6 December 2001 GST/HST Ruling 35825 - Services Provided by Condominium Corporation

Dear XXXXX:

Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to services provided by a condominium corporation. In late August, we also received a package of documents from XXXXX of your office.

Since the subject property is located in a non-participating province, we will restrict our comments to the application of the GST.

All legislative references are to the Excise Tax Act (ETA) unless otherwise noted.

Statement of Facts

1. Our understanding of the facts and transactions is as follows. Our understanding is based on your letter, our telephone conversations with XXXXX of your office and a review of the following documents, forwarded to our office by XXXXX: (We have treated the unsigned and undated documents as sample documents provided for our general information. Several documents make reference to "XXXXX Condominium Corporation No. ______", however no corporation number is inserted. In those cases we understand from XXXXX that the phrase is meant to represent the XXXXX Condominium Corporation Number XXXXX referred to in your letter. This is consistent with the Agreement of Purchase and Sale which defines "Corporation" as being XXXXX Condominium Corporation No. XXXXX.)

Sample Agreement of Purchase and Sale with Schedules "XXXXX" (Owner's Services Agreement) and Appendix "XXXXX" (Basic Services Package);

-    Disclosure Statement XXXXX dated XXXXX;

-    Declaration by XXXXX. and Schedules XXXXX through XXXXX (unsigned/undated);

-    XXXXX Condominium Corporation No. ____ by-laws (unsigned/undated);

-    XXXXX Rules and Schedules XXXXX;

-    Insurance Trust Agreement between ________ Condominium Corporation No. _____ and the XXXXX and Schedule "XXXXX" and "XXXXX "- (unsigned/undated);

-    Condominium Management Agreement between XXXXX Condominium Corporation No. ___ and XXXXX - (unsigned/undated);

-    Diagrams of plot plan and lay-out of condominiums; and

-    Condominium Services Agreement between XXXXX Condominium Corporation No.____ and XXXXX - (unsigned/undated).

2. XXXXX will construct a condominium at municipal address XXXXX (the Condominium). The Condominium will include XXXXX residential units, which we understand to be residential condominium units (Subsection 123(1) of the ETA defines a "residential condominium unit" as "... a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit".) for purposes of the ETA. Title to and ownership of a particular residential condominium unit passes under an agreement of purchase and sale. Life-lease arrangements are not involved.

3. According to Part XXXXX Disclosure Statement, the Condominium is designed to provide facilities, amenities and services geared to serve the needs of seniors who might periodically require some degree of support services (as indicated at Part XXXXX XXXXX Disclosure Statement). The Condominium is intended to be a place of long-term residence.

XXXXX

4. XXXXX will create the XXXXX, which will be one or more condominium units contained within the legal description of the Condominium.

5. The XXXXX includes a dining room, a health and wellness centre, library, lounge, swimming pool, equipped fitness facility, commercial kitchen, staff room, multi-purpose activity rooms, administrative offices and a social centre. The XXXXX is not an entity in its own right, but rather is the name of the physical facility.

XXXXX Condominium Corporation Number XXXXX

6. The XXXXX Condominium Corporation Number XXXXX (the Corporation) was created pursuant to the provisions of the Condominium Act, XXXXX and the Regulations made thereunder. The Corporation was established upon the registration of the Condominium under the laws of XXXXX. The shareholders of the Corporation are the owners of the units and their appurtenant common interests in respect of the Condominium.

7. The Corporation will enter into a Condominium Management Agreement with XXXXX for XXXXX to be the exclusive manager of the property and assets of the Corporation.

8. XXXXX is not a corporation established upon the registration of a condominium or strata lot plan or description or similar plan or description under the laws of a province.

Basic Services Package

9. Article XXXXX of the Declaration by XXXXX requires the Corporation to enter into a Condominium Services Agreement immediately following registration of the Declaration. The article also states that the Corporation is to maintain the Condominium Services Agreement "... to ensure that a Basic Services Package is provided to the Condominium and its residents on an uninterrupted basis." Paragraph XXXXX of the Condominium Services Agreement refers to a Basic Services Package "... to be provided by XXXXX to the Corporation and its unit owners and residents ...".

