When is a reno 'finished'? Homeowners battle tax agency over confusing rebates

Three years after the death of B.C.'s experiment with the HST, a group of homeowners are in court this week fighting for thousands of dollars in tax rebates they claim were mired in bureaucracy and misinformation.

The confusion comes from a pair of rebate programs administered by the Canada Revenue Agency: one for the federal goods and service tax, and one for the provincial portion of the HST.

Both applied to people who built a new home or substantially renovated an old one during the time the HST was in place in B.C. from July 2010 to April 2013.

But because the federal rebate was only available to homeowners whose properties were worth $450,000 or less, many British Columbians assumed the same limit applied to the provincial rebate as well.

As one homeowner testified in Tax Court, the CRA told her as much when she first inquired.

"We were told that we didn't qualify," said Heidi Rahn. "We actually had conversations about how no one in Vancouver could ever qualify for this rebate, because it only applied to properties under $450,000."

'The house isn't finished now'

Rahn is one of 10 homeowners who applied for the tax rebates after seeing advertisements for the services of a self-styled tax crusader named Sean Leitenberg.

The CRA has rejected them all on the grounds their rebate applications were filed too late: outside a two-year window following "substantial completion" of the renovation project in question.

That's led to an unusual set of proceedings in the tiny courtroom on the sixth floor of a Vancouver office building as a judge tries to figure out what exactly "complete" means when it comes to home renovation.

Never mind that all the appellants claim they wouldn't have filed so late, if the fact the rebate actually applied to them had been better advertised in the first place.

Rahn was looking for $9,422 back on more than $200,000 worth of renovations to her East Vancouver heritage home.

She said the lack of a railing led to her father falling down a set of stairs in March 2012, a year after the 2011 date the CRA had determined as the conclusion of her project.

She also still had hot water coming out of the toilet.

John Tober, the applicant whose case was heard next, said he spent more than $400,000 gutting his Coquitlam home.

He was living in the house but couldn't get an occupancy permit until well after the CRA claimed his renovation was complete.

"I don't understand what 'finished' means anymore," Tober testified. "The house isn't finished now."

'You're not entitled ... and that was it'

​Two department of justice lawyers are squaring off against Leitenberg, a pony-tailed former hot-dog salesman who says his cut of the hundreds of rebate applications he helped file enabled him to move to Hawaii.

Leitenberg believes the confusion around the $450,000 cap may have cost British Columbians millions. He claims many of his clients were misinformed by frontline workers when they called a CRA hotline.

"If someone called from British Columbia, they were asked the value of your home. If you said it was more than $450,000 they plainly said you're not entitled to a rebate and that was it," he said.

"What they should have told you is that there's a provincial rebate that we administer that you're still entitled to —regardless of the value of your home."

The details are contained in the fine print of the CRA's online guide which says "a provincial new housing rebate may be available even if a GST/HST new housing rebate for the federal part of the HST is not available."

But Tober testified that even his architect was misinformed about the $450,000 threshold.

Fairness not an issue in tax court

Leitenberg cuts an unlikely figure as courtroom advocate, leading his clients through testimony about how they found his services and taking the occasional reminder from the judge about legal rules.

At one point in Rahn's case, he tried to call himself as a witness.

Leitenberg did try to introduce the issue of fairness into the proceedings, arguing that if his clients were late in filing, it was only because of the CRA's misinformation.

But Judge Brian Neal said it wasn't up to him to consider fairness: the only issue on the table in tax court is whether or not an appellant can "demolish" the tax agency's assumptions.

"If there is a remedy open to the appellant with respect to fairness, any application to advance that cause must take place in another court," Neal said.

Leitenberg says he will consider appealing to federal court.

The judge ultimately ruled against Rahn, finding the work that fell after the CRA's completion date — including the replacement of drain tiles — constituted finishing touches not envisioned as part of the original plan.

The CRA was not able to provide comment on Leitenberg's allegations.