The First-Time Home Buyers’ Tax Credit (HBTC) is a program in Canada that provides a tax credit to individuals who are purchasing their first home. This tax credit allows eligible individuals to claim a non-refundable tax credit of up to $4,000 on their income tax return for the year in which they purchased the home. The HBTC is designed to help first-time home buyers with the costs associated with purchasing a home, such as legal fees and land transfer taxes. To be eligible for the HBTC, the home buyer must be a resident of Canada, have purchased a qualifying home, and not have owned a home preceding the purchase.
The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750. However, if the total of your non-refundable tax credits is more than your federal income tax, you will not receive a refund for the HBTC.
To be eligible for the Home Buyers’ Tax Credit (HBTC) in Canada, an individual must meet the following criteria:
- Be a first-time home buyer (or have not owned a home preceding the purchase).
- Be a resident of Canada for tax purposes.
- Have purchased a qualifying home, which can be an existing home, a newly constructed home, or a mobile home.
- The home must be in Canada.
- The individual must intend to occupy the home as their primary place of residence within one year of the purchase.
It is important to note that the HBTC is a non-refundable tax credit, which means that it can only be used to reduce the amount of income tax that a taxpayer owes and cannot be used to generate a refund. Additionally, the eligible costs associated with the purchase of the home must have been paid in the same taxation year as the claim.
In Canada, a qualifying home for the purposes of the Home Buyers’ Tax Credit (HBTC) is defined as a home that is eligible for the Home Buyers’ Plan (HBP). A qualifying home can be:
- An existing home, such as a single-family home, a semi-detached home, a townhouse, or a condominium unit.
- A newly constructed home, meaning a home that has been built and bought within the last year.
- A mobile home, meaning a home that is designed to be moved and is equipped with a self-contained electric or plumbing system.
The home must be in Canada and must be purchased with the intention of being used as the buyer’s primary place of residence within one year of the purchase. Additionally, the buyer must not have owned a home in the four years preceding the purchase to be considered a first-time home buyer. It is important to note that the eligibility for the HBTC is separate from the eligibility for other home-buying programs or incentives.
The home must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system.
You do not have to submit documents supporting your purchase transaction with your income tax and benefit return. However, you have to make sure that this information is available if the Canada Revenue Agency asks for it.
Canadian Residency is concerned with how many days out of a calendar year a person lives in Canada.
Contrary to popular opinion, being considered a non-resident of Canada is not related to whether a person is a Canadian citizen. For instance, a Canadian citizen would be treated as a non-resident if they have been living in Canada for less than a total of 183 days in the year. Additionally, a person is NOT a resident if they live outside of Canada.
Any person who is not a Canadian citizen is considered a non-resident of Canada if he or she lives outside Canada. A person who is not a Canadian citizen and is not a landed immigrant can still be treated (for tax purposes) as a resident of Canada if the person has lived in Canada for more than 183 days a year.
For further inquiries on Canadian residency requirements please visit www.cra.gc.ca
A real estate agent assists with buying or selling property, while a real estate lawyer provides legal advice and handles the legal aspects of the transaction. If any legal issues arise, your real estate agent may not have the expertise to handle them during the process. However, a real estate lawyer can provide valuable assistance in reviewing the purchase or sale agreement and guiding you through the closing process.
I am a first-time home buyer with many questions about the real estate purchasing process. Can your firm accommodate the needs and concerns of first-time buyers and provide guidance throughout the transaction?
Our firm has extensive experience working with a wide range of clients, including first-time home buyers. We understand that purchasing a property can be a daunting process, and we are committed to providing guidance and support to ensure a smooth and successful transaction. Whether you are a first-time buyer or an experienced investor, we are dedicated to addressing your needs and answering any questions you may have. Our goal is to help you understand the process and feel confident in your role throughout the transaction.
In Ontario, it is customary for each party involved in an Agreement of Purchase and Sale to retain their own lawyer. The Rules of Professional Conduct for lawyers state that an attorney cannot represent both parties, except in very specific circumstances. Representing both the buyer and the seller simultaneously would jeopardize their fundamental obligations to their clients, such as maintaining confidentiality, providing proficient service, and remaining loyal to their respective clients.
However, it is possible for buyers and sellers to engage lawyers from the same law firm, provided that they are aware of certain conditions. This includes the existence of a dual retainer, which means that both lawyers are representing their respective clients and are obligated to maintain confidentiality. Additionally, both lawyers must withdraw if a conflict of interest arises.
If you are a first-time home buyer, it is important to gather as much information as possible before making any decisions. Be sure to review the property taxes and any restrictions on the title before making an offer. It is also recommended to have a professional building inspector provide a written report detailing any damages or issues with the property. Additionally, it is crucial to consult with a banker to confirm your eligibility for a mortgage.
