Revenue and Customs v Fortyseven Park Street Ltd,  EWCA Civ 849
The owner of a property in Mayfair, London that had been converted into 49 residences, agreed with purchasers that, in consideration for a lump sum, each purchaser (a "member”) would have the right, after making a reservation, to use a residence of the particular quality level (1 to 5) for which they had paid, for up to 21 days a year during the term of approximately 50 years (plus for a further 14 nights on payment of a modest charge). Members, when in occupation had access to the amenities of a boutique hotel, e.g., concierge, internet room, daily housekeeping.
The applicable Directive exempted “the leasing or letting of immovable property”, but excluded from that exemption (in Item 1(d)) “the provision of accommodation … in the hotel sector or in sectors with a similar function.”
Newey LJ noted that although, if all the members exercised their rights to the full 21 nights in a year, not all of them could be served, this was a “highly theoretical” rather than a “real” potential, and found (at para. 34) that the reservation system should be seen as “facilitative” rather than as “introducing conditionality such as to make the land exemption unavailable.” However, having regard to the jurisprudential doctrine that “the ‘leasing or letting of immovable property’ is ‘usually a relatively passive activity linked simply to the passage of time and not generating any significant added value” (para. 36) and that hotel-like services were provided to the members, that exemption was not available.
Although it was thus unnecessary to consider the Item 1(d) exclusion, he nonetheless found that the Upper Tribunal should not have interfered with the finding of the First-Tier Tribunal that indicated that such exclusion applied, stating (at paras. 58-59):
The fact that Membership gives "the flexibility to enjoy short stays of a stated maximum amount each year, in an environment similar to a hotel and with the services which can be expected in a hotel" … was surely something that the FTT could properly take into account in arriving at its assessment. …
Miss Hall [for the HMRC] did not suggest that the CJEU has ever held that the grant of a right to short-term sleeping accommodation in an establishment similar to a hotel cannot fall within the exclusion from the land exemption … merely because the right is to last for an extended period. Nor does it seem to me that the fact that such a right is of a long-term nature should necessarily preclude application of the exclusion. To my mind, the duration of the right is not of itself determinative but rather a factor which can properly be taken into account.
2137691 Ontario Limited. v. Lucia Pessoa Park, 2018 ONSC 4218
The Plaintiff sold to the Defendant the middle lot of a three-lot property over which a home had spread. This middle lot contained a pool house and hallway structure that connected to the rest of the home on the other two lots. The sale agreement (“APS”) required that any existing structures be demolished by the vendor, but this did not occur until 45 days after closing. The APS provided that any HST applicable to the sale was in addition to the sale price of $2,800,000. However, in order to help make the sale close, the vendor delivered a Statutory Declaration re HST that the sale qualified as an exempt sale of a used residential complex.
No HST was collected on the sale. However, a year later, the Plaintiff brought a motion for summary judgment seeking payment of HST from the Defendant on the sale of the property.
After noting (at para. 35) that “I am being asked to determine contractual issues and obligations between the Plaintiff and Defendant, and in doing so must interpret certain sections of the ETA [which] is within the jurisdiction of this court,” Coats J went on to find that, in fact, the sale was exempt from HST. Although (notwithstanding ETA s. 133) “the time of the supply is the time that the deal closes” (para. 57) and the “material time for the determination of whether the property was a ‘residential complex’ and ‘residential unit’ subject to an HST exemption is the time of closing” (para. 58), at that time the “residential complex” definition was satisfied. She stated (at paras. 63-64, 70):
[A]t the time of closing, the residence and pool structure were a complete structure which were suitable for living in. … It was clearly an appurtenance to the detached home.
… There is no requirement in ETA that the residential complex/residential unit exemption involve the transfer of an entire residential unit or a complete residency unit. This would be contrary to the “part thereof” language in section 123(1) of the ETA.
… [T]he parties’ expectations with regard to the future demolition do not change the facts on the ground at the time of closing.
