When purchasing a new pre-construction condo, first-time home buyers are often surprised to find out that there are essentially two closings, the “interim closing”, and the “final closing”. During the interim closing, you are given the keys to your unit and given the right to occupy your property. It is important to note that during this time, you don’t actually own the property yet! The time from when they give you the keys to when you actually close on the property is known as “Interim Occupancy.” Get ready for the complete lowdown on interim occupancy so you can feel confident when the time comes for you to move into your new condo!
What is Interim Occupancy
Interim occupancy is the period of time when you are given the right to move into your new condo vs. when you actually take ownership of it.
You are able to move in as soon as the building is deemed fit for occupancy by the municipality. This doesn’t mean that the building is completely finished, in fact, a number of the units and common areas might still be under construction, but when your unit is deemed fit for occupancy, it usually means that an inspector has inspected the building and has determined that important requirements like running water, bathrooms and your kitchen are functioning and safe to use.
Typically, the first ones who are given the right to occupy are buyers who purchased units on lower floors. It might be cool to think that you will be one of the first people to move-in, but this can also work against you because now it means that you will have to start paying “Interim Occupancy Fees” before anyone else!
What are Interim Occupancy Fees?
Your unit is ready. You have been given the go-ahead by the builder to occupy it, but not yet close on it. This is known as the “occupancy closing” or “interim closing”. Whether you take possession of it or not, you must now pay the developer for the right to live in it! This fee is what is known as “Interim occupancy fees.” It is a monthly fee comprised of three things:
- The interest applied to your unpaid balance from your purchase price.
- an estimate on the property taxes for your unit.
- The projected common expense fee for your unit (maintenance fees)
The thing you need to know about interim occupancy fees is that they are normal and unavoidable, so complaining about them won’t make them go away any quicker, although I would forgive you if you griped a bit.
The fee is paid to the developer or vendor. It is important to note that the builder is not profiting from this fee, in fact, there are strict stipulations in the Condominium Act in regards to the calculation of the fees that prevent a developer from profiting. The fact is, the builder only makes money when a unit actually makes it to the final closing and title is transferred to the new owner, so it’s only in their best interests to get the building completed as quickly as possible.
Even when builders are working as fast as they can, you should expect the interim occupancy to last a while. A typical period might last from 3 to 6 months and sometimes longer, especially if you purchased a unit on a lower floor. Lower floor = longer occupancy period, Higher floor = shorter occupancy period. The truth is there really is no way to know how long an interim occupancy period might last.
The unfortunate thing about interim occupancy fees is that no portion of it is applied towards your mortgage, which means that during interim occupancy you are not building any equity in your home, which can be tough if you are one of the first ones to move in.
Why Is There an Interim Occupancy Period?
The reason there is an Interim occupancy period is that you can’t own your unit if it doesn’t exist yet. A building has to be “Registered” first, which only happens when it is finally entered into the Land Registry system. The reason it takes so long for a building to “register” is that there are literally hundreds of units that have to be registered at the same time and that can often take quite a bit of time to work through.
When Does the Interim Occupancy Period End?
The interim occupancy period ends when the building is registered and you are finally able to close on your property. Once you close on your property, you get the deed to your property and you can now start making payments towards your mortgage instead of interim occupancy fees to the developer!
Does the Tarion Warranty Begin at Interim Occupancy or at Final Closing?
As soon as you are granted occupancy for your unit, your warranty begins. In fact, you can fill out a warranty claim within the first 30 days of occupancy, but the warranty on any of the common elements in your building won’t begin until the condo is officially registered.
Do you need help understanding Interim Occupancy? If so call, text, or email me anytime!
