6 August 1998 GST/HST Interpretation HQR 775 - Urgent Hazards -

                                                                        GST/HST Rulings and Interpretations
Place Vanier, Tower C, 9th Floor
25 McArthur Avenue
Vanier, ON
K1A 0L5

Dear XXXXX

I refer to your letter of July 9, 1997 (with attachments) and our telephone conversation of October 29, 1997, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transaction(s) described below.

Statement of Facts

Our understanding of the facts is as follows:

1. Under XXXXX the City may pass by-laws for fixing a standard of fitness for human habitation to which all dwelling owners shall conform; requiring owners to conform; for governing and regulating persons in the use and occupancy of dwellings and for appointing inspectors for the enforcement of the by-law.

2. In accordance with XXXXX passed XXXXX. Under XXXXX of the By-Law when any dwelling, building or premises are not in conformity with City standards, the inspector may notify the owner of the defects. The owner shall repair the defects at his own expense. Under XXXXX of the By-Law if any owner refuses or neglects to remedy the defects in the dwelling the Inspector may prohibit the further use of the building and may without the consent of the owner demolish the subject property.

3. Under XXXXX, if the owner of or occupant of a dwelling fails to demolish the dwelling or to repair in accordance with an order as confirmed or modified, the City in addition to all other remedies, shall have the right to demolish or repair the dwelling accordingly and to do any work on adjoining property necessitated by such demolition or repair.

4. Under XXXXX, an inspector of the City, if upon inspection is satisfied that in some respect any dwelling violates the standards in a manner that constitutes an urgent hazard to the health or safety of any person, the inspector may make an order requiring the violation to be corrected immediately. The City may take or cause to be taken whatever measures the inspector deems necessary to correct the violation. The City is not liable to compensate the owner, occupant or any other person by reason of anything done by or on behalf of the corporation under the provisions of this subsection, including anything done without notice to such person.

5. When a property owner is in arrears on a utility account and the utility has been terminated, the City considers the lack of heat, power, etc. as a result of the utility's termination to be an urgent hazard and in need of immediate attention pursuant to XXXXX. All utility accounts in arrears which result in an urgent hazard situation are directed to the City as authorized by the Chief Building Inspector.

6. The City remedies the urgent hazard and pays the arrears and the utility is restored. Payments are made by the City from general tax revenue of the city and charged initially to a special receivable net of the 57.14% municipal rebate. Under XXXXX an outstanding utility account unpaid by the property owner may be included as a lien and charge upon the lands in the same manner and to the same extent as municipal taxes upon land. The City will continue to pay for these utilities until such time as the property owner of the property pays back all taxes and liens.

7. From time to time the original owner will pay the City for any such urgent hazard disbursements and reclaim the property.

Ruling Requested

XXXXX is eligible to claim the 57.14% public service body rebate for the non-creditable tax paid on property owners' outstanding utility accounts under XXXXX[.]

Ruling Given

Based on the facts set out above, the XXXXX, in compliance with XXXXX, has an obligation to pay property owners' outstanding utility accounts in order to ensure that urgent hazards in housing are rectified and the housing meets City standards. In those situations where an urgent hazard exists for which the City has taken corrective action incurring GST in doing so, the City has incurred GST payable by the City. Where the City is not eligible to claim input tax credits for the GST incurred by the City, i.e., non-creditable tax, the City is eligible to claim the 57.14% public service body rebate.

In the situation where the City is unable to obtain payment from the property owners and places the net amount on the property tax roll, the City is entitled to claim the public service body rebate in that no ITC Is available. In the situation where the property owner subsequently pays the City for the amounts paid, the payment is consideration for an exempt non-optional municipal service under section 21 of Part VI of Schedule V to the Act. The City having made an exempt supply is entitled to claim the 57.14% public service body rebate for GST incurred in making the exempt supply.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 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 departmental interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please contact Ms. Enikö Vermes, Manager, Municipalities and Health Care Services at (613) 954-5127 or the undersigned at (613) 954-4280.

Yours truly,

Owen W. Newell, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
GST/HST Rulings and Interpretations Directorate