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|Tax Topics - Excise Tax Act - Section 224||registrant could bring a motion for declaration that HST was owing to it without complying with s. 224||248|
|Tax Topics - Excise Tax Act - Section 133||supply of land occurred at the closing||131|
|Tax Topics - Excise Tax Act - Section 194||purchaser entitled to rely on Statutory Declaration of the Vendor as to exempt status||326|
Wotherspoon v. The Queen,  GSTC 108, 2011 TCC 343 (Informal Procedure), briefly aff’d 2012 FCA 271
The appellant purchased a condo unit for personal use as a residence. The unit had been used by the vendor as a ski rental unit. In finding that the unit was not a residential complex, so that the appellant was not entitled to a rebate of the GST charged to it on the purchase, Campbell J stated (at para. 9):
The evidence supports that the property was not a premises similar to those described in subsection 123(1), that the vendors used a company that arranged for the rentals, hired individuals to clean the unit, rented it for short-term periods averaging seven to ten days and that the vendors never used it as a place for their personal residence. This means that the property falls within the concluding portion of subsection 123(1)… .
Hamilton v. The Queen, 2010 TCC 591 (Informal Procedure)
In finding that the sale of a vacant house with land was exempt, Boyle J stated (at para. 24):
[T]he house on the land sold satisfies the definition of residential unit in section 123 of the GST/HST legislation by virtue of being a detached house that, at the time of sale, was vacant but was last occupied as a place of residence for individuals. … . The portion of the lot that he sold together with the house was attributable to the use of the house and was reasonably necessary for its use and enjoyment as a place of residence for individuals.
Ko v. The Queen, Docket: 2002-455-GST-I (Informal Procedure)
Before finding that the sale of a lot with a partly-constructed house on it was not exempt under Schedule V, Part 1, s. 3, Little J quoted the defintion of residential complex and stated (at para. 30):
It is apparent that the above definition does not include partly finished buildings.
Bruton v. London & Quadrant Housing Trust,  3 WLR 150 (HL)
A housing trust that had been granted a licence by the local authority to use a number of properties for redevelopment as temporary accommodation for homeless persons and which signed an agreement with the plaintiff for occupation of a self-contained flat in one of the properties on a temporary basis on a weekly licence was found to have thereby created a tenancy in favour of the plaintiff because the agreement with the plaintiff had all the characteristics of a tenancy, including the grant of exclusive possession. The existence of a tenancy did not depend upon the plaintiff establishing a proprietary interest binding on third parties, and the fact that the trust was a licensee of the local authority also did not preclude the grant by it of a tenancy.
Koppert v. The Queen,  GSTC 128 (TCC) (Informal Procedure)
The appellant sold a condo in Whistler which had been rented out on a short-term basis for the previous 34 months excepting one six-month rental. Brulé J found that the condo did not qualify as an exempt residential complex given that the long-term rentals represented less than 10% of the total, stating (at para. 15) that “the gross revenue method should be adopted.”
22 July 2013 Interpretation 145125
A resort building contained multiple condominium units including the condominium unit at issue. CRA stated that "the physical space with reference to which the condominium unit's status as a hotel, motel, inn is determined is the particular condominium unit" rather than the whole building (or part thereof), and that "similarly, the physical space with reference to which the 90% ["all or substantially all" postamble] Test is calculated is the particular condominium unit." Respecting the application of the 90% Test, the correspondent's "suggested method, the number of supplies made by way of lease, licence or similar arrangement, appears to be equivalent to the "Invoice Method" in P-053, which is considered not to be an acceptable method."
CBA National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 27
On the sale of a retirement home containing residential condominium units (or which was a multiple unit residential complex) the residential complex would be considered to include the cafeteria, recreational centre and basement area for storage lockers if they were included in the common area of the condominium plan and were for the exclusive use of tenants. Office space included in such common area would so qualify if it was for the exclusive use of the landlord to rent units.
31 March 2000 Headquarter Letter RITS 7707/HQR0001313
The 1/2 hectare presumption applied to a farm given that the partners owning the farm claimed farm losses on their income tax returns.
6 December 2002 Memorandum RITS 35845
A home at which a class of individuals was entitled to stay at temporarily while awaiting medical treatment off-site was not available to members of the public at large and, therefore, did not constitute a hotel, motel, inn, boarding house, lodging house or similar premises for purposes of the definition of residential complex.
GST/HST Memorandum 19.2 “Residential Real Property” February 1998
Choice of calculation method
30. In cases where there are rental periods of varied length, some of which are 60 days or more and some of which are less than 60 days, a method must be chosen for determining if the establishment meets the 90%-or-more test. The method should be appropriate in the circumstances and be used consistently.
