Is it time to update your credit profile?
Who checks your credit report and credit score?
Big companies – banks, utilities and telecom firms – do so when you apply for credit. Some property insurance companies use creditworthiness as a factor in setting rates.
So, why aren’t you checking your credit report and credit score to make sure they’re accurate and up to date?
No one else but you can find errors and correct them. It’s your duty to do it, despite the roadblocks you may encounter.
Canada has two credit reporting agencies, Equifax and TransUnion, which gather and store information about credit transactions in your name.
Once you get a free copy of your credit report in the mail, look for any outdated information. Then, call your credit granters to ask them to update the credit bureaus on your status.
Here’s what my readers are telling me about their credit reports.
“Credit reports do a great job of recording any loans or car leases you might take on, but are poor at removing them once paid or expired,” says DC.
“I had outdated loans and leases for cars I no longer possessed and on which I owed no money. The credit bureaus wanted a lot of documentation, which I didn’t have readily available, to remove these loans/leases.
“I suspect most people don’t understand it’s their responsibility to provide evidence of paid off loans.”
LM and her husband discharged their mortgage two years ago and have no outstanding loans. They recently went to the Equifax website to check their credit reports and credit scores (for a $23.95 fee).
“Our scores weren’t bad, but should have been better,” LM says.
“Here’s why: We changed our credit cards quite a few times, chasing better air miles deals or in-store promotions. Many of these old cards remained on our reports, even though we cancelled them by phone years ago.
“Also, we foolishly allowed the three cards we do use to keep bumping up our credit limits, way beyond what we needed or would ever use.
“We found out the hard way that you can’t trust credit card issuers to notify the credit bureaus about cards you have cancelled voluntarily.”
Having too much available credit can hurt you. Lenders may worry that you have the ability to spend more than you can possibly pay back.
“You might want to consider closing a few accounts or asking to have your credit limits reduced,” TransUnion says on its credit score report.
Take care, however, because closing too many accounts – especially the oldest accounts on your credit report – can also hurt your credit score.
Suppose you have three credit cards with total available credit of $20,000. Your balances never exceed more than $6,000, which means you’re using less than a third of your available credit.
“Since creditors like to see a credit utilization ratio of 30 to 35 per cent or less, you’re in good shape,” says Bankrate.com, a consumer advisory source.
Now, assume you cancel a card with a zero balance and a $10,000 limit. Suddenly, your utilization ratio jumps to 60 per cent and your credit score drops.
Impersonal credit scoring systems aren’t concerned so much with how much available credit you have, but with how you manage that credit. To them, a 30 per cent utilization rate is better than a 60 per
Monday, September 13, 2010
Saturday, July 24, 2010
Aluminum wiring
Between approximately 1965 and 1973, single-strand aluminum wiring was sometimes substituted for copper branch-circuit wiring in residential electrical systems due to the sudden escalating price of copper. After a decade of use by homeowners and electricians, inherent weaknesses were discovered in the metal that lead to its disuse as a branch wiring material. Although properly maintained aluminum wiring is acceptable, aluminum will generally become defective faster than copper due to certain qualities inherent in the metal. Neglected connections in outlets, switches and light fixtures containing aluminum wiring become increasingly dangerous over time. Poor connections cause wiring to overheat, creating a potential fire hazard. In addition, the presence of single-strand aluminum wiring may void a home's insurance policies. Inspectors may instruct their clients to talk with their insurance agents about whether the presence of aluminum wiring in their home is a problem that requires changes to their policy language.
Facts and Figures
On April, 28, 1974, two people were killed in a house fire in Hampton Bays, New York. Fire officials determined that the fire was caused by a faulty aluminum wire connection at an outlet.
According to the Consumer Product Safety Commission (CPSC), "Homes wired with aluminum wire manufactured before 1972 ['old technology' aluminum wire] are 55 times more likely to have one or more connections reach "Fire Hazard Conditions" than is a home wired with copper."
Aluminum as a Metal
Aluminum possesses certain qualities that, compared with copper, make it an undesirable material as an electrical conductor. These qualities all lead to loose connections, where fire hazards become likely. These qualities are as follows:
higher electrical resistance. Aluminum has a high resistance to electrical current flow, which means that, given the same amperage, aluminum conductors must be of a larger diameter than would be required by copper conductors.
less ductile. Aluminum will fatigue and break down more readily when subjected to bending and other forms of abuse than copper, which is more ductile. Fatigue will cause the wire to break down internally and will increasingly resist electrical current, leading to a buildup of excessive heat.
galvanic corrosion. In the presence of moisture, aluminum will undergo galvanic corrosion when it comes into contact with certain dissimilar metals.
