Reviewing the Agreement of Purchase and Sale: HST Applicability on Resale Properties (In Brief)

This is a new post in our series related to understanding the Ontario OREA version of the Agreement of Purchase and Sale (“APS”). This is Form 100 or 101. Please make sure to review the other posts already completed for this series. 

Before we start, a disclaimer. HST is a complex and highly contextual area of law. The information in this blog post is intended only as a basic introduction to key concepts and should not be relied upon as legal or tax advice. Anyone involved in a real estate transaction with potential HST implications should consult an Ontario real estate lawyer or tax professional before signing an Agreement of Purchase and Sale.

When buying or selling a resale residential property in Ontario, one of the most misunderstood aspects of the Agreement of Purchase and Sale (APS) is the potential applicability of Harmonized Sales Tax (HST). Many buyers assume that resale properties are automatically exempt, while sellers may not realize that certain circumstances can trigger HST obligations. In many typical residential resale transactions, HST does not apply to the purchase price—but there are important exceptions that buyers and sellers must consider. 

The standard Ontario APS provides a clause that addresses HST, generally stating that the purchase price includes HST unless otherwise stated. This means that if HST is applicable, the seller is typically responsible for remitting it unless the parties negotiate differently. The intent of the clause is to protect the buyer from unexpected tax liability, but it places the burden on the seller to understand whether their sale is taxable. Failing to properly identify HST obligations could lead to costly disputes or last-minute amendments.

HST may be chargeable on certain types of resale transactions. For example, if a property has been substantially renovated—to the point that it is essentially considered new—the Canada Revenue Agency may treat it like a new home sale, making HST payable. Similarly, if a seller is operating a short-term rental business (such as Airbnb) in a non-principal residence, or the property may be classified as a mixed-use or commercial property, HST could apply to part or all of the sale price. Vacant land may also attract HST depending on its zoning and use. These situations require careful analysis because they often hinge on factual details that are not obvious at first glance.

Both buyers and sellers should be cautious because misunderstanding HST liability can have serious financial consequences. Sellers who incorrectly assume that their property is HST-exempt may find themselves unexpectedly responsible for remitting tax after closing. Buyers, on the other hand, may negotiate a price believing HST is included, only to later discover that the property’s use or classification makes the transaction taxable. The hefty cost of HST makes accurate advice essential. A brief clause in the APS cannot replace proper tax analysis.

While HST typically does not apply to standard resale residential transactions in Ontario, there are several circumstances where it can be charged. Understanding these exceptions, and properly addressing HST obligations in the APS, helps prevent disputes, unexpected tax bills, and complications at closing. Buyers and sellers alike should always investigate the property’s use, history, and classification to determine whether HST might apply.