HST Clause in an Ontario Agreement of Purchase and Sale

Published 11 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty

Last updated 11 September 2026. Written by Jatin Dua, Broker of Record at RE/MAX Quantum Realty, 799 The Queensway, Etobicoke · For Ontario registrants · 8 min read

The short answer

An HST clause in an Ontario agreement of purchase and sale does not decide whether tax applies to the transaction. That is a tax question for the client’s accountant and lawyer, and it is not yours. What the clause does is set out the closing mechanics where the buyer is a registrant on a commercial component: HST-1 requires the buyer to hand over a statutory declaration that their registration is in force, evidence of that registration, and an undertaking to remit the tax together with an indemnity of the seller if they fail to. Two drafting failures cause almost all of the trouble — a schedule that contradicts the pre-printed HST wording in the agreement, and an agent who answered a tax question they were never qualified to answer.

The sentence that creates the claim

“There’s no HST on this.” I would guess that sentence has cost Ontario registrants more money than any other five words in the business. It gets said in a car, on a showing, to a buyer who has asked a reasonable question, by an agent who genuinely believes it and has no basis for believing it.

The problem is not that the agent is usually wrong. On plenty of transactions they happen to be right. The problem is that they are answering a tax characterisation question, in the moment, without the facts, for a client who will rely on it. When the assessment shows up eighteen months later, the buyer remembers the sentence with unusual clarity.

So start here: whether tax applies is not a real estate question. Your job is the paperwork around it, and the paperwork is more interesting than most agents think.

DO NOT ANSWER THE TAX QUESTIONYou are not qualified to tell a client whether HST applies, whether a rebate is available, whether a self-assessment is appropriate, or whether the price should be stated inclusive of tax. Say that plainly and refer them out. If the other party is self-represented, TRESA takes it further — you must not advise them on price, terms or clauses at all.

What HST-1 actually is

HST-1 (HST Buyer is Registrant (Commercial Component)) is not a tax allocation clause. It is a closing deliverables clause. It sits in the agreement for the situation where the buyer is a registrant and the transaction has a commercial component, and it tells you what the buyer has to produce on the day.

There are three pieces. First, the buyer swears a declaration confirming their registration status under the federal excise tax legislation and confirming that the registration is live. Second, proof of that registration travels with the declaration. Third, the buyer promises to account to the Crown for the tax, and backs that promise with an indemnity covering the seller for the losses, costs and damages that follow a failure to do it.

Read those three again from the seller’s side and the logic becomes obvious. The seller is the one who did not collect tax at closing. Everything in the clause exists to document why they did not, and to give them a contractual route back to the buyer if that decision turns out badly. Pull the current clause from your own OREA member copy — I am describing its function, not reproducing it, and the exact wording is what your client’s lawyer will work from.

The short version

HST-1 does not answer whether tax applies. It documents the buyer’s registrant status and moves the remittance risk onto the buyer’s covenant. The seller’s protection is only as good as the person giving that covenant.

An indemnity is only worth the covenantor behind it

Here is the part that gets skipped on commercial files in this market. The buyer is very often a numbered company incorporated three weeks ago for this purchase. It has no operating history, no assets other than the property it is about to acquire and mortgage, and no reason to be good for a tax indemnity.

The clause gives the seller an indemnity from that company. Whether the seller wants a guarantee from a principal, or a holdback, or something else entirely is a negotiation your client’s lawyer should be having before the offer is signed. It is not something you should be proposing on your own, and it is certainly not something to raise for the first time in the final hour of a condition period.

What you can and should do is ask the question early: who is the buyer entity, and does the seller’s side know? That question costs you nothing and it routinely changes how the seller’s lawyer wants the schedule built.

Inclusive, in addition, or silent

The one HST issue that genuinely is a drafting issue is whether the stated price includes the tax or is exclusive of it. This is a term of the agreement. It gets negotiated, it belongs in writing, and the failure to state it clearly is a drafting failure, not a tax failure.

Before you write anything in a schedule, read the pre-printed HST wording in the agreement you are using. Your schedule and the pre-printed text have to say the same thing. When they do not, you have manufactured an interpretation dispute over a number that may be six figures, and no one will be looking at the vendor or the purchaser when they ask how it happened.

Position	What it means commercially	What has to be true for it to work
Price is inclusive of HST	The seller absorbs any tax; the buyer’s cash outlay is the stated number	The seller’s advisors have quantified the exposure before the offer is signed
Price is in addition to HST	The buyer funds any tax on top of the stated number	The buyer’s lender and their lawyer both know, because it changes the funds required
Buyer is a registrant, HST-1 deliverables	No tax is collected on closing; the buyer accounts for it directly	The buyer really is registered, the registration is in force, and the seller has the declaration and evidence in hand
Schedule silent, pre-printed wording governs	Whatever the pre-printed provision says, which neither client has read	Nothing. Do not do this.
Schedule contradicts pre-printed wording	An argument	Nothing. This is the one that ends up in court.

Courts enforce the allocation you wrote

Agents sometimes assume that an unfair or one-sided commercial term will get softened later. The general direction of the Ontario authority runs the other way.

In Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163, as reported, a limitation-of-liability clause in a builder’s agreement was enforced and the purchasers were limited to the return of their deposit. In Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, as reported, the court set out that relief from forfeiture requires both that the sum be out of all proportion to the damages and that forfeiture be unconscionable — a narrow door, not a general fairness power.

Neither case is about HST. Both make the same point about drafting: the risk allocation in the document is the risk allocation the parties get. An indemnity written into a schedule at midnight is a real obligation. Treat it that way.