10. The Condominium Services Agreement is between the Corporation and XXXXX Under the Condominium Services Agreement, the Corporation retains the services of XXXXX to be the exclusive provider of the Basic Services Package.

11. Only owners and residents ("Resident" is defined at paragraph XXXXX of the Disclosure Statement. Within this letter, "owner" is understood to refer to the owners of the residential condominium units described by the condominium plan registered in connection with the subject condominium.) of the Condominium have the use of the XXXXX and are entitled to the Basic Services Package.

12. XXXXX will bill the Corporation directly for the cost of the Basic Services Package which shall comprise part of the common expenses of the Condominium.

13. The Basic Services Package will include:

•   on-site management and service personnel, whose duties include monitoring and responding to security, health and emergency calls as well as reception and concierge services;

•   use of the XXXXX facilities, including the social centre;

•   nutritional and medication counselling, education and consultation on health matters, co-ordination and scheduling of in-suite personal assistance and care services;

•   provision of cultural, educational, recreational and social programs;

•   transportation to shopping;

•   in-suite (one hour/month) housekeeping, plus emergency repairs; and a credit towards daily lunch and dinner services.

14. XXXXX has subcontracted with XXXXX to provide management, staff, maintenance and administrative services for the XXXXX. XXXXX has subcontracted with XXXXX to provide the Basic Services Package and Additional Services (as described below).

Characterization of Payments toward the Basic Services Package

15. The definition of "common expenses" at Schedule "XXXXX" of XXXXX Disclosure Statement includes items such as payments towards water and sewage and electricity respecting common elements, waste disposal and garbage collection, and snow removal and landscaping. Also included in the definition are "... the costs of the Basic Services Package as determined from time to time pursuant to the Condominium Services Agreement with XXXXX."

16. Further to the above, the Corporation will charge and collect from unit owners, as a mandatory element of the "common expenses", a monthly lump sum amount relating to fees for the Basic Services Package. A separate monthly lump sum will be charged to unit owners for common expenses, such as water, gas, and waste disposal.

17. Sub-paragraph XXXXX of XXXXX Disclosure Statement states that each owner of a unit shall have an undivided interest in the common elements as a tenant in common with all other owners ...". In its Disclosure Statement, XXXXX declares that it is not providing any recreational or other amenities which will be part of the common elements. Article XXXXX of the Disclosure Statement defines "common elements" as excluding residential units and the XXXXX. We have also received confirmation from XXXXX that the property comprising the XXXXX will not form part of the common elements in which the unit owners have an undivided interest as tenants in common.

We note that describing the costs of the Basic Services Package as "common expenses" may appear contradictory. One would normally expect the concept of common expenses or condominium fees to relate to the owners' undivided interests in the common elements of the condominium. However, the subject package does not appear to relate to any such interest.

Ownership of the XXXXX Between the various documents provided, there appears to be some discrepancy as to who owns the property comprising the XXXXX.

18. Paragraph XXXXX of the Disclosure Statement states that the XXXXX is intended to be owned by XXXXX and leased to XXXXX. We understood from XXXXX that no rental fee would be charged to XXXXX for the XXXXX. The Owner's Services Agreement indicates that XXXXX is the lessee of the XXXXX. The Condominium Services Agreement makes reference to a particular arrangement terminating "... upon the earlier of XXXXX ceasing to be the lessee of the XXXXX. ...".

19. The preceding conflicts with paragraph XXXXX of Article XXXXX of the Declaration by XXXXX, which indicates that the XXXXX is to be owned, managed and controlled by XXXXX. As well, in discussing the term of the Condominium Services Agreement between the Corporation and XXXXX, item XXXXX of the Notes to the Budget makes reference to "... the date upon which XXXXX is no longer the Owner of the XXXXX." (all italics ours)

20. XXXXX has stated that the intention of the relevant parties is that the property comprising the XXXXX will be owned, managed and controlled by XXXXX, as set out in the definition of 'XXXXX' in XXXXX Declaration.

