A couple purchased a condo beneath the one they had been occupying as their home and did work to connect the two units by interior staircase. Before finding that the two units did not constitute a single housing unit for purposes of the principal residence exemption, CRA stated:
[I]t is clear that the two units must be sufficiently integrated - and to do so, have undergone major work - for the use of and access to one of the units to be a condition of the full enjoyment of the other unit. Thus, if each unit can be ordinarily inhabited without access being provided to the other unit, (for example, each unit has a kitchen and a bathroom and both have separate access) it will be difficult to consider the two units to be a single housing unit within the meaning of section 54.
On the other hand, if one unit has all the bedrooms and the other unit consists primarily of the kitchen and bathrooms and they are truly used as one unit, the CRA may be more likely to conclude that there is a single unit for purposes of the definition of "principal residence" … .
Although units A and B are connected by an interior staircase, it appears that the layout of the two units has not been altered significantly enough to be considered a single unit. Furthermore, the fact that the two units have retained their respective civic addresses and continue to be subject to separate property tax and electricity accounts seems to support the validity of our position.