The remuneration connection nobody makes

There is a second HST conversation in every transaction and it is about your own fee. Under RECO’s guidance on remuneration clauses in an agreement of purchase and sale, effective 17 January 2024, a remuneration provision has to cover five components: the parties, the purpose, the amount and whether taxes are included in it, the timing, and who pays and who receives. The taxes point is expressly part of the required content. An amount written without saying whether tax is on top of it is incomplete.

Two more rules travel with that. Brokerages must not agree with a self-represented seller to provide assistance or to charge or collect remuneration — that is a hard line, not a matter of documentation. And disclosures must be distinct and separate from the representation agreement and from the agreement facilitating the transaction, which means a remuneration disclosure buried in a schedule to the agreement of purchase and sale is not doing its job. Remuneration terms that affect whether an offer is accepted have to be disclosed as soon as possible after the offer is made and before any offer is accepted.

If you want the full treatment of that fact pattern, it is covered in the self-represented party remuneration clause post.

Two different tax conversations

One is whether HST applies to the property — not yours, ever. The other is whether your remuneration amount includes tax — entirely yours, required in writing, and a compliance problem when it is missing.

Your exposure as the registrant who drafted it

The claims in this area do not usually allege bad drafting. They allege that an agent gave tax advice and the client relied on it.

Characterising the transaction. Telling a client the property is exempt, or that a rebate will be available, or that the buyer can self-assess, is tax advice. It does not stop being tax advice because you have seen it done before.
Writing the schedule without reading the pre-printed provision. A contradiction you created is a contradiction with your name on the offer.
Leaving the price silent on a commercial file. On a transaction where tax may attach, silence is not neutral. It is a decision made by default.
Filling in HST-1 when the buyer is not actually registered. Ask, get it confirmed in writing by the buyer’s lawyer or accountant, and do not rely on “my accountant handles that.”
Helping the unrepresented side. Under TRESA you confirm the person intends to proceed without representation, deliver and explain the RECO Information Guide and the Information and Disclosure to Self-Represented Party form, state plainly that you act for your client and not for them, and make reasonable efforts to obtain written acknowledgement. You do not advise them on price, terms or clauses, and an HST allocation is squarely a term.

How I want this handled

The procedure is short because most of the work is refusing to do somebody else’s job.

The first time a client asks whether HST applies, say you cannot answer it and give them the name of an accountant and their lawyer. Put that in an email the same day.
On any commercial or mixed-use file, ask early whether the buyer is a registrant and who the buying entity will be.
Read the pre-printed HST provision in the agreement before drafting a single line of schedule, and make the schedule consistent with it.
State expressly whether the price is inclusive of or in addition to tax. Never leave it to inference.
If HST-1 is going in, tell both lawyers it is going in, before the offer is signed, so the closing deliverables are not a surprise.
Make sure your own remuneration wording says whether taxes are included, and that any required disclosure is delivered separately rather than tucked into a schedule.

An agent who says “I don’t answer tax questions, here is who does” looks more competent to a commercial client than one who guesses confidently. That has been true in every deal I have supervised.

Questions agents actually ask

Can I tell my buyer whether HST applies to a property?

No. Whether tax applies, whether a rebate is available and how a transaction should be characterised are tax questions for the client’s accountant and lawyer. Answering them is the most common way agents create liability in this area. Say you do not answer tax questions, give them the referral, and confirm it in writing the same day so the file shows what you said.

What does HST-1 actually require at closing?

Three things from the buyer. A sworn declaration confirming their registration status under the federal excise tax legislation and confirming the registration is live. Proof of that registration, handed over alongside the declaration. And a promise to account to the Crown for the tax, supported by an indemnity that covers the seller for losses, costs and damages if the buyer does not follow through.

Does the HST clause decide whether the price includes tax?

No, and that is the distinction to keep straight. HST-1 handles the registrant deliverables. Whether the stated price includes tax or is in addition to it is a separate term that must be stated expressly, must agree with the pre-printed HST wording in your agreement, and is negotiated between the clients on advice from their own professionals.

Is the seller protected by the buyer’s HST indemnity?

Only to the extent the buyer is good for it. On commercial files the buyer is frequently a newly incorporated numbered company with no assets. Whether the seller wants a guarantee, a holdback or something else is a matter for the seller’s lawyer to raise before the offer is signed. Ask early who the buying entity is — that question alone changes how sellers’ lawyers draft.

Does my commission need to say whether HST is included?

Yes. RECO’s guidance on remuneration clauses in an agreement of purchase and sale, effective 17 January 2024, sets out five components a remuneration provision must address, and whether taxes are included in the amount is one of them. An amount stated without that is incomplete. Brokerages also must not agree with a self-represented seller to provide assistance or to charge or collect remuneration.

What if the schedule and the pre-printed HST wording disagree?

You have created an interpretation dispute, usually over a large number, and resolving it is a legal question rather than one you can fix by explaining what you meant. The answer is prevention: read the pre-printed provision before you draft, make the schedule consistent with it, and have both lawyers see the HST wording before the offer is signed rather than after.

The clause checklist I make my own agents use

A one-page pre-submission check for conditions and schedules — the dates, the notice route, and the eight things that get missed. Built for Ontario agents. Free, and there is no drip campaign behind it.

Separately — if you have ever wondered what your last twelve months would have paid on a different split, run it through Quantum Leap. Six questions, no signup wall.

Writing commercial schedules on your own?

Commercial files punish guesswork, and tax is where agents guess most. Every agreement my agents write is reviewed before it goes out, and on commercial deals I want both lawyers seeing the schedule early. If you are drafting these alone, that is worth a conversation.

Book a 15-minute call or call or text 833-330-1925.

If the honest answer is that your current brokerage is fine, I will tell you that.

HST Clauses in an Ontario Agreement of Purchase and Sale