Title insurance is a type of insurance policy that protects property owners and their lenders against losses related to the property’s title or ownership. It provides coverage for issues such as unpaid taxes, fraud, forgery, errors in surveys, encroachments, zoning violations, and other defects that may affect the ownership of the property. Title insurance can be purchased by the buyer or the lender and is typically obtained during the closing process of a real estate transaction. It is not mandatory in Canada but is often recommended by real estate lawyers to protect the buyer or lender’s investment in the property.
Mortgage broker services are exempt from HST, as they are considered part of the financial services sector. Therefore, HST does not apply to the fees charged by mortgage brokers.
Yes, non-residents of Canada can buy residential real estate in Ontario. However, non-residents must follow certain rules and regulations when purchasing property in Canada.
Firstly, non-residents must have a valid passport and can obtain a Canadian mortgage, but typically with a higher interest rate and a larger down payment than Canadian residents. Non-residents are also required to have a Canadian bank account to facilitate transactions related to the property purchase.
In addition, non-residents are required to obtain a clearance certificate from the Canada Revenue Agency (CRA) before they can sell the property. This certificate confirms that the seller has paid all taxes owed to the CRA. The certificate must be obtained before the sale is completed, and the buyer is required to withhold a portion of the sale price until the certificate is obtained.
It is recommended that non-residents of Canada seek legal advice before purchasing property in Ontario or anywhere in Canada to ensure they are aware of all the legal requirements and obligations associated with the purchase.
Can A Non-Resident Of Canada Buy Residential Real Estate In Ontario?
Yes. A non-resident of Canada is able to purchase real estate in Ontario. The legal fees and expenses (disbursements) for purchasing a residential piece of property are typically the same legal fees and expenses that a resident would pay.
If a non-resident of Canada wants to purchase a home and does not work in Canada (or they do not have an established Canadian income), most mortgage lenders would require a substantial down payment (generally 35% of the price).
When a person (resident or non-resident) purchases a home in Ontario, a land transfer tax is charged on the home (the transfer tax is based on the sale price). If a home purchase is made within the boundaries of Toronto (and south of) Steeles Avenue, two (2) land transfer taxes are payable.
Deductions of up to $2000 (for Ontario) and up to $3752 (for the Toronto Land Transfer Tax, if applicable) can be made by the lawyer upon closing the purchase if a buyer is a first-time buyer and meets the following requirements:
- At least 18 years of age
- Never having owned an interest in a residential property anywhere in the world
- Use of property as a principal residence within 9 months of completing the property purchase
- Does not have a spouse who owned an interest in a residential property after the date of marriage
Itemized Issues That First Time Buyers Should Consider:
Purchasing Fire Insurance
Prior to closing, a lawyer or representative of a buyer must receive fire insurance documents from the Ontario Insurance broker.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) requires buyers and sellers to provide current photo identification (at the time of signing) prior to the real estate purchase. The photo identification is given to a real estate sales agent or broker who is required to record information from both parties.
Any buyer of residential real estate must contact all utility suppliers prior to closing a real estate purchase in order to provide personal billing information so that meters can be read on closing. The seller is responsible for utilities prior to closing the sale and the buyer is billed for utilities after closing the sale.
All details regarding rental furnaces or rental hot water tanks should be provided to the lawyer for documentation purposes.
Power Of Attorney
Power of Attorney is often used in instances where the purchaser of real property is unable to be in the province of Ontario to complete the purchase at the time of closing. The purchaser can choose to appoint a representative as Power of Attorney.
If a buyer will not be in Ontario prior to closing the sale and does not opt to choose a Power of Attorney, the documents can be signed outside of Ontario (prior to the closing date) or the purchaser can appoint another person to sign the documents on behalf of the buyer.
Important Information For Non-Residents Selling Residential Real Estate In Ontario
Law offices typically charge anywhere from $250-$400 to process the sale of real estate by a non-resident seller. In addition, the accountant – who usually charges a separate fee- will arrange the non-residency clearance certificate, in which 25% of the gross sale price is usually held in trust until the non-residency clearance certificate has been filed and accepted. The application process usually takes 60-90 days and must be submitted within 10 days of closing the order in order to avoid penalties. When the clearance certificate is obtained, direct payment of any taxes owed on any net profits is paid to the government of Canada, with the remaining balance in trust paid to the client (plus any accrued interest on such money held in trust by the lawyer).
Penalties Payable To A Mortgage Lender When Discharging A Mortgage
The seller (whether resident or non-resident) must pay off any mortgage or secured line of credit registered on the property in order to provide a buyer on closing with a clear title. This is important to ensure that there are no liens on the title.
In addition, there is no penalty for early mortgage discharge (prior to mortgage maturity) if a mortgage is open for prepayment at any time. However, if the mortgage is not open (and it is paid before the term has been completed), a penalty of the greater of 3 months interest or interest rate differential will likely be payable. Consult your mortgage lender on such matters prior to selling.