oxidation. Exposure to oxygen in the air causes deterioration to the outer surface of the wire. This process is called oxidation. Aluminum wire is more easily oxidized than copper wire, and the compound formed by this process - aluminum oxide - is less conductive than copper oxide. As time passes, oxidation can deteriorate connections and present a fire hazard.
greater malleability. Aluminum is soft and malleable, meaning it is highly sensitive to compression. After a screw has been over-tightened on aluminum wiring, for instance, the wire will continue to deform or "flow" even after the tightening has ceased. This deformation will create a loose connection and increase electrical resistance in that location.
greater thermal expansion and contraction. Even more than copper, aluminum expands and contracts with changes in temperature. Over time, this process will cause connections between the wire and the device to degrade. For this reason, aluminum wires should never be inserted into the "stab," "bayonet" or "push-in" type terminations found on the back of many light switches and outlets.
excessive vibration. Electrical current vibrates as it passes through wiring. This vibration is more extreme in aluminum than it is in copper, and, as time passes, it can cause connections to loosen.
Identifying Aluminum Wiring
Aluminum wires are the color of aluminum and are easily discernible from copper and other metals.
Since the early 1970s, wiring-device binding terminals for use with aluminum wire have been marked CO/ALR, which stands for "copper/aluminum revised."
Look for the word "aluminum" or the initials "AL" on the plastic wire jacket. Where wiring is visible, such as in the attic or electrical panel, inspectors can look for printed or embossed letters on the plastic wire jacket. Aluminum wire may have the word "aluminum," or a specific brand name, such as "Kaiser Aluminum," marked on the wire jacket. Where labels are hard to read, a light can be shined along the length of the wire.
When was the house built? Homes built or expanded between 1965 and 1973 are more likely to have aluminum wiring than houses built before or after those years.
Options for Correction
Aluminum wiring should be evaluated by a qualified electrician who is experienced in evaluating and correcting aluminum wiring problems. Not all licensed electricians are properly trained to deal with defective aluminum wiring. The CPSC recommends the following two methods for correction for aluminum wiring:
Rewire the home with copper wire. While this is the most effective method, rewiring is expensive and impractical, in most cases.
Use copalum crimps. The crimp connector repair consists of attaching a piece of copper wire to the existing aluminum wire branch circuit with a specially designed metal sleeve and powered crimping tool. This special connector can be properly installed only with the matching AMP tool. An insulating sleeve is placed around the crimp connector to complete the repair. Although effective, they are expensive (typically around $50 per outlet, switch or light fixture).
Although not recommended by the CPSC as methods of permanent repair for defective aluminum wiring, the following methods may be considered:
application of anti-oxidant paste. This method can be used for wires that are multi-stranded or wires that are too large to be effectively crimped.
pigtailing. This method involves attaching a short piece of copper wire to the aluminum wire with a twist-on connector. the copper wire is connected to the switch, wall outlet or other termination device. This method is only effective if the connections between the aluminum wires and the copper pigtails are extremely reliable. Pigtailing with some types of connectors, even though Underwriters Laboratories might presently list them for the application, can lead to increasing the hazard. Also, beware that pigtailing will increase the number of connections, all of which must be maintained. Aluminum Wiring Repair (AWR), Inc., of Aurora, Colorado, advises that pigtailing can be useful as a temporary repair or in isolated applications, such as the installation of a ceiling fan.
CO/ALR connections. According to the CPSC, these devices cannot be used for all parts of the wiring system, such as ceiling-mounted light fixtures or permanently wired appliances and, as such, CO/ALR connections cannot constitute a complete repair. Also, according to AWR, these connections often loosen over time.
alumiconn. Although AWR believes this method may be an effective temporary fix, they are wary that it has little history, and that they are larger than copper crimps and are often incorrectly applied.
Replace certain failure-prone types of devices and connections with others that are more compatible with aluminum wire.
Remove the ignitable materials from the vicinity of the connections.
In summary, aluminum wiring can be a fire hazard due to inherent qualities of the metal. Inspectors should be capable of identifying this type of wiring.
Facts and Figures
On April, 28, 1974, two people were killed in a house fire in Hampton Bays, New York. Fire officials determined that the fire was caused by a faulty aluminum wire connection at an outlet.
According to the Consumer Product Safety Commission (CPSC), "Homes wired with aluminum wire manufactured before 1972 ['old technology' aluminum wire] are 55 times more likely to have one or more connections reach "Fire Hazard Conditions" than is a home wired with copper."