31. Acceptable methods include basing the calculation on revenues (either daily or total), or on identical lease periods or intervals such as number of “room nights” sold, or on the number of rooms available for rent for periods of less than 60 days and those for periods of 60 days or more.
32. The time period to be used when determining if the establishment meets the 90%-or-more test is also flexible provided the period is reasonable for the supplies in question and is used on a consistent basis. Normally, a one year period is appropriate. However, the period could differ depending on the nature of the operations (e.g., seasonal).
33. If the test is applied on a prospective basis and covers a reasonable period of time (a full year), the resulting determination will not need to be revised unless actual operations turn out to be materially different from those foreseen.
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|Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Residential Unit||53|
GST/HST memorandum 19.2.1 "Residential Real Property-Sales" February 1998
Is the land part of a residential complex?
8. Land of up to a half hectare that is subjacent and immediately contiguous to a residential building is generally accepted by the Department to be the amount of land qualifying as part of the residential complex. This is the amount of land that is usually considered to be reasonably necessary for the use and enjoyment of the building as a place of residence. Land in excess of a half hectare is generally not considered to form part of the residential complex, unless it can be shown that such land is reasonably necessary for the use and enjoyment of the building as a place of residence for individuals. This "half-hectare rule" follows the treatment of land in connection with the definition of "principal residence" under paragraph 54(e) of the Income Tax Act.
9. The portion of a parcel of land that forms part of a residential complex is treated differently for purposes of the GST/HST from the portion that does not. For example, self-supply rules relating to residential complexes do not apply to this excess land. In addition, any part of the GST/HST paid on the value of the excess land would not be included in calculating the housing rebate for the residential complex. When a supply of the property occurs, the provisions of subsection 136(2) may apply to deem that the residential complex and the excess land are separate supplies. ...
Minimum lot size
12. In some cases, restrictions exist that impose minimum lot sizes, e.g., severance or subdivision restrictions. If a legally imposed minimum lot size exists, and this minimum was in effect on the date the property was acquired, this minimum is generally considered to be the amount of land reasonably necessary for the use and enjoyment of the building as a place of residence, even if this minimum exceeds a half hectare.
18 September 1996 Interpretation 931427 – Construction of Winterized Building to be Used as Place of Residence by Employees
Respecting whether a winterized cottage constructed for use of employees at a cottage resort would qualify, CRA stated:
A residential complex is defined to mean all or any part of any building comprised of one or more types of residential units (which includes a cottage), together with the land and common areas associated with such residential units. Each cottage is a building, therefore it must be determined whether each cottage qualifies as a residential complex. A cottage supplied more than 10% for long-term accommodations would be considered a residential complex.
P-099 "The Meaning of 'Hotel', 'Motel', 'Inn', 'Boarding House', 'Lodging House' and 'Other Similar Premises', as used in the definition of 'Residential Complex' and 'Residential Unit'" 16 December 1993
The determination of whether an establishment is a hotel, motel, inn, boarding house, lodging house or other similar premise, should be based on...all the following guidelines... .
- the establishment normally provides temporary accommodation rather than a permanent place of residence;
- where required by municipal and/or provincial regulations, the establishment is licensed for business for the purpose of providing a temporary place to stay;
- the establishment is available for rental to the public on a temporary [transient] basis [For this purpose, the public is considered to be either the community as a whole or a defined class of the public, such as students or senior citizens. Excluded from this concept of the public is a limited group of persons, where such group is limited by some unique characteristics not found in the public at large, such as employees or shareholders of a particular company.]
- where appropriate, there is a common registration area;
- the rooms or suites in the establishment are furnished by the supplier;
- depending on the nature of the establishment, housekeeping services and other facilities are available such as restaurants, meeting rooms, stores, etc.;
It is generally a requirement in all cases that there be a clear intention to operate the facility as a hotel/lodging or similar establishment.
P-062 “Distinction Between Lease, License and Similar Arrangements” 25 May 1993
Lease confers exclusive possession
In the common law provinces, it has generally been determined that a lease normally confers exclusive possession, while a licence of real property normally would not.
