What is interim occupancy & what do I need to do?
When purchasing a new condo, there is a period of time between the day you take possession of your unit and when you take ownership. This is known as interim occupancy.
Once your unit is ready and liveable and the Municipality or City grants the builder permission, you will be able to occupy or take possession of your unit. Although you will be required to live in your unit you will not actually own it yet. Also during this period the building may not be entirely finished.
Prior to your Occupancy date the builder will ask that you complete your Pre-Delivery Inspection, also known as your PDI. During this appointment you will survey your new property and take note of any deficiencies and repairs for the builder to complete later. These deficiencies are recorded with Tarion (your home warranty program), if applicable (for residential only), and you will receive a certificate that day to hold on to, and to provide a copy of to your mortgage lender and us.
The builder and the builder’s Lawyers will also notify you and us of the actual interim closing date, along with information about setting up your utilities (gas, electricity, water and taxes), if applicable. It’s also during this period when the deposit for interim closing is due, as per your Agreement of Purchase and Sale (not always the case). We will also review the financial documents for the interim closing with you, which are usually provided by the builder’s lawyer to us a few days before the interim closing date. You will also need to sign the interim occupancy agreement, provide post-dated cheques for your monthly occupancy fees, proof of your property insurance for your new property, two pieces of I.D., the manor in which you will take title to the property (which will happen on final closing), certified funds for any deposit due, and a completed form to subscribe to any utility providers (usually Hydro). Once we submit everything to the builder’s lawyer to complete the interim closing requirements on the interim closing date, the builder and the builder’s lawyer will notify us, and possibly you, when you can pick up your keys. Keys are normally picked up during regular office hours (sometimes earlier such as before 4:30 pm, Monday to Friday, only), on site at the management office (we will not normally get the keys).
There is no way to say with certainty how long the occupancy period will be, but it normally lasts several months. During this period you must pay the builder an Occupancy Fee.
The amount of the Interim Occupancy Fee is based on three things:
1. Interest on Unpaid Balance of Purchase Price (the rate is protected under the Condominium Act and is the then Bank of Canada posted rate for a mortgage with a 1 year term)
2. Estimate of Common Elements Fee (what you would normally pay for any condo as your contribution to the common expenses)
3. Estimate of Property Taxes (apportioned monthly).
The interim occupancy fee does not accrue to the mortgage, and it’s like a rent you pay the builder for the right to live in the unit. However, had you owned the property you would still be required to pay property taxes and a monthly common elements fee. Furthermore, if you will be getting a mortgage on final closing, there is an interest component that you will be required to pay. Overall, the Occupancy Fee is meant to be fair to both sides, builder and purchaser.
Finally, you will NOT need a mortgage for interim occupancy. Normally, about 30 days before your final closing date (the date you take title and ownership to the property) the builder and/or the builder’s lawyer will notify you and us. You will then be required to quickly secure your mortgage for closing on that final closing date.
But remember, during the interim occupancy period, you do not own the property. Therefore, if you desire to rent or lease during this period, you’ll need authorization from the builder to do so. Unfortunately, making this request at interim occupancy often requires you to pay fees to the builder and give up certain benefits under the purchase agreement. The best time to make this request would be at the time you entered into the agreement to purchase (although unlikely that you would have anticipated your circumstances years ahead). It is also important to note that if you do lease the property during the interim occupancy period, the builder and CRA will know that the property is not meant to be your principal residence, and most likely a rental; as you or a direct relation of yours is not the first occupant of the property. Hence, you will not be eligible for the HST New Home Rebate and will be required to pay the rebate portion of the HST (that is normally included in your purchase price) in addition to your purchase price, which can be between $24,000 and $31,000. Keep in mind there is a different rebate you can apply for after final closing and directly with the CRA. This HST New Residential Rental Property rebate, is if you lease the property and have a valid lease with a term of at least one year. This will entitle you to get a similar rebate back, however usually it will arrive only 2 to 4 months after final closing (thus, you will still be required to pay the HST rebate on final closing and upfront). We can help you complete the New Residential Rental Property rebate and file it with CRA.
We are always here to help, answer your questions, and make this process go as smoothly as possible. We will accommodate virtual signings, and even meet with you in person if required, both in and outside our office. Buying a new home is exciting, and we hope to maintain that element for you.