Unlike resale or pre-owned homes, builder condominiums have two closings: The interim closing (when you receive the keys of your unit) and the final closing (when the title of unit transfers in your name from the builder’s name).
The title to the unit cannot be transferred until the condominium is fully registered. The Condominium Act permits the developer to allow purchaser to assume occupancy of the unit when it is ready for occupancy even though this is prior to registration and closing. This period of occupancy of the unit is called “interim occupancy”. During the interim occupancy period, the developer is entitled to charge a monthly fee, sometimes referred as “rent” or “ghost rent”. In the Act it is called the “occupancy fee”.
Condominium occupancy fee is made of the following:
- Interest on the unpaid balance of the purchase price. The prescribed rate is set under the Condominium Act of Ontario, which essentially comprises a rate equivalent to a conventional one year mortgage rate. The buyer might able to pay the entire balance of the purchase price, on the date of interim occupancy, in order to reduce or eliminate the interest component of the monthly occupancy fee. However, in order to do this, the purchaser must make this election during the 10-day rescission period following the date of signing the agreement of purchase.
- An amount representing an estimate on a monthly basis for municipal taxes attributable to the units purchased.
- The projected monthly common expense contribution for the units purchased as set out under the proposed first year budget statement for the Condominium.
Essentially the interim occupancy fee’s three components is a rough estimate of what you would be paying to the builder. None of these fees goes against your mortgage, property taxes etc. Keep in mind that you are not the legal owner of the condo unit yet, and there is no condo corporation to pay any fees to.
What happens on Occupancy date?
On the occupancy date the owner is allowed to move into the property. He receives the keys, parking remotes and a move-in manual. This manual provides basic information about the building, the unit and its components, instructions and the manufacturer’s information for certain items within your condo (i.e. flooring, plumbing, security alarm, air-conditioning and heating unit etc.) It should be reviewed to learn various aspects of your new condominium unit.
The interim occupancy period comes with a number of rules, as per the The Condominium Act. For example, the developer is allowed to repair and maintain the building and the unit in the same manner as the future condominium corporation will maintain post registration of the corporation. The developer may withhold the right to consent to an assignment of the unit. The developer is allowed to charge a reasonable fee for consenting to the assignment. (unless fee has been waived off as per the agreement of sale). The builder and his tradesmen are allowed to visit the unit, with occupant’s permission in order to complete deficiencies found during the pre-delivery inspection (PDI) of the unit.
Lawyer role during Condominium Occupancy
Builder will provide your lawyer an Interim Statement of Adjustments showing the total monthly occupancy fee to be paid. Based on the amount to be established, you will be requested to provide a series of monthly post dated cheques for these payments.
Disclaimer: Above blog post should not be intended as legal advice. Anyone requiring legal advice relating to any aspect of condominium law should consult competent and qualified legal counsel.