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Assignments and HST

One of the most difficult issues when dealing with Assignments is the HST issue. The first issue is to determine if HST applies to the transaction. If you are working on an Assignment of an Agreement for a Used Residential Property then generally speaking HST does not apply. If you are dealing with the Assignment of an Agreement for a New Build property, a Substantially Renovated property or, a Commercial Property, then it is likely that HST does apply to the transaction.

Once you have determined that HST will apply then it will be necessary to negotiate between the Assignor and the Assignee whether the HST will be “included in” the Purchase Price (i.e., the Assignor/Seller (pays the HST from the Purchase Price received) or, whether the HST is payable “in addition to” the Purchase Price (which means that the Assignee/Buyer will pay the HST in addition to the Purchase Price on Closing). The HST issue must be analyzed with respect to the Original Agreement (i.e., between the Original Seller and the First Buyer/Assignor) as well as with respect to the Assignment (i.e., the Agreement between the First Buyer/Assignor and the Second Buyer/Assignee). The fact that the Assignee may be able to claim an input tax credit which may eliminate the HST liability altogether is a separate issue.

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