Through Canada’s Economic Action Plan, the federal government introduced the First-Time Home Buyer’s Tax Credit (HBTC) to assist first-time purchases of houses. The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief.
- To assist first-time homebuyers with the costs related to the purchase of a home, such as legal costs, disbursements, and land transfer taxes, which are can be a burden for first-time homebuyers. Applicable to first-time buyers purchasing a home closing after January 27, 2009.
- An individual is considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four prior calendar years
- Any unused portion of an individual’s HBTC may be claimed by the individual’s spouse or common-law partner.
- When two or more eligible individuals jointly purchase a home, the credit may be shared but the total credit amount claimed cannot exceed $5,000
For more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website.
HST (harmonized sales tax) is a tax that applies to the property and services as GST (goods and services tax). HST is imposed in provinces that have harmonized their provincial sales tax with GST. Participating provinces of HST are Ontario, Prince Edward Island, Nova Scotia, New Brunswick, and Newfoundland and Labrador.
What if I use a Mortgage Broker? Are their fees HST-payable?
HST does not apply to mortgage broker services. Mortgage broker fees are part of the financial services industry.
Does HST apply on Real Estate Commission?
On real estate sales closed after July 2010, HST will be payable on commission. For sales entered before July 2010, there is a general guideline that if at least 90% of the services were performed prior to July 2010, only 5% GST is payable and PST is not payable.
As a notice to sellers – If a sale was made prior to July 2010, the seller would have had to clarify in writing with the realtor that only the GST will be payable on commissions on a sale closing after July 2010.
Does HST Apply to Rent Paid by Tenants?
For residential tenancies, HST does NOT apply. For commercial tenancies (in example, industrial, office or retail space) HST applies. HST is charged on rents paid after July 1, 2010. It should be noted that most commercial tenants qualify to recover such HST payments through input tax credits.
Does HST Apply to Condominium Monthly Maintenance Fees?
HST will NOT apply to residential fees in regards to monthly common expenses. However, HST is payable for commercial (retail, office, industrial) condo common expenses paid on or after July 1, 2010. It should be noted that most commercial condo owners qualify to recover such HST payments through input tax credits.
Is HST charged on Home Renovations?
Yes. If any type of home renovation was performed after July 1, 2010, it would have been subject to HST. Expenses included in renovation costs include labor, service, and materials used.
Is HST chargeable on vacation homes and resale cottages?
No. HST is not payable on the price of the property if the house is used for personal/residential use. However, if the seller rents out the property for more than 50% of the time during the seller’s ownership, the price will likely be subject to HST. In addition, if the property is being sold as part of a rental pool, HST will apply. Consult a certified tax accountant.
Is HST charged on the resale of residential property?
No. HST is not charged on the sale of residential property.
Is HST chargeable on the purchase of a substantially renovated home?
If a residence being purchased has been substantially renovated, HST will generally apply. Canada Revenue Agency (CRA) Bulletin B-092 states that a substantial renovation refers to a renovation where at least 90% of the interior of a building (excluding the foundation, external walls, internal supporting walls, roof, floors and staircases) have been removed or replaced.
Is HST Payable on the purchase or resale of an apartment building?
NO. HST is not payable on the purchase of an apartment building (also known as a multi-unit residential building). If part of such a building is commercial, the purchase price must be reasonably dispensed between the part of the building that is residential (HST exempt) and the part of the building that is commercial component (subject to HST).
How does HST affect the Purchase of commercial properties?
Regardless of when the offer is signed, HST will apply to the purchase price of a commercial property. However, buyers who obtain GST registration prior to closing a sale (they must be registered for GST in the same manner as the ownership will be taken) do NOT need to pay HST, provided:
(a) a GST registration is obtained prior to the closing date,
(b) the buyer signs an appropriate undertaking in the lawyer’s office to become self-assessed.
How does HST affect the purchase of Vacant Land?
If a piece of farm land is sold for personal use, HST will apply. HST may also be treated commercially if it is sold as part of a farming business. It is always advisable to contact a certified tax accountant.
ii) BUILDING LOTS
HST will typically apply to the price when the seller is involved in a commercial real estate activity. However, some lot sale prices might be exempt from HST if the seller is not engaged in the real estate commercial activity.
iii) PERSONAL USE OF VACANT LAND
HST is not payable if an individual sells vacant land meant for personal use.
HST on ASSIGNMENT & FLIP SALES
An offer to purchase an assignment by a buyer will state that, if applicable, HST is included in the purchase price (as is typically seen in any offer to buy resale residential properties). According to CRA (Canada Revenue Agency), there are sometimes situations where HST will, in fact, be applicable and payable by the assignor/seller who is assigning a contract to buy a newly constructed residence.