Aluminum as a Metal
Aluminum possesses certain qualities that, compared with copper, make it an undesirable material as an electrical conductor. These qualities all lead to loose connections, where fire hazards become likely. These qualities are as follows:
higher electrical resistance. Aluminum has a high resistance to electrical current flow, which means that, given the same amperage, aluminum conductors must be of a larger diameter than would be required by copper conductors.
less ductile. Aluminum will fatigue and break down more readily when subjected to bending and other forms of abuse than copper, which is more ductile. Fatigue will cause the wire to break down internally and will increasingly resist electrical current, leading to a buildup of excessive heat.
galvanic corrosion. In the presence of moisture, aluminum will undergo galvanic corrosion when it comes into contact with certain dissimilar metals.
oxidation. Exposure to oxygen in the air causes deterioration to the outer surface of the wire. This process is called oxidation. Aluminum wire is more easily oxidized than copper wire, and the compound formed by this process - aluminum oxide - is less conductive than copper oxide. As time passes, oxidation can deteriorate connections and present a fire hazard.
greater malleability. Aluminum is soft and malleable, meaning it is highly sensitive to compression. After a screw has been over-tightened on aluminum wiring, for instance, the wire will continue to deform or "flow" even after the tightening has ceased. This deformation will create a loose connection and increase electrical resistance in that location.
greater thermal expansion and contraction. Even more than copper, aluminum expands and contracts with changes in temperature. Over time, this process will cause connections between the wire and the device to degrade. For this reason, aluminum wires should never be inserted into the "stab," "bayonet" or "push-in" type terminations found on the back of many light switches and outlets.
excessive vibration. Electrical current vibrates as it passes through wiring. This vibration is more extreme in aluminum than it is in copper, and, as time passes, it can cause connections to loosen.
Identifying Aluminum Wiring
Aluminum wires are the color of aluminum and are easily discernible from copper and other metals.
Since the early 1970s, wiring-device binding terminals for use with aluminum wire have been marked CO/ALR, which stands for "copper/aluminum revised."
Look for the word "aluminum" or the initials "AL" on the plastic wire jacket. Where wiring is visible, such as in the attic or electrical panel, inspectors can look for printed or embossed letters on the plastic wire jacket. Aluminum wire may have the word "aluminum," or a specific brand name, such as "Kaiser Aluminum," marked on the wire jacket. Where labels are hard to read, a light can be shined along the length of the wire.
When was the house built? Homes built or expanded between 1965 and 1973 are more likely to have aluminum wiring than houses built before or after those years.
Options for Correction
Aluminum wiring should be evaluated by a qualified electrician who is experienced in evaluating and correcting aluminum wiring problems. Not all licensed electricians are properly trained to deal with defective aluminum wiring. The CPSC recommends the following two methods for correction for aluminum wiring:
Rewire the home with copper wire. While this is the most effective method, rewiring is expensive and impractical, in most cases.
Use copalum crimps. The crimp connector repair consists of attaching a piece of copper wire to the existing aluminum wire branch circuit with a specially designed metal sleeve and powered crimping tool. This special connector can be properly installed only with the matching AMP tool. An insulating sleeve is placed around the crimp connector to complete the repair. Although effective, they are expensive (typically around $50 per outlet, switch or light fixture).
Although not recommended by the CPSC as methods of permanent repair for defective aluminum wiring, the following methods may be considered:
application of anti-oxidant paste. This method can be used for wires that are multi-stranded or wires that are too large to be effectively crimped.
pigtailing. This method involves attaching a short piece of copper wire to the aluminum wire with a twist-on connector. the copper wire is connected to the switch, wall outlet or other termination device. This method is only effective if the connections between the aluminum wires and the copper pigtails are extremely reliable. Pigtailing with some types of connectors, even though Underwriters Laboratories might presently list them for the application, can lead to increasing the hazard. Also, beware that pigtailing will increase the number of connections, all of which must be maintained. Aluminum Wiring Repair (AWR), Inc., of Aurora, Colorado, advises that pigtailing can be useful as a temporary repair or in isolated applications, such as the installation of a ceiling fan.
CO/ALR connections. According to the CPSC, these devices cannot be used for all parts of the wiring system, such as ceiling-mounted light fixtures or permanently wired appliances and, as such, CO/ALR connections cannot constitute a complete repair. Also, according to AWR, these connections often loosen over time.
alumiconn. Although AWR believes this method may be an effective temporary fix, they are wary that it has little history, and that they are larger than copper crimps and are often incorrectly applied.
Replace certain failure-prone types of devices and connections with others that are more compatible with aluminum wire.
Remove the ignitable materials from the vicinity of the connections.
In summary, aluminum wiring can be a fire hazard due to inherent qualities of the metal. Inspectors should be capable of identifying this type of wiring.
Wednesday, July 14, 2010
Assignment Listings
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What is Assignment?
A common question raised during the pre-construction process is assignments. For those who are not familiar with assignments, it is simply a sales contract entered into by two parties at an earlier date. It is essentially a transfer of the right to purchase that property from the original purchaser to a new purchaser prior to the unit closing. Assignments of sale are very common during the construction stage of new developments by allowing the original purchaser to resell their unit before the sale is completed for the property. Since units in pre-construction are purchased sometimes 3-4 years prior to occupancy, sellers often choose to assign their units before they occupy as their lives may take on a different path. On the flip side, a lot of purchasers may look for assignments to buy before the building is complete. Once construction has started, there are always many assignment agreements floating around as occupancy dates become more accurate. There are however many stipulations that are involved when selling or buying an assignment.