Owner's Services Agreement

21. Under paragraph XXXXX of the proposed Declaration, each resident shall enter into an Owner's Services Agreement which contains substantially the same terms and provisions as the Condominium Services Agreement. Paragraph XXXXX of the Agreement of Purchase and Sale also requires the purchaser to enter into the Owner's Services Agreement.

22. The Owner's Services Agreement is between the owner of the residential condominium unit and XXXXX.

23. The Owner's Services Agreement is in effect until the Corporation is registered, and then is suspended as long as the Condominium Services Agreement remains in effect. If the Condominium Services Agreement ceases to exist for any reason other than XXXXX ceasing to be the lessee of the XXXXX See our comments earlier regarding the relationship of XXXXX to XXXXX, then the Owner's Services Agreement would again come into effect.

24. Under the Owner's Services Agreement, the residential condominium owner retains XXXXX to provide exclusively the Basic Services Package to the Owner.

25. No payment for Basic Services Package is due under the Owner's Services Agreement as long as the fees are included as part of the common expenses and paid to XXXXX by the Corporation.

Additional Services

26. The Condominium Services Agreement and the Owner's Services Agreement each provide that XXXXX may make available to unit owners optional, additional levels of support beyond the scope of the Basic Services Package. Such Additional Services will be contracted for directly between XXXXX and the individual unit owner and will not form part of the common expenses of the Condominium.

27. The Additional Services include the following:

•   direct nursing care and medication assistance provided by a Registered Nurse or a Registered Practical Nurse;

•   foot care provided by a Registered Nurse;

•   assisted living (HSW/PSW - terms not defined);

•   hydro therapy assistance; and

•   housekeeping and handyman services, catered events, shuttle transportation arrangements.

Status of the Entities

28. We understand from XXXXX that none of the entities referred to in the preceding Statement of Facts are public service bodies (Subsection 123(1) of ETA defines "public service body" as "... a non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college or a university".) for purposes of the Excise Tax Act (ETA).

29. We further understand from XXXXX that XXXXX, the Corporation, XXXXX and XXXXX are all currently registered for purposes of the GST/HST. However to date we have not been able to obtain any of the relevant Business Numbers from XXXXX, which would enable us to search our records for possibly relevant material.

30. Your office has forwarded to us a third party authorization dated XXXXX. The authorization is on behalf of XXXXX and is on XXXXX letterhead. We have also received from your office a copy of a XXXXX third party authorization, which we understand was sent by facsimile transmission to your office. The authorization is on behalf of the XXXXX Condominium Corporation No. XXXXX. The heading at the top of the facsimile sheet reads XXXXX.

31. We understand that none of the above-noted entities are closely related corporations under section 128. Accordingly, we have not examined the impact of such a relationship (such as the effect of an election under section 156 to treat certain supplies as having been made for nil consideration). We understand that no agency, partnership, joint venture, or trust relationship exists between any of the entities, and accordingly have not examined the impact of any such relationships.

The following response is based on our understanding that the Basic Services Package will be provided pursuant to the Condominium Services Agreement. If the Basic Services Package has been or will be provided pursuant to the Owner's Services Agreement, then our response may differ and we suggest that you contact our office for further discussion.

Rulings Requested

1. The charge for Additional Services from XXXXX to the condominium owners will not be exempt pursuant to section 13 of Part I of Schedule V.

2. The charges by the Corporation to the owners of a condominium unit in respect of the Basic Service Package are exempt for GST purposes pursuant to section 13 of Part I of Schedule V.

3. XXXXX will be required to charge GST on the service provided to the Corporation with respect to the Basic Services Package.

4. Certain components of the above-mentioned Additional Services, if billed separately, may be exempt pursuant to either section 6 or section 9 of Part II of Schedule V[.]