When applicable, HST will be payable by the Assignor (buyer #1 from the builder) on the portion of the assignment sale price related to the return of deposits (paid to the builder by the assignor/seller) the gross profit (the difference between the builder price and the assignment price).
Whether HST is applicable to the assignment is a contentious issue. Assignment sellers should MAKE SURE THAT AN ASSIGNMENT SALE WHICH STATES HST IS INCLUDED IN THE PRICE IS CONDITIONAL ON ASSIGNOR’S/SELLER’S LAWYER’S APPROVAL so that the lawyer for the assignor/seller can advise a seller whether or not HST is applicable to the assignment/sale,
HST assignment depends on the original intention of the seller when the offer to purchase was made with the builder. If the PRIMARY PURPOSE by the seller in was to profit by assigning and/or flipping the deal, then HST is applicable to the assignment/sale.
On the other hand, if an individual originally signed an offer to purchase a condo apartment (to be newly constructed by a builder) with the primary intention that the unit being bought would be used (for example) by:
(1) a son or daughter when attending University/College,or
(2) a parent who wanted or needed a place to reside,or
(3) a spouse who planned to separate from the family,or
(4) the buyer(s) who intended to downsize,or
(5) the buyer(s) who intended to use the apartment when working downtown or when visiting in Toronto,or
(6) a son or daughter who was engaged to be married,or
(7) buyer wanted to move closer to a workplace or to relocate a place of work
THEN CRA would typically conclude that HST is not applicable on the assignment/sale if (at a later date) a reasonable change in circumstances resulted in an assignment/sale of the unit if, for example,
(1) such son/daughter chose not to go to University/College,or
(2) the buyer’s mom or dad no longer could use or wanted to use such apartment as a residence (death or needs a retirement home),or
(3) intention to separate from family changed, or
(4) decision was made later not to downsize, or
(5) the buyer(s) reasonably changed his/their minds about such intended use, or
(6) the engaged son or daughter decided not to marry or decided to live elsewhere,or
(7) the workplace location changed or the intended relocation of workplace changed.
The question is whether the intention of the sale is to generate a profit or whether the intention of the sale is to create a space for personal use.
HST on PURCHASES OF NEWLY CONSTRUCTED RESIDENTIAL PROPERTY
(a) Builder’s Agreement Prior to June 19, 2009
No HST is payable if an offer to purchase from a builder was accepted prior to June 19, 2009 (only GST will apply; however, most builders include GST in the sale price).
(b) Builder’s Agreement Accepted after June 18, 2009
If an offer to purchase property from a builder was accepted after June 18, 2009 or the final closing of the sale occurs prior to July 1, 2010, HST is NOT payable; however, HST is payable if both occupancy (in a new condo purchase) and final closing occur AFTER July 1, 2010.
(c)If Builder’s Agreement makes no mention of HST
If an offer to purchase from a builder was accepted AFTER June 18, 2009 and the builder failed to make reference to HST, the sale price includes Ontario’s 8% PST component of the HST if it is payable (the builder must pay the PST and cannot charge it to the buyer).
NOTE: In order for the GST rebate to be assigned to the builder by the buyer, the buyer must qualify the buyer an immediate family member living in the unit. If not qualifying (such as an investor who will be renting out the unit), the rebate cannot be assigned to the builder and the builder will charge the cost of such unassignable rebate to the buyer on closing in addition to the purchase price, which results in the buyer being forced to make a separate application to the federal government to recover such rebate. To qualify for recovery of such rebate, the investor must own the unit for at least one year and reasonably expect to rent the unit to the initial tenant for one year. An investor need not wait the year to apply for and obtain the rebate; if the government later discovers that ownership was less than one year, the government may recover the rebate paid to the investor.
(e) PST Rebate (calculated on the 8% PST Component of the 13% HST)All builder agreements should be reviewed by a lawyer before a buyer signs an offer or during the cooling off period, since some builder agreements require buyers to pay the 8% PST (or the Net PST) component of the HST along with the purchase price.
Regarding a PST rebate, 75% of the 8% PST component (of the HST) is refundable to a buyer on the part of the purchase price that is up to $400,000.00. No government rebate is offered on the 8% PST for the part of any part of the price that exceeds $400,000.00. This means that 75% of 8% (ie: 6%) is refundable by the government and 25% of 8% (ie: 2%) is NOT on the first $400,000.00 of the price.
NOTE: An investor or buyer who rents out a piece of property will qualify for an assignment of the PST rebate to the builder and, therefore, on closing, must pay the purchase price of $500,000.00 in addition to the gross PST of $40,000.00, (a total of $540,000.00) and then, after closing apply to the government for the rebate of $24,000.00 to be received if the investor qualifies (must be owning for one year and rent to a tenant who is reasonably expected to live in the unit for one year, although the rebate application can be made as soon as the purchase from the builder is closed).
