Interim Occupancy and Final Closing
Buying a pre-construction condominium in the GTA is a little different than purchasing a re-sale unit. There are a few more steps involved, including two different closing stages, known as the Interim Occupancy phase and the Final Closing phase. This can seem a little confusing to some buyers, so we’re here to help shed some light on how both phases work.
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. At this time, you’ll sign the Interim Closing papers and they’ll collect any further deposit payments or Interim Occupancy Fees 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.
What Really is an Interim Occupancy?
If your building is in the pre-construction phase, you’ll likely have 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, as 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.
This is common, even expected during the process, so don’t be concerned. It allows the developer to coordinate what could be hundreds of buyers moving in. And while your suite may be ready, it’s possible that other suites or some of the common areas are still awaiting final touches. Typically, suites on the lower floors will begin to qualify for occupancy earlier, which means moving in at an earlier date, but paying closing costs 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.
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. This process can be quite variable, which means your Interim Occupancy period can last anywhere from two months to two years.
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What are Interim Occupancy Fees?
You’ve probably heard this term and you’re wondering exactly what it means. Before you take official ownership and your mortgage can be registered, you will be paying “rent” to the developer, which they like to call “occupancy fees.” These fees are similar to what your monthly carrying costs on the unit will eventually be.
They’re calculated based on an estimate of taxes, condominium fees and a monthly interest payment on the remainder of the total purchase price, meaning the money you haven’t put down to date.
A common concern is that because a builder is receiving these fees, they benefit from extending this period for as long as possible. This, however, 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. You’ll be contacted by your lawyer, advising 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 this date. This just makes sure things are in place financially and your final closing process is as smooth as possible.
Typically one to five days before closing your condo, your Lawyer will be providing you with the following via email: a “Statement of Adjustments” which is in regards to the transfer of your condo from the vendor to you, the adjustments included are property taxes and condominium fees. A Trust Ledger which outlines how the funds will move through your Lawyer’s Trust account on the day of closing and how much money you will need to bring in when you meet with your Lawyer 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 which covers everything such as all fees, title insurance, land transfer tax and the remainder of your down payment if required.
A day or two before closing, you’ll meet with your Lawyer again to sign your final documentation and provide the Bank Draft or Certified Cheque. On closing day your Lawyer will receive your mortgage funds if any and also complete the banking on your file.
Then courier your signed closing documentation together with the funds you have given them, along with 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. This could be complete 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.
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 a process that’s worth it. Now you are the owner of a beautiful, newly-built condominium suite that you can start making memories in.
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