Section 254.1

Paragraph 254.1(2)(d)

Administrative Policy

4 July 2013 Interpretation Case No. 144290

supply of new townhouse on ground lease

The City leases land to the Developer (with a right to sever and remove improvements on the termination of the lease), and the Developer enters into a "Purchase Agreement" with the Purchaser (conditional upon the Lessor's consent to the transfer of the Lease) for a stipulated purchase price, with the Developer covenanting to construct a townhouse in accordance with specifications. CRA stated:

One of the basic principles of real estate law is that a fixture, such as a building, forms part of the land to which it is affixed, even if the person who affixed the building has retained the right to sever and remove it. …There is no indication in the Lease that the City has given ownership of the building portion of the Unit to the Developer. … The Developer has only an interest in the Unit constructed on the Lot and cannot therefore dispose of something more (i.e., the Developer cannot make a separate sale of the building portion of the Unit). …Instead of the sale of the building portion of the Unit and a lease, or assignment of a lease, in the land portion of the Unit, we would characterize the supply in this case as an assignment of a lease of land on which the building is located (i.e. an assignment of the leasehold in the Unit). As such, neither the condition in subparagraph 191(1)(b)(i) nor the condition in subparagraph 191(1)(b)(ii) is met and the Developer is not required to self-supply the Unit. As there is no self-supply under subsection 191(1), there is no rebate entitlement under section 254.1 (i.e., a… new housing rebate is not permitted). …This is a taxable supply as there are no provisions to exempt the supply.

However, the new housing rebate under section 256 for owner-built homes was available.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 191 - Subsection 191(1) purported supply of new townhouse on ground lease characterized as mere assignment of leasehold interest 300
Tax Topics - Excise Tax Act - Section 256 - Subsection 256(2) supply of new townhouse on ground lease 84