(f) Qualifying for a Rebate (GST or PST) when Buying from a Builder
In order to qualify for GST or PST rebates, the property purchased from a builder must be intended to be a primary place of residence, which means that if a person has more than one residence in the world, (in order to qualify for the rebate) the unit must be the main place of residence and In addition the residence purchased must be used as a primary place of residence (as stated above) by the buyer or a relation of the buyer. Relation of the buyer includes an individual who is related by blood, marriage, adoption or common law ( including a former spouse or a former common law partner). Blood relation is limited to parents, siblings, children, grandchildren but does not include cousins, uncles or aunts.
(g)Additional Transitional PST rebate for NON-CONDOMINIUM Builder Purchase (where part of construction was done as of July 1, 2010) If HST is payable on a newly constructed home (not condominium) and if construction of the residence was AT LEAST 10% complete as of July 1, 2010, a transitional PST rebate of up to 2% of the sale price can be claimed on the PST component of the HST as follows:
% Completed as of July 1, 2010
Portion of 2% of PRICE to be Refunded
10% – 24%
25% – 49%
50% – 74%
75% – 89%
90% – 100%
Example: If buying a freehold townhouse, a semi-detached or a detached from a builder for $500,000.00 where construction was 95% complete on July 1, 2010 and closing occurs on July 15, 2010, PST rebate for qualified buyer will be:
(i) 75% of 8% on the first $400,000.00
(ii) 100% of 2% on $500,000.00
Instead of paying a gross PST of 8% on $500,000.00 being $40,000.00, the rebates of $34,000.00 would reduce the net PST payable to $6,000.00.
For more information on HST, please call Canada Revenue Agency (CRA):
For Personal property and services – 1 (800) 959-5525
For Real property – 1 (800) 959-8287
Tax Free Capital Gain
In Canada, generally speaking, a profit on the sale of a principal residence is a tax free capital gain and as such, expenses incurred in the costs incurred during a sale are not tax deductible.
One must meet the following requirements to qualify a home as a principal residence:
- The unit must be a residential housing unit; and
- The unit must be solely or jointly owned with another person; and
- At some point in time in the year (there being no minimum time period, being only based on whether the unit was in fact ordinarily occupied for any period and not being occupied merely for the purpose of gaining or producing income) in which the property was sold, the unit must have been lived in by the owner or the owner’s current or former spouse or common law partner or by any of the owner’s children. If during the year in which the unit was sold, the unit was vacant, but was occupied in the year prior to sale, it can still be considered the sale of a principal residence if an appropriate election is filed – IT-120R6; and
- The property must be designated as a principal residence under Canada Revenue Agency guidelines. See Canada Revenue Agency website at www.cra-arc.gc.ca)
NOTE: Generally, the value of land adjacent to the home, in excess of 1.24 Acres (1/2 hectare) will not be included as part of a principal residence unless such excess land was reasonably required for the use of the principal residence. It should be noted that farms have special rules which are treated distinctly from primary residences.Tax Free Capital Gain
In Canada, generally speaking, a profit on the sale of a principal residence is a tax free capital gain and as such, expenses incurred in the costs incurred during a sale are not tax deductible.
One must meet the following requirements to qualify a home as a principal residence:
The unit must be a residential housing unit; and
The unit must be solely or jointly owned with another person; and
At some point in time in the year (there being no minimum time period, being only based on whether the unit was in fact ordinarily occupied for any period and not being occupied merely for the purpose of gaining or producing income) in which the property was sold, the unit must have been lived in by the owner or the owner’s current or former spouse or common law partner or by any of the owner’s children. If during the year in which the unit was sold, the unit was vacant, but was occupied in the year prior to sale, it can still be considered the sale of a principal residence if an appropriate election is filed – IT-120R6; and
The property must be designated as a principal residence under Canada Revenue Agency guidelines. See Canada Revenue Agency website at www.cra-arc.gc.ca)
NOTE: Generally, the value of land adjacent to the home, in excess of 1.24 Acres (1/2 hectare) will not be included as part of a principal residence unless such excess land was reasonably required for the use of the principal residence. It should be noted that farms have special rules which are treated distinctly from primary residences.
Under the Law Society of Ontario’s requirements, all lawyers, when acting for purchasers, are required to inform clients of title insurance and its benefits.
Title insurance is an insuring policy that covers title or ownership of real property at the time the policy is issued, and is used to provide ownership protection for a purchaser in the event of a loss or damage of a title issue.
Title insurance is obtained by a purchaser’s lawyer prior to closing a purchase.
Ontario Title Insurance: Although title insurance is standard practice in American real estate, title insurance has gained popularity in recent years in the province of Ontario.
