New Housing Rebates (prior to 2021 amendments)

Recently I attended the tax court and witnessed a case where an appellant was denied a New Housing Rebate (NHR). I wrote about what I witnessed in this post. The appellant in that case entered into a purchase and sale agreement for a new build as a “bare trustee”, meaning they only did so for the purposes of helping the beneficial owner of the interest in the new build (the niece) qualify for a mortgage. At closing the niece was unable to obtain a traditional mortgage and had to enter a short term mortgage agreement with a lender of last resort with a requirement to sell the property asap and without occupancy. The CRA figured out that the appellant had not occupied the property as a primary place of residence and reassessed them for the $24,000 rebate plus interest.

I was thinking about this case this morning because I empathized with the beneficial owner of the interest in the property. She certainly entered into the agreement with the intention to occupy the property as her primary place of residence but for whatever reason was unable to enter into the purchase and sale agreement on her own. Her uncle, doing what family does, supported his niece and that ended up being a tragically fatal act that has made him liable (he technically applied for the rebate) for upwards of $50,000 with all the accumulated interest. I wondered if there had been any recent precedents after Cheema v. Canada that may have changed anything and I found this recent Federal Court of Appeal case, Chen v. Canada, that affirmed that any NHR cases similar to the facts in Cheema and prior to the legislative amendments in 2021, were conclusively unwinnable by appellants.

Here’s what’s different and interesting about this particular case, the ostensible applicant for the rebate, the person who has been assessed for the amount (the uncle), was simply a bare trustee for the beneficial owner of the residential complex (the niece). In every other case I have seen, the beneficial owner was correctly assessed for the amount. In common law the bare trustee would not generally be the one liable under any agreement, it would be the beneficial owner who could be sued or is otherwise liable by operation of law. In my estimation, in this unique case, the person who has been assessed for the amount is not the person who should be liable for it and the assessment should be vacated in the interest of justice.