Residential Complex

Mr. Litman built a laneway house on top of a detached garage on his property in Ottawa, without severing it, and claimed the new housing rebate. In finding that this qualified under s. 256(2)(a) as the construction of a residential complex which was a single unit residential complex for use as the primary place of residence of a relation (his mother), St-Hilaire J stated (at para. 25) that:

The laneway house is detached from the main house and it forms a new residential complex where, prior to its construction, there was none. In addition, I see nothing in the definition of residential complex that requires that the laneway house be held under separate title to meet the requirements of that definition.

The Appellant used a condo unit for the first nine years after purchase for long-term residential rentals and then listed it on Airbnb and rented it out for a succession of short-term rentals (under 60 days and sometimes for only one night) before its sale.

Before concluding that the condo unit was excluded from being a residential complex, so that its sale was a taxable supply, D’Arcy J found that, at the time of the sale, the unit was similar premises to a hotel, a motel, an inn, a boarding house and a lodging house given that it along with the listed items represented “premises that are regularly supplied as accommodations to third parties on a short‑term basis for a fee” (para. 83) and provided furnished accommodation.

Furthermore, at the time of sale, “all or substantially all of the leases, under which the Condominium was supplied, provided, or were expected to provide, for periods of continuous possession or use of less than 60 days” (para. 87). In rejecting the Appellant’s submission that this test was satisfied because over the whole period of its ownership, the condo was leased for over 90% of that period in long-term rentals, D’Arcy J found that the substantially all test was a “point in time” test (para. 94).

The above conclusion was reinforced by the change-in-use rule in s. 206(2), which applied, by virtue of s. 141.1(3)(a), when the property was first listed on Airbnb (i.e., the doing of something in connection with the establishment of a commercial activity) (para. 46), so that there was a deemed acquisition by the Appellant of the property. Since the only use after the property’s deemed acquisition was for making short-term rentals, the same conclusion would be reached without applying a point-in-time test.

The owner of a property in Mayfair, London that had been converted into 49 residences, agreed with purchasers that, in consideration for a lump sum, each purchaser (a "member”) would have the right, after making a reservation, to use a residence of the particular quality level (1 to 5) for which they had paid, for up to 21 days a year during the term of approximately 50 years (plus for a further 14 nights on payment of a modest charge). Members, when in occupation had access to the amenities of a boutique hotel, e.g., concierge, internet room, daily housekeeping.

The applicable Directive exempted “the leasing or letting of immovable property”, but excluded from that exemption (in Item 1(d)) “the provision of accommodation … in the hotel sector or in sectors with a similar function.”

Newey LJ noted that although, if all the members exercised their rights to the full 21 nights in a year, not all of them could be served, this was a “highly theoretical” rather than a “real” potential, and found (at para. 34) that the reservation system should be seen as “facilitative” rather than as “introducing conditionality such as to make the land exemption unavailable.” However, having regard to the jurisprudential doctrine that “the ‘leasing or letting of immovable property’ is ‘usually a relatively passive activity linked simply to the passage of time and not generating any significant added value” (para. 36) and that hotel-like services were provided to the members, that exemption was not available.

Although it was thus unnecessary to consider the Item 1(d) exclusion, he nonetheless found that the Upper Tribunal should not have interfered with the finding of the First-Tier Tribunal that indicated that such exclusion applied, stating (at paras. 58-59):

The fact that Membership gives "the flexibility to enjoy short stays of a stated maximum amount each year, in an environment similar to a hotel and with the services which can be expected in a hotel" … was surely something that the FTT could properly take into account in arriving at its assessment. …

Miss Hall [for the HMRC] did not suggest that the CJEU has ever held that the grant of a right to short-term sleeping accommodation in an establishment similar to a hotel cannot fall within the exclusion from the land exemption … merely because the right is to last for an extended period. Nor does it seem to me that the fact that such a right is of a long-term nature should necessarily preclude application of the exclusion. To my mind, the duration of the right is not of itself determinative but rather a factor which can properly be taken into account.

