Important Changes to the Standard Real Estate Contract | Nov 2024
GST Now Included in the Purchase Price
If you’re buying or selling real estate in British Columbia, an important change is coming to the standard Contract of Purchase and Sale that you need to be aware of. As of November 12, 2024, the contract will now default to including GST in the purchase price unless otherwise stated. This update aims to prevent last-minute disputes and ensure greater clarity for both buyers and sellers.
What Does This Change Mean for Buyers and Sellers?
For Buyers:
- No More Unexpected GST Costs – Previously, there could be confusion about whether GST was included in the purchase price or added on top. This change helps you know upfront what you’ll be paying.
- Clearer Negotiations – Since the contract assumes GST is included, buyers can negotiate accordingly with sellers and avoid any surprises at closing.
- Still Need to Confirm Applicability – Not all properties are subject to GST. If you’re buying a new home, commercial property, or certain types of investment properties, GST may apply. If you’re buying a used, resale residential home, it likely won’t.
For Sellers:
- Potential GST Responsibility – If your property is subject to GST and you don’t adjust the contract, you could be on the hook for paying it out of the agreed sale price.
- Importance of Knowing if GST Applies – If your property is newly constructed, has been used for short-term rentals, or is a vacant lot, you should consult a tax professional to confirm GST obligations before listing.
- Opportunity to Negotiate – While the default contract includes GST in the price, sellers can negotiate different terms with buyers if both parties agree and explicitly state it in the contract.
Avoiding the GST Trap: What You Should Do
- Get Professional Advice – Determining whether GST applies to your sale can be complex. Speak to a lawyer or accountant to confirm.
- Communicate Clearly in the Contract – If you and the other party agree to a different arrangement regarding GST, ensure it’s explicitly written in the contract.
- Work with an Informed Real Estate Professional – A knowledgeable REALTOR® can help guide you through these changes and ensure your contract accurately reflects your intentions.
Final Thoughts
While this contract update simplifies many GST-related uncertainties, it’s still crucial to do your due diligence. Understanding whether GST applies to your transaction and clearly defining terms in the contract can save you from unexpected financial surprises.