90% Rule HST

CRA is offering HST seminar’s to help us understand the new charges and changes coming. I went to one last week hoping to learn something, meet new people and well you never know where your next listing or purchaser will come from! The course was highly informative I suggest you attend one. I am predicting a flurry of activity especially in the renovation business as we approach the HST start date July 2010. Real estate is affected. Anything that had GST is now subject to HST. That adds to the cost of selling a home and to the cost of buying a home.
Like anything there will be a transition. Today I am writing about the 90% rule. If 90% of the service has been performed before July start date then no HST is applicable. Say you list and sell a house in May conditionally. It firms up in June but doesn’t close until August 15th. As the listing agent 90% of your service or work has been completed before July 1st therefore no HST is applicable.
That makes sense to me but to be sure I suggest you document your work just in case 1 day 5 years later you are been audited. My opinion; a lot easier reviewing notes than trying to remember old sales.

Home energy efficiency...consider a voluntary energy audit

Mary and I just came back from 2 ½ intensive days taking a passive solar course in friendly, rainy Truro Nova Scotia. Make sure you stop in at Murphy’s fish and Chips located on the Esplanade. There is a reason it is rated Atlantic’s best! I am not going to build a passive solar home, but I am going to use and adapt the principles in the course to help make my living conditions more comfortable and cost efficient.

When my buyer is seriously considering a property I encourage them to call the utility companies. This gives you a starting point for the energy costs for that property. I say a starting point because too many questions are unanswered; How hot did they keep the house? How old are the occupants? Who is there during the day? How many hours watching TV? The answer to these questions helps us understand the routine of the house.

An energy audit will help. The government’s new position now makes energy audits voluntary rather than mandatory (yes, that's right; no more mandatory energy audits!). Consider doing one and sharing with prospective buyers, not only will it help the buyer; they may forgo doing a home inspection! Everywhere you look today it is “green” this and “green” that. You can even receive rebates for making your property more energy efficient.

I ask my sellers to tape the heating bills to the furnace. Sharing the costs helps answer a basic buyer question. The rest is educating…you know…for every 2° over 70 can increase your heating bill as much as 15%. Babies and elderly people often keep their homes between 72 & 76. Programmable thermostats reduce heating costs when used properly and increase costs when not.

Back to the passive solar course, I re-learned the angle of the sun between winter and summer and its efficiency time, roughly high noon and 15°- 30° either way. In the winter allow the sun in during the day and let it warm something that can radiate heat. In the summer keep it out to help keep your home cooler. The result is less energy needed to heat or cool your home. I learned a lot this past weekend. Living in an old house our forefathers knew a lot about this emerging technology; history does repeat itself. A penny saved is a dollar earned!

Two similar properties offered for sale, 1 costs $500.00 more to heat…if you were on a budget which would you choose? Which is worth more?

Do you have any tips to share? Are you doing anything to reduce your utility costs without giving up your comfort? Please share.

My thoughts on the new mandatory energy audits

Energy Audits before you sell your home, I’m not sure on this one.

Pro: Lets the buyer know the efficiency of the property they are buying?
Con: Can be used against the seller in negotiating a final/fair price.

Pro: Shows the buyers where improvements can be made to save money on their energy usages.
Con: Forces the seller to spend $

Pro: National Association of Green Agents and Brokers apparently has a kit for a preliminary examination which points out areas in which small changes can help reduce energy costs and improve a property’s score.
Con: Question: could anybody “cook the books” for a better score?

Pro: Only licensed auditors will perform these audits.
Con: Exactly what does the licensing entail? Licensing plumbers, electricians and carpenters take several years; will an auditor be as educated? After all, they are providing a professional opinion indirectly on these trades.

I read that new windows don’t necessarily save money (energy) compared to old. I believe most building inspectors will tell you my 100 year old windows should be replaced. I get a little anal sometimes and this winter we tested out my “grandparent theory”… Close the drapes! Our living/dining room is 30 feet by 16 feet with 2 large windows facing south and 2 large windows facing west. Our experiment involved opening the drapes one evening, and closing them the next. We found a 4-5° difference in temperature. Our grandparents were right, 5° warmer with the drapes closed! So if you want to be warmer…close the drapes. If you want them open, understand the extra cost associated. It’s your money!

My drapes would be closed for an energy audit. Would I pass or fail? How would we know if any standard testing could be strictly adhered to? Impossible! I am all for reducing costs through education and choices but I don’t believe we should be forced.

Comments Please?

New "tenant tax"?

If the City council approves, owners of small apartment buildings, with six or fewer units, will be required to obtain a license at a cost of $150 per unit every five years to allow for city inspections to ensure housing standards are met.

The new rules would allow bylaw officers to blitz neighbourhoods they believe to be rife with problems, but they would still have to give a month's notice to tenants and landlords before inspecting inside homes.

