GST Certificate / Private contract

What is a GST Certificate?

Answer: A GST Certificate is to ensure that, if need be, that the seller should provide the buyer with the GSC Certificate. So sometimes GST is applicable on transactions, unless there’s an exemption. Usually the exemption that applies is that you’re selling used and residential property, in which case GST doesn’t apply. Now, if you’re, for instance, flipping a house or something that sort, GST can apply, and that’s why sometimes GST Certificates, like the residency status and Residency Certificate is important because the buyer wants to make sure or all the parties want to make sure that GST isn’t due and owing, because if it is, then the government can come back and try to chase you for it. And we’ve had situations like that as well.

 

How much time does somebody need to be living in the house, in order for GST to not be applicable? So, say I’m purchasing property that was developed a year ago and somebody only lived in it about six months or two months, and decided to sell it.

I think it’s a number of factors that go into that question, of which probably an accountant or like a tax professional could probably answer better for you. I think some of the factors are, yes, the length of time that you live there. Are you in the business of flipping properties, you know it is probably your intention to live there. There are some reasons why, for whatever reason, you end up purchasing it with all intentions to move in but because of certain circumstances, it never happens. But those intentions itself contribute to a list of factors that the CRA will determine whether GST should be due and owing or not.

Things to Look Out for on Private Contract

(Subject removal & completion date)

Question: Towards the end of the contract, I do note that you guys have your completion and possession dates. Is there a certain period of time that you should give yourself between? Let’s say, your subject removal and your completion date? Or can you do it on the same day? Or how does that work?

Answer: You’d want to give enough time from the subject removal to affect the completion date. When you remove subjects, there may be more than one subject, so there may be subjects such as financing. Once you’ve obtained financing, there may be another subject that requires you to get an inspection report, all of which need to be completed before the transaction can be executed. And once, all the subjects have been removed, then a completion date can actually go forward. Obviously you want to leave yourself enough time from finishing all those subjects to be comfortable going forward with the transaction and then executing the transaction, which occurs on the conclusion date.

Yes, and plus there’s other people that are involved at that point. Usually your lawyers are going to be involved, so if you have the subject removal date the day prior to completion, that leaves one day for your lawyers to finish all the paperwork, to contact the bank, if you need financing as a buyer, to contact the bank for the discharge over the seller. There’s a lot of stuff that happens in between what you should do and what you need to do to actually complete the transaction. Generally, I would say, at the very least, you should probably have at least one to two weeks because there are things in between that need to be done. Even for the purchaser themselves, they’ll have to get the money, and often a lot of people don’t want to do that until the contract actually is binding, and that occurs only after subjects are removed, if you have subjects.

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