When is a home NEW?
Newly-Constructed Homes - this is the most obvious category to which the Homeowner Protection Act will apply. Home Warranty Insurance coverage must apply.
Substantially Reconstructed Homes - the HPA was amended in 2007 to include within the definition of a new home, "a home that is or is being substantially reconstructed". According to the HPO, a home that has been changed so that 25% or less of the original structure above the foundation remains, or 75% or more of the reconstructed home is new, the home is deemed to be substantially reconstructed.
Example 1: A home suffers extensive fire damage. The entire structure is torn down and a new structure is built on the existing foundation. New Home Warranty Insurance will be required.
Note: Home Warranty attaches to the home and not the owner.
Resale of Older Homes still considered 'NEW' under the HPA - the resale of a home that would not conventionally be considered new may still require active home warranty. Home Warranty Insurance coverage must be in place for homes built within 10 years from the date an Occupancy Permit was first issued.
Special Rules for New Homes of an Owner-Builder
An individual who wishes to build a new home for personal use may fall under the owner-builder exemption of the HPA. An owner-builder who registers with, and is given the owner-builder authorization by the HPO is not required to obtain home warranty insurance from a third party home warranty provider, or be licensed under the HPA. It is important to note that the owner-builder must meet all of the requirements prescribed by the HPO before, during, and after completion of the construction, in order to fulfill the requirements of the exemption. The owner-builder exemption also applies to an individual who wishes to renovate a home to the level of substantial reconstruction.
An owner-builder is prohibited from selling or offering to sell the new home, while it is being constructed. For homes constructed after November 19, 2007, the owner-builder must live in the home for at least one year after an occupancy permit is issued before selling or offering to sell the home, unless an exemption is granted by the HPO. After occupying the home for a year, an owner-builder may offer the home for sale after receiving the Owner Builder Disclosure Notice from the HPO. For the 10 years following the first occupancy (the warranty period), an owner-builder must provide any prospective buyers with a copy of the Owner Builder Disclosure Notice prior to entering into any contract for the sale of the home. The HPA also requires subsequent sellers of owner-built homes to provide the Owner Builder Disclosure Notice to prospective buyers, before selling the new home within the ten-year warranty period.
Is GST payable?
Under the federal Excise Tax Act, the sale of real property in Canada is considered a taxable, subject to the federal GST, unless an exemption applies. As a general rule, the sale by a builder of a newly-constructed or substantially-renovated home will trigger GST that is payable by the buyer. Two questions when looking at whether GST is payable on the sale of a new home are:
1) Is the seller a builder?
2) Is the home considered NEW for purposes of the GST?
Check out these HELPFUL LINKS below for more answers to your questions:
Homeowner Protection Office - Consumer Guides
Homeowner Protection Office - Regulatory Bulletins
Homeowner Protection Office - Substantial Reconstruction
Homeowner Protection Office - New Homes
Canada Revenue Agency - GST Sales Tax changes
Canada Revenue Agency - BC Sales Tax changes
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