Costs of Title Insurance
For residential real estate transactions with a purchase price of less than $500,000.00, a policy can be purchased for anywhere from $100-$500 depending on which law office your purchase your title insurance from. It also depends on the type of residential property and whether a mortgage is in place.
This cost is largely offset by the cost of certain legal disbursements which are no longer required in title insured transactions. As municipalities continue to increase their fees for zoning, subdivision and tax searches, title insurance is becoming more lucrative.
Not Interested in Title Insurance?: No lawyer can guarantee that the title process will be completely seamless. Unfortunately, errors in government records can and do occur. Title insurance can satisfy such gaps in the registry. In this way, title insurance covers the buyer in regards to fraud and forgeries prior to closing and after closing.
Still Not Interested in Title Insurance? You may want to Reconsider Title insurance is a good idea for the consumer as it can be included in a purchaser’s total legal costs when one considers typical total legal fees and legal expenses. It covers against unanticipated costs which the buyer may not consider. Title insurance is a form of no fault certification in which a clean title with (generally) no deductible is guaranteed. Residential Policy Coverage
For a one-time premium (included in our quotation for fees and legal expenses), the policy protects the purchaser(s) and mortgage lender against losses suffered from matters set out below :
- defects that would have been revealed by an up-to-date survey
- survey errors or illegibility of survey
- encroachments (before or after closing)
- contravention of municipal zoning by-laws
- unmarketability of title
- defects in the title
- invalidity or unenforceability of the mortgage on title
- easements (other than usual easements for utilities, etc.)
- contravention of subdivision, development and other agreements
- priority of certain construction liens
- priority of unregistered easements and rights of way
- fraud or forgery (prior to and after closing)
- solicitor error, omission or fraud
- unpaid property taxes or local improvement charges by a prior owner
In addition to policy coverage, the insured also receives:
- indemnity for actual loss or damage for the amount of the policy (being the price paid for the property) and automatically increasing coverage (with inflation and rising property value) overtime to a coverage which can be double the price originally paid for the property.
- payment of legal fees and costs to address title issues
- a “no-fault” method to resolve title problems
There are also other forms of title insurance such as platinum and gold title insurance.Assurance: Buying a home is a major investment. With the peace of mind that you will be covered in case anything occurs with the investment, you have the assurance that the title is 100% (except for any mortgage). Title insurance ensures that you are not responsible for any liens which have not yet been discharged on the property.
Ease of Closing A sale When a vendor or purchaser wishes to close a transaction quickly, a policy of title insurance is often the best option. Title insurance speeds up the process by ensuring that all documentation and registration is completed promptly.
All existing homeowners can obtain the same title insurance protection as a purchaser, including coverage against title frauds and a variety of other matters affecting title. Coverage provided is equal to the value of the insured property at the time title insurance is ordered with the coverage being increased as property value increases up to double the face amount of the policy amount.
What is the Tarion New Home Warranty Program?
The Warranty Program is a warranty which is offered on a sale of real property. Coverage of the warranty takes effect from the date of closing (or, in a condominium, from the date of available occupancy). Warranty coverage also includes the shared areas in condominiums. The coverage for the shared areas in the condominium take effect on the day the condominium corporation is registered. The maximum allowable coverage for a new residence is $150,000.00. More information can be found at www.Tarion.com, Deposit coverage takes effect when the deposit on the purchase is paid. Coverage protects when you buy a new freehold home. You are protected against financial loss, including your deposit, to a maximum of $40,000.00, if the builder does not complete the sale through no fault of the purchaser (up to $20,000.00 if purchase agreement signed before February 1, 2003).
In the case of a new condominium deposits are protected up to $20,000.00 under the Condominium Act, 1998.
Inspecting your New Home (PDI): If you have bought a newly constructed piece of real property, you should complete the following checklist (This is also known as the pre-delivery inspection):
- Inspect and prepare a list of matters that require the attention of the builder
- The inspection appointment time must be arranged with the builder’s representative
- The Certificate of Completion must be completed at the time of the inspection
- All outstanding items need to be noted
- The Warranty Certificate issued should be in your possession, and a copy given to the lawyer, prior to the closing of the real estate purchase.
If you do not note a deficiency at the possession for delivery phase, you may note it on a 30-day report form if you submit the form within 30 days.
There are 3 Types of Coverage:
- One Year Warranty Protection
- Three Year Warranty Protection
- Seven Year Warranty Protection
The Following Information has been placed under this section of the website from www.tarion.com for your convenience:
One Year Warranty Protection: Under the One year warranty protection, the home should be free from defects in materials and workmanship, is fit to live in, and meets the Ontario Building Code requirements for one year from the date that purchaser was entitled to occupy.
