GST Reduction and Unethical Builders - Consumers Watch Out

Rachel in Home Buying, Legal, Money

In my very first post on this blog, I wrote about the GST rebate and how HomeBuyers can take advantage of the benefit of the ‘transitional rebate’.  Well, here we are again, with another 1% reduction in the GST.  In case you had not yet heard the news, the GST will be reduced yet again, from 6% to 5% and no matter how you feel about the reduction (and we know, everybody has an opinion) what this means for the average HomeBuyer is a reduction in the amount the whole purchase transaction will cost.

In a recent National Post article, the president of the Canadian Home Builders Association is quoted as saying, “This is great news for both home buyers and home owners.” 

Speaking strictly from a HomeBuying perspective, I have to agree.  In addition to the lower tax the actual home purchase attracts, there is the additional bonus that the appliances and fixtures and everything else that is newly purchased will be at the lower overall rate.

You can imagine my shock as I scoured the various news sources looking for more opinions in this matter when I came across the Toronto Star article written by prominent real estate lawyer, Bob Aaron.  Builders are apparently trying to scoop the benefit of the rebate from unsuspecting HomeBuyers.  I have not heard of anything like this first-hand, and I certainly hope I never do.  I will repeat the offending language here, and hopefully if you are considering buying from a builder you will be alert to it:

"'Notwithstanding anything to the contrary in this Agreement of Purchase and Sale the Purchaser and Vendor agree that the benefit of any reduction or rebate of GST that resulted from the May 2006 or any subsequent Federal Budget shall be the property of the Vendor and the Purchaser shall execute any further documents required by the Vendor to effect the foregoing.'"

The key words here are "shall be the property of the Vendor," and in the story detailed, the unfortunate purchasers or buyers had agreed to this arrangement, leaving them unable to avoid this trap without losing their investment.

Try not to become a victim.  Do not sign anything without reading it very carefully.  When you bring documents to your lawyer, you should alert them to this potential risk so that as many pairs of eyes as possible are looking out for this language or anything like it.  Finally, if you do come across this kind of wording, I would suggest moving on and finding another builder.  There are enough builders operating with integrity that you should not feel obligated to put yourself in the hands of an unethical company.  If you have a first-hand experience that you would like to share, please feel free to contact me directly.  This kind of anti-consumer manipulation is exactly what frustrates us all about the industry.

Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the area of real estate law. Email Rachel

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