Maintaining homeownership after the breakdown of a marriage or common-law partnership.
The Home Buyers’ Plan (HBP) is an incentive through the Federal Government that allows eligible individuals to withdraw funds from their registered retirement savings plans (RRSPs) for the purpose of building or buying a qualifying home.
In 2019, the Federal Government announced changes to the HBP, including increasing the withdrawal limit from $25,000.00 to $35,000.00. Additionally, the Budget also announced that beginning in 2020, individuals experiencing the breakdown of a marriage or common law relationship could re-qualify for the HBP.
General Requirements for Eligibility
In order to qualify for the Home Buyers' Plan, an individual must:
- Be a Canadian resident from the time the funds are withdrawn and up to the time that the qualifying home is bought or built;
- Intend to occupy the qualifying home as their principal place of residence within one year after buying or building the home; and
- Be a first-time home buyer; and/or
- Have a written agreement to buy or build a qualifying home, either for the individual or for a related person with a disability
- Have a zero repayable HBP balance on January 1st of the year in which they intend to make a withdrawal under the HBP; and
- Occupy the qualifying home being purchased or built no later than one year after buying or building it.
In most circumstances, the individual buying or building the qualifying home cannot own the home more than 30 days before receiving the withdrawal.
Requirements for Spouses
For any withdrawals made after December 31, 2019, individuals experiencing a breakdown of a marriage or common-law partnership are eligible to participate in the HBP. In addition to meeting the aforementioned requirements, the individual may participate in the HBP if they:
- Do not meet the first-time home buyer requirement but live separate and apart from their spouse or common-law partner for a period of at least 90 days due to the breakdown in their relationship;
- Live separate and apart from their spouse or common law partner at the time of the withdrawal and live separate and apart in the year when the withdrawal is made or in any of the four preceding years.
However, an individual who has experienced the breakdown of a marriage or common-law partnership will not be eligible to participate in the HBP if they are living in a home owned and occupied by a new spouse or common-law partner.
If an individual meets these criteria, they must dispose of their previous principal place of residence within two years following the end of the year in which they make the HBP withdrawal. However, this requirement can be waived if the individual buys their spouse’s or common-law partner’s share in the home. Furthermore, in this situation, the individual may acquire the home more than 30 days before making the HBP withdrawal.
All individuals who qualify under the HBP have up to 15 years to repay the withdrawals to their RRSP, pooled registration pension plan (“PRPP”), or specified pension plan (“SPP”). The repayment period kicks in during the second year after the year in which funds were withdrawn. For example, if you withdrew funds from your RRSP in 2020, repayment will begin in 2022.
Each year, the Canada Revenue Agency will issue a HBP statement of account including a notice of assessment or reassessment outlining the amount paid to date, the outstanding balance, and the amount required to be contributed to an RRSP, PRPP, or SPP.
Impact for Separated Spouses or Common- Law Partners
As the inclusion of individuals experiencing the breakdown of a marriage or common-law partnership is a recent change to the HBP, it is yet to be seen how this addition will impact family law proceedings.
If you are separated from your spouse or common-law partner and are considering applying for the HBP, please contact one of our experienced family lawyers for more information on how this may impact you.