The Good, The Bad, and The Ugly of HST

The Good

Tax experts predict the average Ontario family will be further ahead despite harmonized sales tax. Lower-income families will get hit a bit more, but the tax rebate will cushion that.

Harmonizing GST and PST is good for businesses because it lets them recover money now lost to retail sales taxes and use it for investment in new equipment and machinery. Currently, businesses receive a rebate on the GST, but not PST.

A study of Quebec, Newfoundland, Nova Scotia and New Brunswick - which harmonized their GST and sales taxes - found business investment jumped and prices (of goods & services already taxed) decreased.

In the long run, more jobs will be created (better jobs that require equipment and machinery behind them which may pay better) and increased job security.

The Bad & Ugly

We will be paying more at the checkout.

Homebuyers, especially first-time homebuyers, will find it tougher to afford a home. For a resale house priced at $360,000, a HST could add over $2,000 in new taxes to closing costs. Take a look at the table below:



In total, a HST will add $313 million annually in new taxes to resale home transactions. This will hurt the resale home market, prolonging the housing industry’s recovery from the current economic downturn.

Harmonized Sales Tax for Ontarians

More taxes to come (Yipee Yahoo!)

Starting July 1, 2010 expect a harmonized sales tax. The McGuinty government announced it will harmonize the GST and PST, causing consumers to pay extra tax on a range of goods & services.

This will increase the costs associated with real estate transactions (legal fees, moving costs, commissions, home inspection fees), which we currently pay only 5% GST on.

And better yet, we will also be paying more for goods & services we use daily: gas, utilities, haircuts. This is in response to the economic downturn; in hopes of raking in an additional $3.5 billiion in annual revenue.

The good news?

- There will be three tax rebate cheques totalling $1,000 for families with household incomes of less than $160,000 and $300 for individuals who make less than $80,000 a year.

- Some basic goods will be exempt from the blended sales tax, such as children's clothing, books, diapers and new houses costing less than $400,000.

Mandatory Green Audits

Thinking of selling your home? You won’t be able to sell your home or condo without first getting a home energy audit, which will cost you $300.

Under the New Green Energy Act, you will now have to get a private contractor to do an energy audit before selling, but there will be no requirement to take any action. This audit is simply intended to inform potential buyers what state of energy efficiency a property is in so they can take action if desired.

While this adds an expense to homesellers, it is predicted that 50,000 new jobs will be created.

This is anoter step to encourage electricity conservation and encourage renewable sources of energy. In Portugual, solar systems are required in new houses.

New Building Code Requirement

Ontario is ensuring new homes in the province are more energy efficient with a new requirement under the Building Code.

Starting in January 2009, Ontario’s Building Code will require near full-height insulation on foundation walls in all new home construction. The basement insulation requirement is the second step in a three-phase approach to energy efficiency brought in with the introduction of the 2006 Building Code.

After 2011, further requirements will see houses with at least an EnerGuide 80 level of efficiency. EnerGuide 80 is a model energy rating system for houses developed and administered by Natural Resources Canada.

For more information on the new requirements click here.

Rent Increase Guideline

The Ontario Government has set the rent increase guideline at 1.8% for 2009.

This is the maximum amount a landlord can increase rent for a current tenant, if at least 12 months have passed since the move in date. A landlord must give at least 90 days written notice to tenants before enforcing the rent increase.

This amount does not apply if you are renting to new tenants or those not covered by the Residential Tenancies Act.

Get out your ID if you’re thinking of buying

Until recently, as of June 23 2008, real estate agents are now required to ask clients for identification.

Following the attack on the World Trade Centre, the Government of Canada introduced the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) late in 2001. This legislation introduced new regulations that required targeted “high-risk” industries, including real estate, to implement client identification and record keeping requirements.

The new requirements that agents must comply with are: record all funds received (unless funds are received from a financial entity or public body), and verify and record the identification of clients with respect to every purchase and sale.

New city bylaw cracking down on basement bedrooms

From what I understand, the student sale/rental market is in the process of changing quite significantly. The city of London has agreed with the Fire Department in the “dangers” of renting basement bedrooms. The city is allowing the Fire Department to inspect (rental) properties and “disqualify” the basement bedrooms. The fire department has taken the position that a basement bedroom must have a “man” size egress; large windows are no longer acceptable if the unit is a rental. Owners selling properties with basement bedrooms are struggling in achieving top dollar values as the buyers are discounting the income from the basement bedrooms.

If you disagree with this, phone City Hall and ask. This new bylaw could mean that any bedroom in the basement is illegal unless it has a walk-out. It is not just affecting rentals, but could affect the whole city.

I am all about safety, however I am against discrimination. If you have any objections to this new bylaw, call City Hall and let them hear you.