23 July 2001 GST/HST Interpretation 31352 - Application of the GST/HST to Certain Supplies of Real Property

We are writing in response to your letter of September 14, 2000 to Costa Dimitrakopoulos, concerning the application of the Goods and Services Tax (GST) to certain supplies of real property made by XXXXX (the "Company").

All legislative references are to the Excise Tax Act (the Act).

Our understanding of the situation is as follows.

1. In 1994, XXXXX (the "Residents") purchased a park model trailer (the "Unit") having dimensions of 3.66 m x 13.41 m and containing a bedroom, kitchen, bathroom, and living room. A year later a family room was added to the Unit.

2. The Unit was trucked to a site at a park called the XXXXX, which is owned by the Company. The Company installed the Unit on the site at a cost of XXXXX. The installation required the following steps:

(a) concrete strip footings were poured,

(b) the Unit was placed and levelled on the footings,

(c) chains were attached to the frame of the Unit and embedded in the concrete,

(d) a skirt was installed around the foundation,

(e) the Unit was connected to underground municipal sewer and water services, a hydro meter, and underground television and telephone services,

(f) stairs and a dock were constructed to provide access to the unit, and

(g) landscaping and a driveway were added.

3. The park itself consists of over XXXXX sites that comprise roughly two sections that are separated by a road. We assume that the road is a private road. One section appears to contain some XXXXX permanently serviced sites. Year round access is available with respect to these sites and it appears that the Residents placed their unit on one such site. The other section of the park consists of XXXXX seasonal sites that are suitable for seasonal use. The trailers on those sites tend to be left on site on a year round basis, but access to this section of the park is not available between November and April.

4. The Residents paid an annual "membership fee" of XXXXX plus GST for the use of their site. This fee covered property taxes, water and sewer rates, snow ploughing, garbage pick up and site maintenance. The Residents also received the use of two parking spaces.

5. The Residents lived in the Unit for nine months a year and spent their winters in a house that they owned in XXXXX. On occasion they went to XXXXX for the winter.

6. The Residents were not permitted to use the site as a mailing address. Their address was a rented post office box.

7. The Residents are registered by XXXXX to vote in the county where the Unit is located.

Issue

You are enquiring as to whether the membership fees charged by the Company to the Residents are subject to the GST.

Response

Schedule V, Part I, paragraph 7(b)

As you are aware, paragraph 7(a) of Part I of Schedule V to the Act exempts certain supplies of land (other than a site in a residential trailer park), while paragraph 7(b) of that same Part exempts certain supplies of land situated in a residential trailer park. As there may be some question as to whether the land in question is a residential trailer park, an analysis in that regard is warranted.

The definition of "residential trailer park" in subsection 123(1) stipulates that where a person owns two or more trailer parks that are immediately contiguous to each other, the residential trailer park comprises the land in both trailer parks. In other words, a single residential trailer park will encompass all immediately contiguous trailer parks owned by the same person.

In this case, the year round sites are more or less separated from the temporary sites by a private road. The land comprising the permanent sites and the land comprising the temporary sites touch each other in the middle of the private road and are therefore contiguous. On that basis, it is reasonable to conclude that the year round sites and the seasonal sites are contiguous to each other and form a single residential trailer park.

If it turns out that the road is a public road owned by a municipality, it would be more difficult, if not impossible, to treat the two areas as comprising a single residential trailer park given their physical separation and the differences in the types of units placed on the sites and the rules and regulations under which each area operates.

If the year round sites and the seasonal sites are immediately contiguous trailer parks then it is clear that they do not constitute a residential trailer park. The combined area does not consist of sites substantially all of which are supplied for periods of continuous possession of at least a month (or 12 months for trailers). Moreover, only XXXXX of the XXXXX total sites are suitable for year round use.

Paragraph 7(b) of Part I of Schedule V to the Act exempts from GST certain supplies of sites in a residential trailer park regardless of whether a mobile home or trailer is placed upon the site. As it has been determined that the park in question is not a residential trailer park, it follows that the supply of the sites is not exempt from GST under paragraph 7(b).

Schedule V, Part I, paragraph 7(a)

In order to fall within the exemption in paragraph 7(a) of Part I, the supply in this situation must be made to "the owner, lessee or person in occupation or possession of a residential unit that is or is to be affixed to the land for the purpose of its use and enjoyment as a place of residence for individuals". (From subparagraph 7(a)(i) of Part I of Schedule V to the Act. It must be noted that subparagraph 7(a)(ii) also provides exemption for certain supplies of land made to a person who will construct a residential complex on the land in the course of a commercial activity. However, subparagraph 7(a)(ii) is not relevant to the situation you described)[.]

"Residential unit" is defined in subsection 123(1) to mean, in part,

"(a) a detached house, semi-detached house, rowhouse unit, condominium unit, mobile home, floating home or apartment,

(b) ..., or

(c) any other similar premises,

or that part thereof that..."

Therefore, a park model trailer could be a residential unit if it is similar to a detached house. For example, if the park model trailer is capable of being installed on a foundation and is otherwise similar to a detached house, then it could meet the definition of a residential unit.

Policy P-104, "Meaning Of 'Mobile Home', 'Residential Unit' And 'Residential Complex' In The Context Of Mini-Homes, Park Model Trailers, Travel Trailers And Motor Homes", requires that a park model trailer be affixed to land in the same manner as a house, but it does not explicitly require that a park model trailer be bolted down in order to be permanently affixed. In this case, it appears that by investing a considerable amount of money to prepare a foundation for the Unit and by securing the Unit to that foundation (as evidenced by the factors listed in point 2 above), the Residents have substantially complied with the requirements in policy P-104 in terms of the Unit being affixed to the land. (It may appear that Example 1 in the policy provides that a park model trailer that is strapped to the ground cannot be a residential unit. However, it is unclear from the example as to the degree of affixation that the hurricane straps afford. In the case at hand, we consider the Unit to be sufficiently affixed to the concrete footings so as to allow the Unit to fall within the definition of "residential unit". )

Accordingly, in this situation, on the understanding that the Residents use the Unit as a place of residence, we would consider the Company to be making a supply to the Residents that is exempt under subparagraph 7(a)(i) of Part I of Schedule V to the Act. It must be noted however, that this exemption applies to the particular circumstances of the Resident's situation and our findings should not be used to necessarily exempt all supplies of sites in the park made by the Company. Other supplies must be determined in light of the specific facts of the case, including the nature of the unit being placed on the land, whether there are indicators that such a unit is sufficiently affixed to the land, and whether the place of residence requirement is met.

Should you require further information, or have any questions regarding this matter, please contact me at (613) 954-4393.