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Interim Occupancy and Final Closing
Your Journey to Homeownership Should Not Include Surprises
When purchasing a brand new condo and finally receiving your keys to the suite, many buyers are surprised to find out that their new home is not entirely theirs yet. Although this is an exhilarating phase in the journey, it is not the ownership phase.
Buying a pre-construction condominium in the GTA is a little different than purchasing a resale unit. There are a few more steps involved, including two different closing stages known as the Interim Occupancy phase and the Final Closing phase.
While interim occupancy is beneficial because it means that you can take possession of the suite earlier, rather than having to wait until the developer has completed all the other units and final inspections, it can add a bit of confusion to the pre-construction closing phase. So we're here to shed some light on how both of these phases work.
The Basics of Interim Occupancy
As your new building approaches completion, you will be informed that the Interim Closing Date is ready to take place. This means you’re one step closer to occupying your new home!
Once your lawyer receives a document known as the Interim Statement of Adjustments from the developer, they will schedule an appointment to meet with you. You should be excited because this is when you’ll sign the Interim Closing papers and any further deposit payments or Interim Occupancy Fees will be collected in the form of post-dated cheques.
This meeting will likely take no longer than 15 minutes. On the day of interim closing, you’ll be notified when your keys are ready for pickup, usually from the developer’s site office after 3 p.m.
The vast majority of people who buy pre-construction will undergo interim occupancy and pay occupancy fees.
The unit has been deemed safe to live in, but the city hasn’t performed it’s final inspection, register the project and provide title transfer.
This is where you pay occupancy fees. This is because the property is not registered yet and title transfer can't take place.
Interim occupancy can last anywhere from 2 months to two years.
If you’re buying during the pre-construction phase, you’ll likely experience an Interim Closing. This happens when the city has designated the property as safe to live in, but it has yet to be officially registered because the municipality hasn’t done a final inspection. This means you are legally allowed to occupy your suite, but the developer can’t give you the “title” to your property.
There’s nothing to be concerned about! This is common, even expected during the process. It allows the developer to coordinate what could be hundreds of buyers moving in. It’s also possible that while your suite is ready, other units or some of the common areas are still awaiting final touches.
Typically, suites on the lower floors will begin to qualify for an earlier occupancy date, which means moving in at an earlier date, but paying occupancy fees for a longer period. This is why many buyers prefer to purchase units on the upper floors, as their move-in-date may end up being significantly closer to final closing.
Another important part of interim occupancy is the TARION warranty process. As soon as you are granted occupancy of your unit, your one-, two- and seven-year TARION warranties begin. You can fill out your first warranty form within the first 30 days of occupancy. The warranty on the common elements of your building will not begin until your condominium is registered.
Eventually the city will do a thorough inspection of the completed property, making sure the developer has delivered exactly what they presented in their original site plan. The timeframe of this process can be quite variable, which means your Interim Occupancy period can last anywhere from two months to two years.
What Are Interim Occupancy Fees?
You’ve probably heard this term before and you’re wondering exactly what it means. Before you take official ownership and your mortgage can be registered, you will be paying occupancy fees to the developer. These occupancy fees are similar to what your monthly carrying costs on the unit will eventually be.
The fee is made up of 3 parts: they’re calculated based on an estimate of taxes, condominium fees (projected common expense contribution to keep the building running) and a monthly interest payment on the remainder of the total purchase price, meaning the money you haven’t put down to date. The interest on the outstanding balance of the purchase price is currently at 3.64% which is Bank of Canada's 1 year conventional mortgage rate, the larger the deposit, the smaller the interest charges.
It’s also important to note that you won’t be paying the maintenance fees directly to the condo corp or property tax directly to the city during your Interim Occupancy. The maintenance fees and property taxes are directly paid by the developer, so you can’t officially be billed by the city for property taxes during Interim Occupancy.
Maintenance fees, hydro, gas, water, and property taxes all contribute to the cost of your Interim Occupancy Fees.
A common concern is that because a builder is receiving these fees, they benefit from extending this period for as long as possible, but this is a common misconception. In fact, there are stipulations in the Condominium Act that address the calculation of these fees, preventing developers from earning a profit this way.
Let’s fast forward a few months. Your lawyer will contact you to advise that your final closing date has been set. This is great news! At this stage, we advise our clients to contact their financial institution and inform them of their new closing date. This is to ensure things are in place financially, and your final closing process will go as smoothly as possible. Typically one to five days before closing your condo, your Lawyer will be providing you with the following via email:
Final Statement of Adjustments
This is in regards to the transfer of your condo from the vendor to you. The adjustments will include and just to name a few: sale price, HST Tax/Rebate, total deposits paid, occupancy fee adjustment for month of closing, property taxes, realty taxes, tarion enrollment fee, development charges/education levy, parkland contribution, art levy, law society levy, discharge fee, status certificate, and balance due on final closing.
A Trust Ledger
This outlines how the funds will move through your Lawyer’s Trust account on closing day, as well as how much money you will need to bring with you when you meet with your Lawyer. You should be prepared to pay by way of Bank Draft or Certified Cheque made out to your “Lawyer’s in Trust”. This will be the total amount for the closing costs, one amount that covers everything in the Final Statement of Adjustments and including lawyer’s fees and land transfer.
A day or two before closing, you’ll meet with your Lawyer again to sign your final documentation. You will also need to provide payment via Bank Draft or Certified Cheque. This payment is your full and final closing cost payment that includes everything in the Final Closing Package, which is all mentioned on the Final Statement of Adjustments and can include title insurance, Land transfer Tax “Land Transfer Tax Statements”, registration on mortgage and lawyer’s fees. These fees are normally around $40,000, but make sure you clarify the amount with your lawyer beforehand. On closing day your Lawyer will receive your mortgage funds and also complete the banking on your file.
The 4 items you need to bring with you when meeting your lawyer for your final closing are:
- 3 pieces of ID;
- The certified funds mention in the Trust Ledger
- One post dated cheque made out to your condominium corporation in the amount of your 1st month’s condo fees and
- One VOID chequefor the automatic payment of the condo fees/utilities after the 1st month.
After that, your lawyer will courier the payment for the closing fees documentation, and the mortgage funds to the vendor’s Lawyer office. Once they send these off to the developer’s legal team, it’s just a waiting game until you are notified that your registration has been processed, which could be completed by the end of the day!
Once you’ve completed the final closing process, you will receive the official title and your mortgage will be registered.
Further to the successful transaction, a week after your closing date you will also receive an email from your lawyer with the final report and supporting documents prepared for your records and informational purposes only.
That’s it! Congratulations on being the official owner of your new home.
Navigating a pre-construction sale can seem like a lengthy process, but in the end, it’s totally worth it. Now you are the owner of a beautiful, newly-built condominium suite where you can start making memories.
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