a combination of two or more elements that must include either a building in which one or more residential units are located (for example, a building such as a detached house or an apartment building) or a mobile home, and that may include any common areas and appurtenances to the building or any appurtenances to the mobile home, and the land that is subjacent or immediately contiguous to the building or the mobile home. However, the definition of “residential complex” contains a special exclusion for situations where a mobile home is affixed to land that is a site in a residential trailer park. In such situations, the residential complex is the combination of the mobile home and any appurtenances to the mobile home, excluding the land that is subjacent or immediately contiguous to the mobile home.
In other words, in situations where there is land, but neither a building in which one or more residential units are located is situated on the land nor a mobile home is affixed to the land, the land itself is not a residential complex for GST/HST purposes. In addition, a lease or sublease of such land does not constitute the supply of a residential complex for GST/HST purposes.
So, if a person makes a lease or sublease of only land to an owner, lessee or person in occupation or possession of a mobile home that is affixed to the land, and if such land is not a site in a residential trailer park, then the land to which the mobile home is affixed is regarded as forming part of a residential complex. However, to be clear, the person making the lease or sublease of the land is not making a supply of a residential complex, but rather is making a supply of an element that forms part of a residential complex.
In contrast, if a person makes a lease or sublease of only land to an owner, lessee or person in occupation or possession of a mobile home that is affixed to the land, and if such land is a site in a residential trailer park, then only the mobile home and any appurtenances to the mobile home is the residential complex. To be clear, the person making the lease or sublease of the land is neither making a supply of a residential complex nor making a supply of an element that forms part of a residential complex.
As explained above, in situations where a mobile home is affixed to land, the matter of whether the land is a site in a residential trailer park is important in determining whether the land forms part of a residential complex. Depending on the circumstances, a site or a group of sites, where each site is a legally registered property or parcel in a provincial or federal land registry, may be a trailer park for GST/HST purposes. Generally, a “trailer park,” as defined in subsection 123(1), is a piece of land that is exclusively composed of one or more sites each of which is (or is intended to be) supplied by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, or a travel trailer, motor home or similar vehicle or trailer, situated (or to be) situated on the site. A trailer park may encompass other land that is reasonably necessary for the use and enjoyment of the sites by individuals residing in or occupying the mobile homes, vehicles or trailers, or other land that is reasonably necessary for the purpose of engaging in the business of supplying the sites by way of lease, license or similar arrangement.
Generally, a “residential trailer park,” as defined in subsection 123(1), is the land that is included in a trailer park, or where there are two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, provided that in either case the land encompasses at least two sites. The definition of “residential trailer park” contains other conditions that must be met, but practically a residential trailer park can encompass two contiguous trailer parks that are each composed of one site.
In summary, the definitions of “residential complex” and “residential trailer park” contemplate very distinct things for GST/HST purposes. Land that is a site in a residential trailer park cannot be land that forms part of a residential complex for GST/HST purposes.
Interpretation 2
As explained above in Interpretation 1, a lease or sublease of only land does not constitute a supply of a residential complex for GST/HST purposes. However, in situations where land that is not a site in a residential trailer park is leased or subleased to an owner, lessee or person in occupation or possession of a mobile home that is affixed to the land, the land is regarded as forming part of a residential complex.
Although the judge in the Federal Court of Appeal case of Hidden Valley Golf Resort Association v. The Queen made a statement to the effect that a sublease of land is a supply of real property that is a residential complex, that statement was an obiter remark that was not essential to the decision, and in any event, that statement was incorrect. With all due respect to Justice Sharlow, in making that statement, it seems that she quoted subparagraph 136(2)(a)(i) when she likely meant to quote subparagraph 136(2)(a)(ii). In our view, a sublease at issue in that particular case would have been a supply of real property that is land that forms (or is reasonably expected to form) part of a residential complex.
Interpretation 3
“Real property,” as defined in subsection 123(1), includes:
(a) in respect of property in the Province of Quebec, immovable property and every lease thereof;
(b) in respect of property in any other place in Canada, messuages, lands and tenements of every nature and description and every estate or interest in real property, whether legal or equitable; and
(c) a mobile home, a floating home and any leasehold or proprietary interest therein.
“Supply,” as defined in subsection 123(1), means the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition.
The sublease of a lot registered in the Registry is a supply of an interest in real property, and therefore is real property under paragraph (b) of the definition of “real property” in subsection 123(1).
Interpretation 4
As explained above in Interpretation 1, a residential complex must include either a building in which one or more residential units are located (for example, a building such as a detached house or an apartment building) or a mobile home.
Also as explained previously in Interpretation 1, generally, a residential trailer park is land included in a trailer park, or where there are two or more trailer parks that are immediately contiguous to each other, the land that is included in those contiguous trailer parks, provided that in either case the land encompasses at least two sites. Provided all other conditions within that definition are met (including: (i) that 90% or more of the sites are supplied under a lease, licence or similar arrangement under which continuous possession or use of a site is provided for at least one month in the case of mobile homes or other residential units (or twelve months in the case of travel trailers or motor homes, or similar vehicles that are not residential units), and (ii) that 90% or more of the sites, if occupied by mobile homes, would be suitable for use by individuals as a place of residence throughout the year) a leased land development may be considered to be a “residential trailer park” as defined in subsection 123(1).
Interpretation 5
It would first have to be determined whether land composed of a number of sites (whether or not each site is a legally registered property or parcel in a provincial or federal land registry) is a trailer park and then a residential trailer park. If a mobile home is affixed to land that is a site in a residential trailer park, then the mobile home itself would be a residential complex and the land would not form part of the residential complex. To be clear, land that is a site in a residential trailer park does not form part of a residential complex by the mere affixing of a mobile home on the land.
The definition of “residential trailer park” has been explained previously in Interpretations 1 and 4. The mere affixing of a mobile home on land (regardless of whether the land is a legally registered property or parcel in a provincial or federal land registry) in and of itself does not create a residential trailer park, rather a residential trailer park exists where the conditions within the definition of “residential trailer park,” as defined in subsection 123(1), are met.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, […]. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Ron Litzenberger
Industry Sector Specialist
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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