When purchasing a building for your daycare, it’s crucial to consider the closing expenses. Generally situated on commercial properties, daycares entail additional costs beyond the mortgage. These expenses must be covered separately with cash reserves.
HST for Commercial property
Unlike purchasing a personal residence, acquiring commercial property incurs a 13% HST. This often catches daycare operators off guard. Factor in a 13% HST when budgeting for commercial property purchases. Nonetheless, consulting with your lawyer can help determine if HST applies to your corporation’s situation.
Ontario Land Transfer Tax
Buyers in Ontario are obligated to cover the Ontario Land Transfer Tax, which operates on a tiered structure. Additionally, the City of Toronto imposes an additional Municipal Land Transfer Tax (MLTT) in addition to the provincial tax. These taxes are determined based on the property’s purchase price. You can utilize an online calculator to determine the land transfer tax applicable to your area, or continue reading to understand the calculation process based on your location.
Ontario Land Transfer Tax
First $55,000 – 0.5%
$55,000.01 to $250,000.00 – 1.0%
$250,000.01 to $400,000.00 – 1.5%
$400,000.01 to $2,000,000.00 – 2.0%
Over $2,000,000 – 2.5%
Toronto Land Transfer Tax
First $55,000 | 0.5% |
$55,000.01 to $250,000.00 | 1.0% |
$250,000.01 to $400,000.00 | 1.5% |
$400,000.01 to $2,000,000.00 | 2.0% |
Over $2,000,000 | 2.5% |
Over $3,000,000 and up to $4,000,000 | 3.5% |
Over $4,000,000 and up to $5,000,000 | 4.5% |
Over $5,000,000 and up to $10,000,000 | 5.5% |
Over $10,000,000 and up to $20,000,000 | 6.5% |
Over $20,000,000 | 7.5% |
Legal Fee
This fee is what you remunerate your lawyer for concluding the property transaction on your behalf. Included in the closing fee is the purchase of title insurance by your lawyer. The cost of title insurance varies depending on the property’s value, ranging anywhere from $500 to $5000 or higher.
Environmental Site Assessment
Some of the ensuing expenses pertain directly to the daycare itself (whether you opt to buy or lease, these expenses may arise). When purchasing a property, contingent upon the sum involved, the bank may necessitate an ESA Phase 1 report (Environmental Site Assessment) to verify the site’s cleanliness. This report typically incurs a cost of $3K to $4K. Additionally, you may require this report for the Ministry of Education if requested. The Ministry of Education might occasionally mandate an RSC (Record of Site Condition); however, requirements vary by location, so it’s advisable to inquire with them directly. The cost for an RSC is approximately $7K.