GST/HST Policy Statement P-053 Application of all or Substantially all to Residential Complexes November 2, 1992
Preferable to use relative revenues or room nights/normally one-year period is appropriate unless seasonal residence
In calculating the proportion of supplies by way of lease, licence or similar arrangement of 60 days or more and supplies of less than 60 days, for purposes of the "all or substantially all" test the registrant will be allowed to choose a method which is appropriate in the circumstances provided it is used consistently. The preferable method, however, would be to base the calculation on revenues from such supplies (either daily or total), or identical lease periods or intervals (such as number of "room nights" rented or rooms available for rent). … The time period to be used for this determination is also flexible provided the period is reasonable for the particular supplies in question and is used on a consistent basis. Normally, a one year period would be appropriate, however, the period could differ depending on the nature of the operations (e.g. seasonal) and the business operations for the period in question.
Test can be applied prospectively
Since the test may be based on expectations, the test may be applied on a prospective basis over a reasonable period of time. The determination made would not normally need to be revised unless the actual operations are materially different from the expectations. In addition, applying the test prospectively may prevent the triggering of the change of use rules where the determination is made over a specific period of time (eg. one year) even though periods of accommodation may change over the period of time depending on the business (for example, seasonal residences).
Williams, Rhodes, "Canadian Law of Landlord and Tenant", 6th Ed. (Bentley McNair and Butkus), 2016
Lease requirement for exclusive possession (1:1:3)
To create the relation of landlord and tenant of real property it is essential that the tenant have the right to exclusive possession of the demised premises... .
GST/HST Notice 224 September 2007
Inclusion of nursing areas in nursing home or other residential care facility MURC (under General and Issue No. 1)
[A] residential care facility includes any residential facility at which an individual intends to reside for an indefinite period where the individual receives additional property and services together with a room or suite in the facility. Such additional property and services may include meals, nutritional, housekeeping, laundry, security monitoring and nursing care services, scheduled transportation, social, recreational, educational and religious services, personal supervision, personal care, and assistance with the activities of daily living (e.g., bathing, dressing, grooming, eating, ambulating). ...
For GST/HST purposes, a residential care facility, or a part thereof, including a facility that is a "health care facility" as defined in paragraph (c) of the definition of that term in section 1 of Part II of Schedule V to the Act, is a residential complex if the conditions set out in the definitions of "residential complex" and "residential unit" in subsection 123(1) of the Act are met.
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|Tax Topics - Excise Tax Act - Schedules - Schedule V - Part I - Section 6||193|
Grands Palais du nouveau Saint-Laurent Inc. v. Agence du revenu du Québec, 2020 QCCQ 281
The plaintiff (“Grands Palais”), which had constructed a condominium complex that included 363 condo units and 408 parking spots (each having a separate cadastral lot), received assignments from the condo unit purchasers of their entitlements to the Quebec new housing rebate, and paid corresponding rebates to them on their purchases. All but two of the purchasers of units also purchased one or more parking spots.
The ARQ assessed Grands Palais on the basis that the consideration paid by 93 of the purchasers for their “single unit residential complex” included the parking spot purchased by them at the same time (viewed by the ARQ under the “residential complex” definition as being “attributable to the unit and … reasonably necessary for the use and enjoyment of the unit”), so that such total consideration exceeded the maximum $300,000 permitted consideration for purposes of the new housing rebate (pursuant to s. 362.2 of the Quebec Sales Tax Act).
In affirming this ARQ position, Croteau, J.C.Q. stated (at paras. 61, 63, 65, TaxInterpretations translation):
[I]ndoor parking spaces are an integral part of the eight high-rise buildings that the Grand Palais has chosen to locate in an urban area that is not very suitable for parking a vehicle. There are 408 of them, and they exceed the total number of residential units held in divided co-ownership that make up the real estate project. …
The location of the various high-rise residential buildings and the advantages that indoor parking spaces can provide led 99.44% of purchasers to express their intention to acquire at least one parking space at the same time as their residential unit.
[A]lthough they constitute different cadastral lots, the cost of which was calculated separately in the deeds of sale, the interdependence and interconnection of the parking spaces to the residential units are such that they could not be considered, for the purposes of establishing the amount of the Rebate to which the purchasers were entitled, as separate components.
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|Tax Topics - Excise Tax Act - Section 254 - Subsection 254(6)||builder "ought to know" of rebate ineligibility based on CRA/ARQ Bulletins||291|