Homeowners are obligated to notify the builder and the Tarion New Home Warranty Program in writing of any defects before the end of the first year. If Tarion does not receive notice in writing within the warranty period, the claim might not be allowed.
Builders will pass on to you any warranties given by manufacturers, suppliers and subcontractors that extend beyond the first year. In these cases, a purchaser should make any claims directly to the manufacturer or distributor.
- Walls/Ceilings – Repairs to shrinkage cracks due to settling and corner bead splits will be done as a courtesy only once within the one-year period. Repair will not include repainting or replacing upgrades.
- Electrical – Defects in materials or installation to wiring, light switches, duplex outlets, electrical panel and breakers are covered by this warranty. The addition of breakers or circuits or any alterations to the electrical system by the Homeowner voids this warranty item.
- Plumbing – Defects due to materials or improper installation for all copper piping, drains, soldered joints and shut-off valves. Finishes on plumbing fixtures or faucets are covered by the manufacturer’s warranty where applicable. Plumbing blockages caused by Homeowners are not applicable under this warranty. The satisfactory operation of the faucets is covered under the manufacturer’s warranty where an extended warranty applies.
- Doors – Warped or ill-fitting interior doors (except closet sliders and cabinet doors). Normal shrinkage and expansion due to humidity levels will occur and will usually correct itself in the first year.
- Ventilation Fans – Performance of kitchen/stove hood fan and bathroom fan(s), provided the fans/filters have been kept free of grease and dirt build-up.
- Appliances – Manufacturer’s warranty-deal with the manufacturer directly.
Common Elements and Exclusive Use Common Elements
Common Elements (as defined by the Declaration and Description) are not covered under individual suite warranty. Where applicable, the Common Elements are covered under the Ontario New Home Warranty Program, separately. These issues should be addressed to the Board of Directors, via Property Management and copied to your Customer Service Representative.
Two-year Warranty Protection: For homes enrolled on or after January 1991, the program warrants for two years against:
- Water seepage through the basement or foundation walls (in condominiums, this protection includes all below-ground areas such as parking garages)
- Defects in materials and work including caulking, windows and doors so that the building envelope prevents water penetration
- Defects in materials and work in the electrical, plumbing and heating delivery and distribution systems
- Defects in materials and work which result in the detachment, displacement or deterioration of exterior cladding
- Violations of the Ontario Building Code’s health and safety provisions
Seven Year Warranty Program: Homes enrolled on or after January 1991 are protected for seven years against major structural defects; a major structural defect is defined in the Ontario New Home Warranties Plan Act as any defect in materials or work that results in the failure of a load-bearing part of the home’s structure, or any defect in materials or work that significantly and adversely affects the use of the building as a home.
What is not covered Under the Tarion Warranty Program?
Under the Tarion warranty, are strictly limited to those repairs and time periods expressly set forth, and no other responsibility or obligation is to be implied. In any event, Tarion is not responsible for any indirect, secondary or consequential damage which are attributed to defects in which repair obligations apply.
New Homebuyers should note that the following items are not covered under warranty protection:
- Defects in materials, design and work supplied or installed by the Homeowner/Purchaser, e.g., cabinets, flooring, and painting
- Secondary damage caused by defects under warranty. While the defects themselves are covered, the personal or property damage they cause is not. Often, Homeowner’s insurance covers secondary damage.
- Normal wear and tear
- Normal shrinkage of materials that dry out after construction
- Damage resulting from improper maintenance or Homeowner negligence. For example, dampness or condensation caused by Homeowner failing to maintain proper ventilation levels.
- Alterations or additions made by the Homeowner.
- Settling soil around the building or along utility lines.
- Damage caused by Homeowner, tenants and guests.
- Damage from insects or rodents, unless construction does not meet the Ontario Building Code.
- Damage beyond the Homeowner’s control, e.g., floods, acts of God, wars, riots and vandalism.
- Damage caused by municipal services and other utilities.
- Surface defects in work and materials noted in writing and accepted by the Homeowner at the time of possession.
- Homes that have been lived in or rented prior to sale.
- Home purchased from a receiver or trustee may not have warranty coverage.
Protection Against Delayed Closing (Freehold Buyers) A builder can extend the closing date up to a total of 120 days at any time prior to closing by giving written notice of the extension. However, if the builder does not give the following written notice of delays, you may be able to claim compensation for out-of-pocket expenses. A claim can only be made once you are the owner.
A builder anticipating a delay in closing of more than 15 days must notify you at least 65 days before the original closing date and set a new closing date. The builder may extend the closing date once by up to 120 days, if you are given written notice at least 65 days before the closing date.
The builder is allowed up to five days grace regarding last-minute closing delays without penalty. Beyond that, any builder who fails to give proper notice will be required to compensate you up to $100 a day for living expenses plus all direct costs caused by the delay, to a maximum of $5,000.
