An issue I ran into recently is, what if you buy a property that was being used by the seller as an Air BnB?

I’m not a tax lawyer, but, I did out of curiosity wade through copious volumes of Canada Revenue Agency publications, the Excise Tax Act and several articles. As typical with CRA publications, which don’t seem to be written for regular human beings to consume, they left me with a lot of questions, and a refreshed appreciation for how many potential landmines there can be in property transactions.

One thing was abundantly clear, and that is: if you are going to buy any residential property, you need to make pretty extensive inquiries of the sellers to make sure that the sale is not subject to GST.

Air BnBs are stealthy ninjas. Any ordinary looking single family dwelling, or condo, could have been operated as an Air BnB by its owner. You, as purchaser, are liable for GST unless a sale is exempt… a property used chiefly for short term rentals, where the seller was claiming GST input tax credits in respect of the property, is almost certainly subject to GST. There are other ways the property could be subject to GST. You could end up footing a stiff GST bill if you fail to make the right inquiries about the sellers’ use of and relationship with the property, and fail to protect yourself in the sale contract, regardless of how you intend to use the home.

You could end up paying GST on a $1M home (ouch!) that you intended to just use as your principal residence, just by not realizing it was an Air BnB. That’s a $50,000 mistake.

Caveat emptor, or, buyer beware: instruct your realtor to make the right inquiries, and protect yourself in the sale contract accordingly. Ideally, engage your lawyer before any conditions on the contract are removed.

Jo McFetridge is a lawyer in Victoria, B.C.