Builder

CRA denied the ability of a home builder (“Universo Home”) to claim a new home rebate purportedly assigned to it pursuant to ETA s. 254(4) on the basis that Universo Home had no interest in the property at the time the home was constructed and, therefore, did not qualify as its “builder.” The difficulty centered on the fact that the 2011 purchase and 2013 sale documentation named the wife (Mrs. Dhesi) of the sole shareholder (Mr. Dhesi) of Universo Home as the purchaser and vendor of the property, and the fact that Declaration of Trust, which named Mrs. Dhesi as the nominee for Universo Homes, was found by Bocock J to have not been signed until sometime before (perhaps, shortly before) the closing of the 2013 sale.

Bocock J nonetheless found that Universo Home was the beneficial owner for some period prior to the sale, partly on the basis that it paid for the construction work and reported the property as an asset for financial statement purposes. Accordingly, it qualified as a builder for rebate purposes.

Bocock J also intimated in obiter that even if Universo Home had not acquired beneficial ownership, it still would have qualified as having an “interest” in the property (which was all that the “builder” definition required) by virtue of potential builder’s liens on the property for the construction work that it had performed.

Ms. Simonetta acquired a new Toronto home in Toronto pursuant to a purchase agreement that specified that the purchase price included any applicable HST. The vendors (two individuals) claimed that the sale was exempt from HST, so that it was evident that they did not consider Ms. Simonetta to have paid them any HST on the purchase, and that they would not complete the builder-required portion (“Section D”) of the form for the new housing rebate.

Sommerfeldt J found on the evidence (even though the vendors were not parties to the case) that the vendors had never occupied the home as a residence and had sold the home as an adventure in the nature of trade – so that they were builders, and the sale was subject to HST. Accordingly, Ms. Simonetta had established one of the mooted requirements for claiming the rebate, namely that she had paid HST on her purchase.

The taxpayer and her husband owned a home in Richmond Hill (Brillinger). In 2013, they bought an old home in Toronto (Balliol), tore it down, and built a new five bedroom home and moved there in April 2015, which was after she had completed chemotherapy but before surgery. They continued to own Brillinger and visited there on weekends. When she was in recovery, the taxpayer decided they should move back to Brillinger to be closer to her friends and community, which they did in August 2015. The Minister assessed on the basis that they were builders (i.e., the Balliol home had been constructed in the course of a business or adventure in the nature of trade) when they sold the Balliol home at a gain in March 2016.

In allowing their appeal, Spiro J stated (at paras. 32,-34-35):

[Circumstances responsible for the sale] … strongly favour ... the Appellants. The chain of events leading to the disposition began with Ms. Abedipour’s cancer diagnosis, followed by chemotherapy and its side effects, followed by surgery, followed by Ms. Abedipour’s desire to move back to Brillinger to be close to her social circle and support network. The Appellants offered a plausible explanation… .

… Rather than installing multiple televisions, the Appellants installed multiple fireplaces. This strongly suggests that they built the home only for themselves.

… [T]he Appellants left nothing for a potential purchaser to customize. … The fact that the Appellants finished everything to their own personal taste strongly suggests that they built the home only for themselves. The fact that it took the Appellants six months to sell the property after several price reductions supports this conclusion as do the extensive renovations performed by the buyers.

Libfeld claimed the $24,000 Ontario new housing rebate on his purchase in 2018 of an unoccupied and sparsely-furnished home. He provided indirect evidence that the individual vendor was a builder of the home, including a Toronto Life promotional article (admitted to be hearsay) titled “House of the Week: $7 million for a newly built mini-mansion in Forest Hill” and explaining that the vendor had torn down a pre-existing house and built this one in its place.

In finding that Libfeld had not established that the vendor was a builder, as required by s. 254(2)(a), so that the rebate was unavailable, Smith J noted (at para. 44) that “the Court does not have the benefit of any direct evidence from the Vendor or other independent witness as to the frequency of similar transactions, what her intention was when she acquired the Property or what her motive was for selling” and that, on the closing of the purchase, Libfeld had accepted the sworn declaration of the vendor that the sale was not a taxable supply. There also was not much evidence to establish, as required by ss. 254(2)(f) and (g), that the vendor had not, at some point, occupied the “new” home prior to its sale.

The taxpayer signed an agreement of purchase and sale (“APS”) on November 13, 2007, with a builder to purchase a townhouse under construction. She took possession of the property on May 19, 2011 along, with a tenant, and lived there for a month. Registered title to the property was conveyed to the taxpayer on December 22, 2011. Meanwhile, she had begun a relationship with a US citizen in 2010, and in early 2012, the taxpayer made plans for her exit from Canada in anticipation of her move to the US to join her then fiancé. She decided to list the property around April 2012, and after selling and vacating the property, the taxpayer lived briefly with a relative in the Toronto area before moving to the US. In 2015, the taxpayer was audited and reassessed by the Minister on account of business income arising from the disposition of the property for the taxation year 2012 under the ITA. That reassessment gave rise to the consequential HST assessment before the court, made on the basis that she was as a “builder” under s. (f)(iii) of the definition thereof, i.e., she had acquired the townhouse in the course of a business or an adventure or concern in the nature of trade.

Bocock J concluded that the taxpayer was not a “builder.” The taxpayer conducted herself more in keeping with the townhouse being an investment and/or residence of an owner-occupier having regard to a number of Happy Valley Farms factors: she held the “equitable title” to the property for 5 years (counting from the date of the purchase agreement); she moved into the property; she took on a conventional mortgage; and she took on a co-habiting tenant (para. 35). There was no apparent business plan nor was the effort to sell the property done rapidly, competitively or in a business like fashion. (para. 36) Most compellingly, her change in personal circumstances from being a single person at the time of committing to buy the property in 2007 to leaving for the US to become married in 2012 outweighed other factors and was given determinative weight (para. 37).

Over a 23-year period, the appellant, who through a wholly-owned company (“TSC”) carried on a small construction business, bought and sold five homes in the Victoria, B.C. area. The fourth (“JDF”) property was bought as a vacant lot in October 2009, he and his wife and children, during construction of a home thereon with the assistance of TSC, moved into the basement and then the main floor in August and November 2010, respectively – but the house was sold in June 2013 (with an October closing) due to financial pressure on the taxpayer resulting from a business downturn.

Sommerfeldt J found that the appellant had not constructed the JDF Property as a builder and, in particular, not as part of an adventure in the nature of trade or in the course of a business, so that he was not required to self-assess under s. 191(1) upon substantial completion and occupancy.

In applying the various indicia listed in Happy Valley Farms, Sommerfeldt J noted that the appellant (as contrasted to TSC) did not carry on a development and construction business, accepted (at para. 38) that the property “was… intended to be occupied as a residence, i.e., for personal enjoyment” and “as his dream home” and thus was custom-built accordingly to “the needs of their family,” that the “the frequency of sales in this Appeal is significantly less than the frequency in many other appeals” (para. 40) and that “the reason for selling the JDF Property was the difficult financial circumstances in which TSC and they found themselves as a result of the downturn in the construction industry in Victoria in 2012 and 2013.” He also accepted the “explanations given for the sales of the other residential properties owned by Mr. Swift and Ms. Kirkby” (para. 45).