They are as follows:
Selling an Assignment
The first step that should be taken when considering assigning your condo is whether you are indeed allowed to assign your contract. In most cases the developers will have certain rules that must be followed. For example, some new developments in Toronto stipulated that at $2,500-$5,000 administration fee must be paid, 80% of the building must be sold out, the floor plan that you have purchased must be sold out, it cannot be advertised on MLS, and the builder must give permission for assignments to take place. Once all the criteria have been met, it is recommended that you speak to your lawyer to assist you with assigning your condo.
Buying an Assignment
The first step that should be considered when purchasing an Assignment Agreement is that the assignor is indeed allowed to assign his condo. There can be serious ramifications from the builder if units are assigned without the builder's permission. The process of purchasing an assignment is quite different than your standard real estate transaction as you are purchasing a contract from the original owner of that contract and assuming all of their rights and obligations. Here is an example of how an Assignment works:
Original Purchase Price: $400,000 put down 15% deposit
New Purchase Price: $460,000
*Difference: $60,000 + $60000 (15% deposit) = $120,000 - This amount is paid to the original purchaser of the Agreement of Purchase and Sale
Once the assignment fee is paid to the original purchaser, the new owner is obligated to pay the original purchase price of the property as per the terms of the original Agreement of Purchase and Sale to the developer.
When dealing with assignments, it is extremely important for both the assignor and assignee to seek legal advice as these transactions can sometimes become very challenging. When handled correctly, assignment can have a mutual benefit to both parties involved.
What is Assignment?
A common question raised during the pre-construction process is assignments. For those who are not familiar with assignments, it is simply a sales contract entered into by two parties at an earlier date. It is essentially a transfer of the right to purchase that property from the original purchaser to a new purchaser prior to the unit closing. Assignments of sale are very common during the construction stage of new developments by allowing the original purchaser to resell their unit before the sale is completed for the property. Since units in pre-construction are purchased sometimes 3-4 years prior to occupancy, sellers often choose to assign their units before they occupy as their lives may take on a different path. On the flip side, a lot of purchasers may look for assignments to buy before the building is complete. Once construction has started, there are always many assignment agreements floating around as occupancy dates become more accurate. There are however many stipulations that are involved when selling or buying an assignment.
They are as follows:
Selling an Assignment
The first step that should be taken when considering assigning your condo is whether you are indeed allowed to assign your contract. In most cases the developers will have certain rules that must be followed. For example, some new developments in Toronto stipulated that at $2,500-$5,000 administration fee must be paid, 80% of the building must be sold out, the floor plan that you have purchased must be sold out, it cannot be advertised on MLS, and the builder must give permission for assignments to take place. Once all the criteria have been met, it is recommended that you speak to your lawyer to assist you with assigning your condo.
Buying an Assignment
The first step that should be considered when purchasing an Assignment Agreement is that the assignor is indeed allowed to assign his condo. There can be serious ramifications from the builder if units are assigned without the builder's permission. The process of purchasing an assignment is quite different than your standard real estate transaction as you are purchasing a contract from the original owner of that contract and assuming all of their rights and obligations. Here is an example of how an Assignment works:
Original Purchase Price: $400,000 put down 15% deposit
New Purchase Price: $460,000
*Difference: $60,000 + $60000 (15% deposit) = $120,000 - This amount is paid to the original purchaser of the Agreement of Purchase and Sale
Once the assignment fee is paid to the original purchaser, the new owner is obligated to pay the original purchase price of the property as per the terms of the original Agreement of Purchase and Sale to the developer.
When dealing with assignments, it is extremely important for both the assignor and assignee to seek legal advice as these transactions can sometimes become very challenging. When handled correctly, assignment can have a mutual benefit to both parties involved.
Saturday, July 10, 2010
Monday, June 14, 2010
HST? - How It Affects 12 Matters In Ontario Real Estate
Beginning July 1, 2010, there will be sales tax in Ontario
of 5% + 8% = 13% (12% in British Columbia) replacing
the former 5% GST (Goods and Services Tax) and the
former 8% PST (Provincial Sales Tax).
1) HST and Mortgage Brokerage Fees (to arrange
a mortgage, if one uses a Mortgage Broker)
HST will not apply since mortgage brokerage services are
exempt as part of the financial services industry.
2) HST on Real Estate Commissions
Generally, HST will be payable on commissions for any
real estate sale closed after July 1, 2010. However, the
general transitional rule (for sale contracts entered into
before July 1, 2010), is if at least 90% of the services
were performed prior to July 1, 2010, only 5% GST is
payable (no PST). If an offer to purchase real estate was
accepted prior to July 1, 2010, then the realtor services
were performed prior to July 1, 2010, and only 5% GST
should be payable even though the realtor’s commission
is not due for payment until the sale has closed after July
1, 2010. Warning to sellers: If, prior to July 1, 2010, a
seller is about to accept an offer to purchase (which will
close after July 1, 2010), the seller should clarify
in writing with the realtor that only GST will be payable
on commissions due on a sale closing after July 1, 2010.
3) HST and Rents Paid by Tenants
For residential tenancies, HST will not apply to such rents.
For commercial tenancies (industrial, office or retail), HST
will be charged on rents paid after July 1, 2010 (but most
commercial tenants qualify to recover such HST payments
through input tax credits).
4) HST and Condominium Monthly Maintenance Fees
For residential condominiums, HST will not apply on
monthly common expenses, but HST is payable for
commercial (retail), office, industrial) condo common
expenses paid on or after July 1, 2010 (most commercial
condo owners qualify to recover such HST payments
through input tax credits).
5) HST on HOME RENOVATIONS
For any part of services (labour and materials) provided
after July 1, 2010 (no matter when a contract for
renovations of a residence was signed), the part performed
or provided after July 1, 2010, will be subject to HST.
6) HST and RESALE COTTAGE / VACATION
PROPERTY PURCHASES
HST will not be payable on the price if the property sold
by the seller and bought by the buyer is personal use
property. However, if the seller had been renting out the
property more than 50% of the time during the seller’s
ownership, the price will likely be subject to HST. If the
property being sold was part of a rental pool, HST will
apply. Consult your tax accountant.
7) HST and RESALE RESIDENTIAL PROPERTY
PURCHASES
There will be no HST on the price of resale residential
purchases. Note: Resale residential purchases will
therefore become a much more attractive investment
(rather than buying from a builder) particularly when one
considers that builder prices will result in 13% HST
(whether built into the price or being structured in
addition to the price by some builders in Ontario).
Builder prices also must include higher increased current
costs of labour, materials and land costs as well as
substantial municipal levies and educational levies
plus sizable closing adjustments (often being hidden by
builders in the fine print of many pages in a builder’s
agreement), all of which are not payable by a buyer /
investor who purchases resale residential property.
(Think about it!)
8) HST on a PURCHASE OF A SUBSTANTIALLY
RENOVATED HOME
If a residence being purchased has been “substantially
renovated”, it will be treated in the same manner as
buying new construction from a builder and HST will
generally apply to the price paid. See Canada Revenue
Agency (CRA) Bulletin B-092 which states that a
“substantial renovation”, in effect, 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) has been
removed or replaced.
9) HST and PURCHASE of RESALE APARTMENT
BUILDINGS (Multi-Unit Residential)
No HST will be payable on the price of a resale apartment
building (multi-unit residential). If part of such a building is
commercial, the purchase price must be reasonably
apportioned between the part of the building that is
residential resale (HST exempt) and the other part of the
building that has a commercial component, which part will
be subject to HST.
10) HST on PURCHASE OF COMMERCIAL
PROPERTIES (new or resale commercial properties
closing after July 1, 2010 no matter when an offer
was signed)
HST will apply to the purchase price; however, typically,
buyers who obtain a GST registration prior to closing
(must be registered for GST in the same manner as
ownership will be taken) will not need to pay the HST on
closing provided:
(a) a GST registration is obtained prior to the closing date
and
(b) the buyer signs an appropriate undertaking in the
lawyer’s office to become self-assessed.
Note: Watch out for the purchase of office condominiums,
industrial condominiums, and retail condominiums, the
price for which will be subject to HST (being subject to
only GST on the price for closings prior to July 1, 2010).
11) HST and the PURCHASE OF VACANT LAND
(a) Farmland
HST will typically apply to the price of such land if farm
land is sold alone; however, if the land is sold as part of
a farming business, it can be treated differently. Consult
your tax accountant.
(b) Building Lot
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 a real estate commercial activity.
(c) Personal Use Of Vacant Land
No HST is payable if an individual sells personal use
vacant land (which would have been exempt from GST).
12) 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 inside the sale
price). Note: Buying by way of an assignment (where the
builder sale agreement was signed prior to June 19, 2009)
becomes attractive!
(b) Builder’s Agreement Accepted after June 18,
2009
If an offer to purchase from a builder was accepted after
June 18, 2009 and either occupancy closing (for a new
condo purchase) or final closing occurs prior to July 1,
2010, HST is not payable; HST is payable if both
occupancy (in a new condo purchase) and final closing
occur after July 1, 2010.
(c) If Builder’s Agreement Silent about HST
If an offer to purchase from a builder was accepted after
June 18, 2009 and failed to make reference to HST, the
sale price includes Ontario’s 8% PST component of the
HST if it is payable (which means that the builder must
pay the PST and cannot charge it to the buyer).
(d) GST Rebate (calculated on the 5% GST part of
the 13% HST)
Typically, most builders include the GST component of
HST (being 5%) in the sale price based on the government
GST rebate being assigned from the buyer to the builder
(such GST rebate being 36% of the GST payable on the
first $350,000.00 which is reduced to NIL as the price
increases from $350,000.00 to $450,000.00, there being
no GST rebate after $450,000.00).
Note: In order for the GST rebate to be assigned to the
builder by the buyer, the buyer must qualify by the buyer
or 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 but if the government later discovers that
ownership was less than one year, the government might
seek to recover the rebate paid to the investor.
(e) PST Rebate (calculated on the 8% PST
Component of the 13% HST)
Warning: All builder agreements should be reviewed by
a lawyer either before a buyer signs an offer or during
any available cooling off period since some builder
agreements require buyers to pay the 8% PST (or the
Net PST) component of the HST in addition to the
purchase price.
Regarding a PST rebate, only 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
(being newly constructed from a builder since there is
no HST on resale residential property). There is no
government rebate on the 8% PST for the part of
any price that exceeds $400,000.00! This means that
75% of 8% (being 6%) is refundable by the government
and 25% of 8% (being 2%) is not on the first
$400,000.00 of price.
Example: If the price from a builder is $500,000.00,
the gross 8% PST component of the HST would be
$40,000.00, but since the government offers a rebate
of 75% of the 8% PST on the first $400,000.00, this
will effectively (for a qualifying buyer whose immediate
family member will be living in the unit) reduce the PST
to 2% on the first $400,000.00 to $8,000.00. Since
there is no PST rebate for that part of the price over
$400,000.00, 8% is charged on the next $100,000.00
being a further $8,000.00 which means (for a qualified
buyer who can assign the rebate to the builder) that the
total net PST payable is $16,000.00. If the net PST is
not included in the price of $500,000.00, the price plus
net PST payable becomes $516,000.00. The gross 8%
PST on $500,000.00 is $40.000.00 but (due to the
rebate of $24,000.00 on the first $400,000.00) the net
PST payable is $16,000.00.
Note: If the builder’s agreement requires the Net PST to
be paid by the buyer, the buyer pays $16,000.00 on top
of the price. If the builder’s agreement states that the Net
PST is included in the price (as GST is typically with most
builders), the price remains $500,000.00. Watch out!
Caution: An investor-buyer who will rent out the unit will
not qualify for assignment of PST rebate to the builder
and, therefore, on closing, must pay the purchase price
of $500,000.00 plus the gross PST of $40,000.00
(being 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 not a secondary residence.
Also, 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 a
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, 2010Portion Of 2% Of Price To Be Refunded
10% - 24%25%
25% - 49%50%
50% - 74%75%
75% - 89%90%
90% - 100%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 = $24,000.00
(ii) 100% of 2% on $500,000.00 = $10,000.00
Total rebates $34,000.00
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. The question
is whether such Net PST is included or not included in the
purchase price from the builder according to the terms
of the builder’s agreement!
Note: The PST transitional rebate of up to 2% of the
purchase price can only be obtained if:
(i) HST is payable on the price where the builder’s
agreement was accepted after June 18, 2009 and
closes after July 1, 2010;
(ii) the purchase is for new residential construction which
is not a condominium;
(iii) construction is at least 10% complete as of July 1, 2010;
(iv) a certificate is obtained on closing from the builder
stating the percentage of completion of construction as
of July 1, 2010. Note: the builder is not required to provide
this to a buyer unless the terms of the purchase agreement
with the builder requires such a certificate to be provided;
and
(v) an application for a transitional PST rebate is filed with
the government by July 1, 2014.
(h) CONTACT TELEPHONE NUMBERS FOR HST
TRANSITIONAL RULES
Ontario has proposed transitional rules that assist businesses
in the transition to a Harmonized Sales Tax (HST). For
more information on the transitional rules for the HST, please
call Canada Revenue Agency (CRA):
For Personal property and services - 1 (800) 959-5525
For Real property - 1 (800) 959-8287
To speak with an information officer about the introduction
of the HST in Ontario, please call 1 (800) 337-7222 or
1 (800) 263-7776.
of 5% + 8% = 13% (12% in British Columbia) replacing
the former 5% GST (Goods and Services Tax) and the
former 8% PST (Provincial Sales Tax).
1) HST and Mortgage Brokerage Fees (to arrange
a mortgage, if one uses a Mortgage Broker)
HST will not apply since mortgage brokerage services are
exempt as part of the financial services industry.
2) HST on Real Estate Commissions
Generally, HST will be payable on commissions for any
real estate sale closed after July 1, 2010. However, the
general transitional rule (for sale contracts entered into
before July 1, 2010), is if at least 90% of the services
were performed prior to July 1, 2010, only 5% GST is
payable (no PST). If an offer to purchase real estate was
accepted prior to July 1, 2010, then the realtor services
were performed prior to July 1, 2010, and only 5% GST
should be payable even though the realtor’s commission
is not due for payment until the sale has closed after July
1, 2010. Warning to sellers: If, prior to July 1, 2010, a
seller is about to accept an offer to purchase (which will
close after July 1, 2010), the seller should clarify
in writing with the realtor that only GST will be payable
on commissions due on a sale closing after July 1, 2010.
3) HST and Rents Paid by Tenants
For residential tenancies, HST will not apply to such rents.
For commercial tenancies (industrial, office or retail), HST
will be charged on rents paid after July 1, 2010 (but most
commercial tenants qualify to recover such HST payments
through input tax credits).
4) HST and Condominium Monthly Maintenance Fees
For residential condominiums, HST will not apply on
monthly common expenses, but HST is payable for
commercial (retail), office, industrial) condo common
expenses paid on or after July 1, 2010 (most commercial
condo owners qualify to recover such HST payments
through input tax credits).
5) HST on HOME RENOVATIONS
For any part of services (labour and materials) provided
after July 1, 2010 (no matter when a contract for
renovations of a residence was signed), the part performed
or provided after July 1, 2010, will be subject to HST.
6) HST and RESALE COTTAGE / VACATION
PROPERTY PURCHASES
HST will not be payable on the price if the property sold
by the seller and bought by the buyer is personal use
property. However, if the seller had been renting out the
property more than 50% of the time during the seller’s
ownership, the price will likely be subject to HST. If the
property being sold was part of a rental pool, HST will
apply. Consult your tax accountant.
7) HST and RESALE RESIDENTIAL PROPERTY
PURCHASES
There will be no HST on the price of resale residential
purchases. Note: Resale residential purchases will
therefore become a much more attractive investment
(rather than buying from a builder) particularly when one
considers that builder prices will result in 13% HST
(whether built into the price or being structured in
addition to the price by some builders in Ontario).
Builder prices also must include higher increased current
costs of labour, materials and land costs as well as
substantial municipal levies and educational levies
plus sizable closing adjustments (often being hidden by
builders in the fine print of many pages in a builder’s
agreement), all of which are not payable by a buyer /
investor who purchases resale residential property.
(Think about it!)
8) HST on a PURCHASE OF A SUBSTANTIALLY
RENOVATED HOME
If a residence being purchased has been “substantially
renovated”, it will be treated in the same manner as
buying new construction from a builder and HST will
generally apply to the price paid. See Canada Revenue
Agency (CRA) Bulletin B-092 which states that a
“substantial renovation”, in effect, 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) has been
removed or replaced.
9) HST and PURCHASE of RESALE APARTMENT
BUILDINGS (Multi-Unit Residential)
No HST will be payable on the price of a resale apartment
building (multi-unit residential). If part of such a building is
commercial, the purchase price must be reasonably
apportioned between the part of the building that is
residential resale (HST exempt) and the other part of the
building that has a commercial component, which part will
be subject to HST.
10) HST on PURCHASE OF COMMERCIAL
PROPERTIES (new or resale commercial properties
closing after July 1, 2010 no matter when an offer
was signed)
HST will apply to the purchase price; however, typically,
buyers who obtain a GST registration prior to closing
(must be registered for GST in the same manner as
ownership will be taken) will not need to pay the HST on
closing provided:
(a) a GST registration is obtained prior to the closing date
and
(b) the buyer signs an appropriate undertaking in the
lawyer’s office to become self-assessed.
Note: Watch out for the purchase of office condominiums,
industrial condominiums, and retail condominiums, the
price for which will be subject to HST (being subject to
only GST on the price for closings prior to July 1, 2010).
11) HST and the PURCHASE OF VACANT LAND
(a) Farmland
HST will typically apply to the price of such land if farm
land is sold alone; however, if the land is sold as part of
a farming business, it can be treated differently. Consult
your tax accountant.
(b) Building Lot
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 a real estate commercial activity.
(c) Personal Use Of Vacant Land
No HST is payable if an individual sells personal use
vacant land (which would have been exempt from GST).
12) 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 inside the sale
price). Note: Buying by way of an assignment (where the
builder sale agreement was signed prior to June 19, 2009)
becomes attractive!
(b) Builder’s Agreement Accepted after June 18,
2009
If an offer to purchase from a builder was accepted after
June 18, 2009 and either occupancy closing (for a new
condo purchase) or final closing occurs prior to July 1,
2010, HST is not payable; HST is payable if both
occupancy (in a new condo purchase) and final closing
occur after July 1, 2010.
