Citation: 2012TCC227
Date: 20120621
Docket: 2011-2923(GST)I
BETWEEN:
BEVERLEY D. BLADES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
Beverley Blades appeals
the denial of her application for a GST/HST New Housing Rebate of $6,300 filed
with the Minister of National Revenue (the “Minister”) on March 31, 2010 with
respect to her home in Red
Deer, Alberta.
[2]
At the beginning of the
hearing, the Appellant informed the Court that she had miscalculated the amount
of the rebate in her application and the correct rebate is $780.20 as was
calculated by the Minister.
[3]
The Minister denied the
application for a rebate on the basis that the Appellant’s house was not
substantially renovated. This is the only issue which remains in the appeal.
[4]
Subsection 256(2) of
the Excise Tax Act (the “Act”) provides that where an
individual constructs or substantially renovates a residential complex which is
used as their primary residence, the Minister shall pay a rebate to that
individual. The term “substantial renovation” is defined in subsection 123(1)
of the Act as follows:
“substantial renovation” of a residential complex means
the renovation or alteration of a building to such an extent that all or
substantially all of the building that existed immediately before the renovation
or alteration was begun, other than the foundation, external walls, interior
supporting walls, floors, roof and staircases, has been removed or replaced
where, after completion of the renovation or alteration, the building is, or
forms part of, a residential complex;
[5]
The Appellant, her
husband and son completed most of the renovations to the house and they resided
in the house while the work was being done.
[6]
The Appellant’s home is located in
downtown Red Deer. It is a bungalow with a basement. On the main floor,
there are a living room, a kitchen, a bathroom, two bedrooms and a hallway.
Prior to the renovation, the area of the main floor was 890 square feet and
after the renovation, it measured 1090 square feet due to a 200 square foot
addition to the living room. A deck was also added to the front of the house.
[7]
The Appellant submitted
photographs and sketches which showed the house prior to and after the
renovations and she described the work completed in each of the rooms.
[8]
The plumbing and
electrical systems were upgraded. All windows were replaced and insulation was
placed around them. In the bathroom, wainscoting was installed on the walls;
and, the tiles, flooring, fixtures, lights, baseboards and cabinets were
replaced. In the kitchen, the pantry was rebuilt; an island was built between
the kitchen and dining area; and the cabinets, sinks, tiles, and flooring were
replaced. The wall in the kitchen was replaced prior to installing the new
tiles. In order to build the new addition to the living room, the flooring,
ceilings and walls in the living room were replaced. A fireplace was built in
the living room. In the bedrooms, the hardwood floors, baseboards and trim were
refinished; the ceilings and walls were sanded and painted; the lights were
replaced and closets were built or redesigned.
[9]
It was the Appellant’s
evidence that the interior central wall of her home which separated the two
bedrooms was load-bearing and she could not have gutted her home. I have
accepted this evidence as the Appellant has designed homes for eight years. She
has the expertise to determine which walls in her home were load-bearing. The
Respondent brought no evidence to refute the Appellant’s testimony.
[10]
Although there were no
details in the pleadings with respect to the basement in the home, in cross
examination, the Appellant stated that it measured 890 square feet and that
prior to the renovations, the basement had been divided into two bedrooms, a
bathroom and an open living space. She renovated the basement into a suite for
her son. The existing interior walls in the basement were not moved but she
replaced all of the windows, the flooring, the electrical fixtures, the toilet,
the furnace and built a kitchen in the basement.
[11]
In the Reply to Notice
of Appeal, the Minister has conceded that the renovations which the Appellant
made to her kitchen, bathroom and living room were substantial. The question
remains whether the renovations to her bedrooms and basement meet the
definition of “substantial renovations”. It is my view that the renovations in
the basement must be considered in my determination because both prior to and
after the renovations, it was habitable.
[12]
It is clear that the
renovations were considerable but in order for the renovations to qualify as
substantial, they must satisfy the definition in the Act. That is, all
or almost all of the house must be removed or replaced except the foundation,
external walls, interior supporting walls, floors, staircases and roof.
[13]
I agree with O’Connor
J.’s comments in McLean v. Canada, [1998] G.S.T.C. 57 that the
definition of substantial renovation in the Act is very restrictive. He
stated:
6 The definition of substantial renovation is restrictive. Firstly,
it has no reference to the total costs of the renovation in relation to the value
of the home. Secondly, renovations or alterations to the foundation, external
walls, interior supporting walls, floors, roof and staircases are not taken
into account. Thirdly, it appears that additions are not to be considered. The
only items that are considered are the renovations or alterations of “the
building that existed immediately before the renovation or alteration was
begun”. This leads to the conclusion that what is being referred to is the
interior structure of the residential complex excluding interior items
mentioned above.
[14]
It is my view that the
renovations in the bedrooms and the basement do not satisfy the requirements of
the definition. I realize that the wall between the bedrooms was a supporting
wall and could not be removed. However, building closets, painting walls, and
refinishing the floors are cosmetic in nature. The walls in the bedrooms were
not taken down to the studs; they were neither replastered nor drywalled. They
were only sanded and painted. Likewise, the renovations to the basement were
not substantial and the basement represented 50% of the area of the house.
[15]
All or substantially
all of the house was not removed or replaced. Except for the living room, the
kitchen and the bathroom, the renovations to the rest of the home were esthetic
changes.
[16]
The appeal is
dismissed.
Signed at Ottawa,
Canada, this 21st day of June 2012.
“V.A. Miller”
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