Ruling Given (Ruling Request 1)

Based on the facts set out above, we rule that the charge for Additional Services from XXXXX to the condominium owners will not be exempt pursuant to section 13 of Part I of Schedule V.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 (enclosed) of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation - Ruling 1

The Additional Services are provided under separate contract between XXXXX and individual owners. Since XXXXX is not a corporation described at section 13 of Part I of Schedule V, its supplies cannot be exempt under that provision.

Explanation - Ruling Requests 2 and 3

We regret that we are unable to provide rulings on requests 2 or 3, due to insufficient facts and contradictory documentation as referred to above XXXXX XXXXX. In order to provide rulings, it is essential to be able to identify the supplier, the recipient, their relationship, and the nature of the supply for the transaction covered by the ruling.

As XXXXX and I have discussed, if sufficient facts are established to allow this office to issue a ruling or to provide further comments on either matter at a future date, we will be pleased to do so, under cover of a separate case number. At that time, this office will conduct further research and analysis in connection with your queries, including the appropriate treatment of the bundle of services contained within the Basic Services Package.

Regarding ruling request 2, section 13 of Part I of Schedule V exempts the supply of property or a service by a corporation established upon the registration of a condominium or strata lot plan. The supply is exempt when made to the owner or lessee of a residential condominium unit described by that plan. The property or service supplied must be related to the occupancy or use of the unit.

Regarding ruling request 3, it is not clear that in fact XXXXX is providing services to the Corporation XXXXX.

We can confirm, however, that section 13 of Part I of Schedule V cannot apply to exempt a service provided by XXXXX if that entity is not a corporation or syndicate established upon the registration, under the laws of a province, of a condominium or strata lot plan or description or similar plan or description.

Additional Information Provided

With respect to ruling request 4, it will be a question of fact whether the supply of a particular good or service qualifies for exemption under a provision of the ETA, including either section 6 or 9 of Part II of Schedule V. Since your ruling request encompasses many different possible fact situations, we are unable to provide a ruling.

You did not indicate that any of the services included in the "Additional Services" package are insured services for purposes of the provincial health insurance plan. Our understanding is that it is unlikely that such services would be insured services covered by the provincial health insurance plan, and that XXXXX would not be considered a "provider" for purposes of the provincial health insurance plan legislation. Therefore, it is a question of fact as to whether section 9 of Part II of Schedule V will apply to the supply of any of these additional services.

Please note that paragraph 6(b) of Part II of Schedule V exempts the supply of a private-duty nursing service, if the service is rendered by a registered nurse, a registered psychiatric nurse, a registered nursing assistant or a licensed practical nurse.

A private duty nurse is a nurse who is hired directly by an individual, and the nurse provides nursing care in the individual's home. Note that for purposes of the ETA, a nursing service is that of a traditional nursing service involving the diagnosis and treatment of an individual's health problems. Nursing services are patient care services that pertain to the curative, restorative, and preventative aspects of nursing. They may also include personal nursing care, administration of drugs and other medications and treatments (usually on the orders of a medical practitioner), assessment of patient's nursing needs and requirements, and the preparation of nursing care plans for the individual patient.

None of the other services listed, i.e., assisted living (HSW/PSW - terms not defined); hydro therapy assistance; housekeeping and handyman services, catered events, shuttle transportation arrangements, are generally exempt under any of the provisions of Part II of Schedule V.

However, housekeeping services rendered in an individual's home is an example of a homemaker service. Note that while there is no general exemption for homemaker services, publicly-funded homemaker services are exempt under section 13 of Part II of Schedule V. Accordingly, if an individual receives government assistance specifically for the acquisition of homemaker services, the homemaker services may be exempt to that particular individual, pursuant to section 13 of Part II of Schedule V. If a supplier receives government funding to provide homemaker services, the supply of these subsidized services would also be exempt under section 13. Where neither the supplier nor the individual recipient receive government funding for the supply or receipt of a homemaker service, the homemaker service is subject to the GST/HST at the rate of 7% or 15%.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-3413.

Yours truly,

(Mrs.) S.C. Cahill
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate