Car­olyn Ire­land, Globe and Mail

One Home Turf reader is steel­ing him­self for a tense weekend.

This fel­low, who lives in Toronto, agreed to buy a newly-built home for approx­i­mately $465,000. As luck would have it, he signed up just before details of the Ontario gov­ern­ment bud­get were announced on March 26^th. The sched­uled clos­ing for the house falls after July 1, 2010.

He’s scram­bling now to get the clos­ing date moved for­ward but he’s not sure if he’ll be suc­cess­ful. He has to decide this week­end whether to go ahead with the purchase.

As most inter­ested peo­ple will know by now, the har­mo­nized tax announced on bud­get day will blend together the fed­eral goods and ser­vices tax of 5% and the provin­cial sales tax of 8%. That means that the sales tax will now be tacked onto some pur­chases that used to be exempt, includ­ing new homes.

Pur­chasers of homes val­ued at below $400,000 will get a break, but those who buy a home for a price above $500,000 will pay full freight. There’s a murky area between those two prices – right where this reader falls.

There’s also no clar­ity about the date. Will the tax apply only on deals that are agreed to after July 1, 2010, or will this reader – who signed up before bud­get day – be on the hook?

Nobody knows yet. Even Ontario finance min­is­ter Dwight Dun­can and his peo­ple have yet to work out the details, as we learned when he took ques­tions from read­ers on this topic on globe​and​mail​.com ear­lier this week.

So our reader is in a bind: The higher tax could increase the cost of his new house by more than $30,000. Buy­ers who are pre-approved for a mort­gage, he points out, may find that they can’t get addi­tional financ­ing if they have to fork over a lot more at the time of closing.

Nicole Ross, a real estate lawyer with Wright & Asso­ciates in Toronto, has received lots of calls from her clients so she put in a call to the Min­istry of Finance this week. They told her they haven’t got a time­line yet.

Ross says we may be able to look to the imple­men­ta­tion of the Munic­i­pal Land Trans­fer Tax, as the Miller tax is more offi­cially known, for guidance.

In that case, the land trans­fer tax came into effect on Feb. 1, 2008. It was “grand­fa­thered” in, in that any agree­ment of pur­chase and sale signed before Dec. 31^st, 2007 was com­pletely exempt from the new tax. Agree­ments entered into after Dec. 31, 2007 for deals that closed on or after Feb. 1, 2008 were sub­ject to the tax.

If the HST comes to pass, Ross spec­u­lates, we could see a sim­i­lar struc­ture. Per­haps the man­darins will pick a date a cou­ple of months in advance and sub­ject all deals signed after that date to the har­mo­nized tax.

Ross stresses, how­ever, that she’s only offer­ing a pos­si­ble sce­nario based on the prece­dent of the land trans­fer tax.

“I know it’s hardly the reas­sur­ance that your read­ers are look­ing for, but it’s all the infor­ma­tion avail­able for the time being.”

The Toronto Real Estate Board, which rep­re­sents real estate agents, finds the talk of higher taxes maddening.

Spokesman Von Palmer points out that at least the lack of details means there is still time for cit­i­zens to influ­ence the outcome.

Our reader, mean­while, is pre­dict­ing law­suits if peo­ple have to walk away from a deal because they can’t get financ­ing because their pur­chase price and clos­ing costs are inflated by taxes.

And he’s wor­ried about his own situation.

“This is not a risk that I can afford to take.”

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

dwight dun­can munic­i­pal prop­erty taxes

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