Which individual or construction entrepreneur, skilled in several fields, never thought of buying a property, renovating it and selling it !! The answer is many. It is not that this practice is illegal or prohibited, on the contrary, but what must not be forgotten is that there are rules to follow and for those who do not follow them, the fines are very heavy. So, what are they?
First you have to analyze the situation. 1- Am I a building owner (a house, a chalet, a condo, an apartment in a residential building, an apartment in a duplex, a trailer, a mobile home or a floating house) who decides to renovate and sell its main residence to get closer to work, for example. 2- Am I an owner who understands that if I renovate and sell my main residence this sometimes allows me to make a big profit then I decide to do it twice a year or more or less. 3- Or, am I an entrepreneur who decides to get into this niche to do business.
Take case no. 1. There is nothing preventing a person from renovating and selling their main residence, however, what you need to know is that you have the right to declare ONE single main residence per year in order to take advantage of the principal residence exemption and thus avoid paying taxes.
Here are the conditions for declaring a principal residence:
- You must be the owner of the residence (alone or with another person);
- Any of the following must have lived in the residence at some point during the year;
- You must designate the property as your principal residence on your tax return for the year of disposal of the property.
If you meet the conditions, no problem. But you have to be careful not to fall into situation no.2.
Situation no. 2. You will have understood that in this situation, if you renovate and sell more than one main residence per year or if you sell a land you own or a second home and make a profit, you will therefore have a capital gain and therefore, half of this gain will be taxable.
Here again, if you follow the rules and declare each sale that exceeds the; once a year, no problem. On the other hand, some people believe that following the rule by renovating and selling their principal residence once each year by asking for the exemption will be accepted by the government .
Well, what you should know is that yes you could do it but if the government is able to prove that the INTENT of the renovations and the sales were absolutely not to get closer to a place or a family member or other but well to make a profit … you will be fined for all exemptions which will be deemed not to comply with the rule. So, you should have well-founded reasons to want to renovate and sell often
Situation no. 3. If you decide to get into this niche, you obviously have to be in good standing with the conditions of the construction in Quebec. If this is the case, you will be able to buy, renovate and sell as many buildings as you want since each sale will be counted in the same way as an entrepreneur who sells cars, services or other.
Now let’s talk about RBQ License
If you are in situation 1 or 2, then you are not a full-time construction contractor and certainly do not think you need an RBQ license.
Note that if you are the owner of a building, you are authorized to carry out work yourself for everything included in Schedule III only, without having to hold a license. You will also be exempt from holding a license if you hire specialized or general contractors. Otherwise, you will need to obtain an owner-builder license.
For situation no. 3, any entrepreneur wishing to make real estate flips, must obtain a general contractor license 1.3.
As for the CCQ
What you need to know about competency cards is that in the residential sector (already inhabited) competency cards are not mandatory since this sector is not subject. So, we could include situation no. 1 and 2. But be careful for situation no. 2 because with abuse (renovation and sale of principal or secondary buildings in quantity), the RBQ and the CCQ could decide to conclude that you are part of the full-time contractors and count you in situation no.3. In this case, you would be in serious trouble and not having taken road no. 3 initially will cost you dearly.
For situation no. 3, it should be understood that the Real Estate Flips (as much for houses as apartments or others) are part of the commercial sector being subject. Therefore, all subcontractors, employees or persons carrying out work in the building must hold the competency card specific to each trade.
At the end of the day
To conclude, what must be remembered is that an analysis of your situation is crucial at the outset and never forget that no matter which path you decide to take to do well or work around the system, the INTENT will always have the final word.