There is no compensation for delays caused by events beyond the builder’s control, e.g., strikes, fires, civil insurrection, floods or acts of God, or for delays which are caused by the purchaser.
Protection Against Delayed Occupancy (Condominium buyers) (For Agreements of Purchase and Sale signed on or after April 1, 1991) For delayed closings for freehold homes, the builder may extend the confirmed occupancy date once for up to 120 days, if the buyer is given written notice at least 65 days before the confirmed date. The builder can also have a 15-day extension if you are given 35 days notice. In all cases, builders are allowed a five-day grace period.
Any builder who fails to give proper notice will be required to compensate you up to $100 a day for living expenses plus all direct costs caused by the delay, to a maximum of $5,000.
Resolving A complaint:1) Any problems should be brought to the attention of the builder and Tarion in writing, before the end of the warranty period. For example, if you took possession of your new home on January 2014, the first, second and seven year warranties expire at midnight on January of the appropriate year. It is good practice to make note of when your warranty coverage expires.
2) At any time during the first 30 days after the closing date with the builder (or after the interim occupancy closing date for a newly constructed condominium), the Homeowner must use Tarion’s 30-day Form in which one can request the repair of any item, which appeared on the PDI Form, as well as any new items.
3) Any time during the last 30 days of the first year the Homeowner is entitled to submit a single Year-End Form outlining any additional defects. When you follow up, and as you contact the builder’s representative for after closing service on outstanding matters, it is wise for you to send confirming letters or faxes each time you call the builder’s representative (and keep copies of such communications) so that you can provide copies of all correspondence to TARION if a complaint will ultimately be filed by you for lack of response by the builder in satisfying any outstanding deficiencies. Builders are rated by TARION with respect to their follow up on after closing service.
4) If Tarion does not receive your notice in writing within the warranty period, your claim may be allowed. In your letter, describe the problem and ask the builder to correct it.
Information you should include:
Your complete address
The Lot and Plan Numbers/ the condominium address and unit number
Condominium unit owners who experience shared space problems should write to their Board of Directors once the condominium is registered. The board is responsible for bringing common element problems to the attention of the builder and Tarion, if necessary.
Note: Written notice of any complaint about a repair must be received by Tarion within the time period for the repair warranty to apply
Tarion Fees: Regular Fees exist for the Tarion Fee Schedule. More information can be found at www.tarion.com. If the builder completed their enrollment before February 2000 however, a deficit recover fee of $100 is payable.
More Information: As a purchaser of a new home, you have various rights pursuant to the Program and, in particular, there are provisions by which you may compel the completion or rectification of prescribed items of construction. More information can be found at www.tarion.com
What is the RRSP Home Buyer Plan?
The RRSP Home Buyer plan allows first time home buyers (or spouses/common law partners) to receive tax credits on their first home purchase. Before a buyer withdraws their RRSP funds, they must have a written agreement to purchase the home.
A purchaser must be a resident of Canada for the period between the date of withdrawal of the RRSP funds and the closing date of the home purchase.
You must use the home as your principal residence in Canada (within one year of completing the purchase).
New or resale purchase?
The home can be a new or a resale purchase.
90 DAY DEPOSIT;
R.R.S.P. funds must have been deposited for at least 90 days before they can be used under the Home Buyer Plan.
Prior RRSP Withdrawals
At the time of your RRSP withdrawal, you must not owe any money to your RRSP for a prior borrowing, to buy a home.
RRSP Funds For any Use
The funds can be applied to the down payment, land transfer tax, legal fees disbursements, improvements to the home, and even furniture and appliances.
MAXIMUM $25,000.00 PER BUYER:
You can borrow up to a maximum of $25,000.00 from your R.R.S.P. tax free. Maximum for two spouses (or any 2 buyers) is $50,000.00. Any such qualified withdrawal from RRSP is not subject to tax at time of withdrawal.
WITHDRAW RRSP WITHIN 30 DAYS OF COMPLETING HOME PURCHASE:
RRSP funds cannot be withdrawn later than 30 days after the house purchase is completed and if multiple withdrawals, they must be made in the same calendar year or in January of the next year.
After an initial grace period of the year in which the withdrawal was made (plus one more full calendar year), you are required to pay back the funds borrowed (beginning in the second year following the year of withdrawal) over a period of 15 years by depositing 1/15th of the amount withdrawn, annually to your R.R.S.P. Prepayments are allowed at any time without penalty. However, if you miss a payment for any given year, you will not be allowed to pay it back and it will be included in your taxable income for that year. If a person paying back dies or becomes a non-resident or becomes 70 years of age, additional repayment rules apply.
Qualified buyers may borrow interest free for 15 years from RRSP savings up to $25,000 per buyer (up to $50,000 per buying couple) towards the cash down payment on the purchase of a residence.