(c) If Builder’s Agreement Silent about HST
If an offer to purchase from a builder was accepted after
June 18, 2009 and failed to make reference to HST, the
sale price includes Ontario’s 8% PST component of the
HST if it is payable (which means that the builder must
pay the PST and cannot charge it to the buyer).
(d) GST Rebate (calculated on the 5% GST part of
the 13% HST)
Typically, most builders include the GST component of
HST (being 5%) in the sale price based on the government
GST rebate being assigned from the buyer to the builder
(such GST rebate being 36% of the GST payable on the
first $350,000.00 which is reduced to NIL as the price
increases from $350,000.00 to $450,000.00, there being
no GST rebate after $450,000.00).
Note: In order for the GST rebate to be assigned to the
builder by the buyer, the buyer must qualify by the buyer
or 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 but if the government later discovers that
ownership was less than one year, the government might
seek to recover the rebate paid to the investor.
(e) PST Rebate (calculated on the 8% PST
Component of the 13% HST)
Warning: All builder agreements should be reviewed by
a lawyer either before a buyer signs an offer or during
any available cooling off period since some builder
agreements require buyers to pay the 8% PST (or the
Net PST) component of the HST in addition to the
purchase price.
Regarding a PST rebate, only 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
(being newly constructed from a builder since there is
no HST on resale residential property). There is no
government rebate on the 8% PST for the part of
any price that exceeds $400,000.00! This means that
75% of 8% (being 6%) is refundable by the government
and 25% of 8% (being 2%) is not on the first
$400,000.00 of price.
Example: If the price from a builder is $500,000.00,
the gross 8% PST component of the HST would be
$40,000.00, but since the government offers a rebate
of 75% of the 8% PST on the first $400,000.00, this
will effectively (for a qualifying buyer whose immediate
family member will be living in the unit) reduce the PST
to 2% on the first $400,000.00 to $8,000.00. Since
there is no PST rebate for that part of the price over
$400,000.00, 8% is charged on the next $100,000.00
being a further $8,000.00 which means (for a qualified
buyer who can assign the rebate to the builder) that the
total net PST payable is $16,000.00. If the net PST is
not included in the price of $500,000.00, the price plus
net PST payable becomes $516,000.00. The gross 8%
PST on $500,000.00 is $40.000.00 but (due to the
rebate of $24,000.00 on the first $400,000.00) the net
PST payable is $16,000.00.
Note: If the builder’s agreement requires the Net PST to
be paid by the buyer, the buyer pays $16,000.00 on top
of the price. If the builder’s agreement states that the Net
PST is included in the price (as GST is typically with most
builders), the price remains $500,000.00. Watch out!
Caution: An investor-buyer who will rent out the unit will
not qualify for assignment of PST rebate to the builder
and, therefore, on closing, must pay the purchase price
of $500,000.00 plus the gross PST of $40,000.00
(being 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 not a secondary residence.
Also, 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 a
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, 2010Portion Of 2% Of Price To Be Refunded
10% - 24%25%
25% - 49%50%
50% - 74%75%
75% - 89%90%
90% - 100%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 = $24,000.00
(ii) 100% of 2% on $500,000.00 = $10,000.00
Total rebates $34,000.00
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. The question
is whether such Net PST is included or not included in the
purchase price from the builder according to the terms
of the builder’s agreement!
Note: The PST transitional rebate of up to 2% of the
purchase price can only be obtained if:
(i) HST is payable on the price where the builder’s
agreement was accepted after June 18, 2009 and
closes after July 1, 2010;
(ii) the purchase is for new residential construction which
is not a condominium;
(iii) construction is at least 10% complete as of July 1, 2010;
(iv) a certificate is obtained on closing from the builder
stating the percentage of completion of construction as
of July 1, 2010. Note: the builder is not required to provide
this to a buyer unless the terms of the purchase agreement
with the builder requires such a certificate to be provided;
and
(v) an application for a transitional PST rebate is filed with
the government by July 1, 2014.
(h) CONTACT TELEPHONE NUMBERS FOR HST
TRANSITIONAL RULES
Ontario has proposed transitional rules that assist businesses
in the transition to a Harmonized Sales Tax (HST). For
more information on the transitional rules for the HST, please
call Canada Revenue Agency (CRA):
For Personal property and services - 1 (800) 959-5525
For Real property - 1 (800) 959-8287
To speak with an information officer about the introduction
of the HST in Ontario, please call 1 (800) 337-7222 or
1 (800) 263-7776.
Saturday, June 12, 2010
Saturday, May 1, 2010
This is the sample of Studio's
This is the sample of Studio's, represent how practical a Real Architect can be to serve most of our down town condos shortage of space.
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