Don't YOU Pay the GST!

CALGARY / CANMORE / EDMONTON / YELLOWKNIFE

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In a previous email, I said:

GST can be a HUGE trap for Realtors, especially on the sell side!

First, although I'm a real estate lawyer with lots of experience, I leave GST opinions to accountants and lawyers who specialize in GST. That's not my area, and I'm guessing it's not yours either.

But here's the issue.

Most of you use the standard AREA contract. All recent versions of that contract say that GST is "included" in the purchase price. There is no GST if your seller client is selling a previously owned, still standing home that's always been used as a personal residence by mom, dad, the kids and the dog. CRA calls this is 'an exempt supply,' which means no GST.

Here are four scenarios where a property is likely not exempt, and GST will be added. This means that any contract must state the purchase price plus GST. Definitely not GST included.

Short term rental properties like Airbnb
Mixed-use properties (i.e. some commercial, some residential)
Properties that have changed character, are now uninhabitable, or have been demolished
Substantially renovated properties

Well, guess what? I just got another deal in where the seller is selling his quarter share in one of those very popular Canmore developments aimed at Airbnb-style short-term rentals.

The selling realtor used the standard condo contract which says GST is included in the sale price. GST is NOT included if the property is a short-term rental. That missing GST is somewhere around $6,500.

Guess who the seller is looking to chase for it? That's right, the listing Realtor!

I'm pretty sure the standard listing contract says that you are not giving any GST advice when you list a property. Don't rely on that to protect you. Lawyers for upset sellers can find plenty of arguments to try to make you liable for that GST.

In anything other than an absolutely standard deal, the best practice for you is to confirm with your client, in writing, that they need to get GST advice. If they won't, you go the extra mile and consult an accountant or lawyer who specializes in GST. These actions don't prevent a seller from suing you, but they will definitely put you in a way better position.

Protect yourself.

Cheers,

Barry

I'm taking on new clients. Please consider me and Field Law when you write your next deal.

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