The Plaintiff sold to the Defendant the middle lot of a three-lot property over which a home had spread. This middle lot contained a pool house and hallway structure that connected to the rest of the home on the other two lots. The sale agreement (“APS”) required that any existing structures be demolished by the vendor, but this did not occur until 45 days after closing. The APS provided that any HST applicable to the sale was in addition to the sale price of $2,800,000. However, in order to help make the sale close, the vendor delivered a Statutory Declaration re HST that the sale qualified as an exempt sale of a used residential complex.

No HST was collected on the sale. However, a year later, the Plaintiff brought a motion for summary judgment seeking payment of HST from the Defendant on the sale of the property.

After noting (at para. 35) that “I am being asked to determine contractual issues and obligations between the Plaintiff and Defendant, and in doing so must interpret certain sections of the ETA [which] is within the jurisdiction of this court,” Coats J went on to find that, in fact, the sale was exempt from HST. Although (notwithstanding ETA s. 133) “the time of the supply is the time that the deal closes” (para. 57) and the “material time for the determination of whether the property was a ‘residential complex’ and ‘residential unit’ subject to an HST exemption is the time of closing” (para. 58), at that time the “residential complex” definition was satisfied. She stated (at paras. 63-64, 70):

[A]t the time of closing, the residence and pool structure were a complete structure which were suitable for living in. … It was clearly an appurtenance to the detached home.

… There is no requirement in ETA that the residential complex/residential unit exemption involve the transfer of an entire residential unit or a complete residency unit. This would be contrary to the “part thereof” language in section 123(1) of the ETA.

… [T]he parties’ expectations with regard to the future demolition do not change the facts on the ground at the time of closing.

The appellant purchased a condo unit for personal use as a residence. The unit had been used by the vendor as a ski rental unit. In finding that the unit was not a residential complex, so that the appellant was not entitled to a rebate of the GST charged to it on the purchase, Campbell J stated (at para. 9):

The evidence supports that the property was not a premises similar to those described in subsection 123(1), that the vendors used a company that arranged for the rentals, hired individuals to clean the unit, rented it for short-term periods averaging seven to ten days and that the vendors never used it as a place for their personal residence. This means that the property falls within the concluding portion of subsection 123(1)… .

In finding that the sale of a vacant house with land was exempt, Boyle J stated (at para. 24):

[T]he house on the land sold satisfies the definition of residential unit in section 123 of the GST/HST legislation by virtue of being a detached house that, at the time of sale, was vacant but was last occupied as a place of residence for individuals. … . The portion of the lot that he sold together with the house was attributable to the use of the house and was reasonably necessary for its use and enjoyment as a place of residence for individuals.

Before finding that the sale of a lot with a partly-constructed house on it was not exempt under Schedule V, Part 1, s. 3, Little J quoted the defintion of residential complex and stated (at para. 30):

It is apparent that the above definition does not include partly finished buildings.

A housing trust that had been granted a licence by the local authority to use a number of properties for redevelopment as temporary accommodation for homeless persons and which signed an agreement with the plaintiff for occupation of a self-contained flat in one of the properties on a temporary basis on a weekly licence was found to have thereby created a tenancy in favour of the plaintiff because the agreement with the plaintiff had all the characteristics of a tenancy, including the grant of exclusive possession. The existence of a tenancy did not depend upon the plaintiff establishing a proprietary interest binding on third parties, and the fact that the trust was a licensee of the local authority also did not preclude the grant by it of a tenancy.

The appellant sold a condo in Whistler which had been rented out on a short-term basis for the previous 34 months excepting one six-month rental. Brulé J found that the condo did not qualify as an exempt residential complex given that the long-term rentals represented less than 10% of the total, stating (at para. 15) that “the gross revenue method should be adopted.”