Ontario Renters Hear Good News About Government Limits on HST Recovery Rent Increases
The Toronto Star is reporting that the Ontario Liberal Government plans to make a big announcement to help out renters of real property by restrictions on rent increases. On the other hand, the announcement restricts the ability of landlords to raise rents to recover unrecoverable harmonized sales tax (HST).
Laurie Monsebraaten reports:
In advance of the harmonized sales tax taking effect in July, sources say the Liberal government will close a loophole in rent regulations that would have allowed landlords to apply for above-guideline rent increases based on the new 13 per cent tax on utilities.
Instead, the new HST costs for utilities will be reflected in rent only as they affect the Consumer Price Index, which the province uses to calculate the annual rent increase guideline.
The unrecoverable HST costs may include repair and maintenance fees, management fees, housekeeping costs, security costs, landscaping fees, renovations, elevator service costs, electricity, hydro and other energy costs, etc. The 8% provincial retail sales tax has not been applicable on real property, most services in respect of real property, management, administrative and other services, utilities and other intangible property. As a result, the change will create a burden for landlords.
The HST is unrecoverable because rental residential real property is exempt for GST/HST purposes after construction and the point in time when the builder self-assesses GST and/or HST. In other words, renters do not pay GST/HST on rent to landlords.
The concern was that the amount of rent itself would increase because of the unrecoverable GST/HST paid by landlords to their suppliers.
The Ontario Liberal Government after months of denying that HST will affect renters is taking these new steps because they are starting to understand that HST is going to have an effect. Susan Levy was right (in hindsight).
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
