Congratulations on the purchase of your new condo!
If you’ve purchased a new pre-construction condo, you must have come across two concepts of closing – the ‘Interim Closing or Interim Occupancy,’ and the ‘Final Closing.’ Interim Occupancy is unique to pre-construction condos and the process might seem foreign to the first-time buyers. To make things easy for you, here is a detailed guide explaining the concepts associated with Interim Occupancy. In this guide, we will cover what Interim Occupancy is all about, how is it different from Final Closing, what is the Interim Occupancy Fees, why the condo buyers need to pay this fees, What are your rights as a condo buyer during the Interim Occupancy Period, when does the Interim Occupancy Period end and more.
Interim Occupancy refers to the period between the day you occupy or move into your unit and the day you take its ownership (Final Closing). What actually happens is that as soon as the units are ready for homebuyers to move in and the building is deemed as safe by the city, Interim Occupancy takes place. This period can generally last from 3 -6 months, depending upon the project. During this period, the building is still in the ‘under-construction’ stage, but the homeowners need to occupy the completed units. It is up to the homebuyers whether they actually live in the unit or not, but they must pay a fee, called as Interim Occupancy Fees, during this time. It is to be noted that the Interim Occupancy Fees that you pay would not be credited to the final purchase price of your condo but would be equitable to the rent as you don’t legally own the condo yet. As a result, you cannot rent your unit and even your mortgages aren’t secured yet.
The Final closing occurs when the building is registered with the Land Registry Office and the builder is ready to register and transfer the ownership to the individual unit buyers. This point marks the end of Interim Occupancy period and that of the interim occupancy fees. Homebuyers can now rent or sell their units or can even secure a mortgage if they want.
Difference Between Interim Occupancy And Final Closing
- Interim Occupancy is the temporary period in which the homebuyers occupy (move-in) the condo but don’t legally own it yet. While in the case of Final Closing, the title of ownership is completely transferred to the home buyer’s name and they officially own the unit.
- During Interim Occupancy Period, you pay the rental fee popularly known as the ‘Interim Occupancy Fees’ to the real estate developer. In the case of Final Closing, the ‘Interim Occupancy Fees’ is not there anymore, and the mortgage payments start.
- During Interim Occupancy, the unit is ready but the construction on the building isn’t fully completed. In Final Closing, all the construction is completed, and the building is registered with the Land Registry Office.
- The Interim Occupancy Period is longer for units on lower floors whereas Final Closing is the same for all units, irrespective of the floor levels.
What Are Interim Occupancy Fees?
When your unit gets ready and you are given the green signal by the developer to occupy the same, it is called as the interim occupancy or the interim closing. During this period, irrespective of whether you take the possession or not, you must pay the developer the rental for your unit. This fee or rental is known as the “Interim Occupancy Fees.” As per Section 80(4) of the Condo Act, the developer is allowed to charge the same from you. This is a monthly fee and comprises of the 3 things:
As per Section 80(4) of the Condo Act, the Interim Occupancy Fees constitutes of the 3 things:
- the interest on the unpaid balance of the purchase price of your unit.
- an estimate on the property taxes for your unit.
- the monthly maintenance fees
A very important point to note here is that levying Interim Fees by the condo developers is absolutely normal and the homebuyers cannot really avoid it. However, even the developers don’t benefit from the Interim Fees, they just can’t. There are very strict norms in the Condo Act to calculate the Interim fees that prevent the developer from any sort of profit-making opportunity.
Ideally, the developers only reap profit after the units make it to the Final closing and the title is transferred to the new owner. Thus, builders are always interested to complete the project and reach the Final closing at the earliest possible time.
The bad thing about the Interim Occupancy Fees is that this amount doesn’t constitute any equity in your home. No portion of it is applied towards your mortgage.
Though a typical interim occupancy period lasts 3-6 months, it can be longer at times. However, higher floor units always have a shorter interim occupancy period in comparison to the units that are on a lower floor.
Your Rights During Occupancy
As per section 80(6) of the Condo Act, during the Interim Occupancy Period, there is a certain set of rules to be followed by the developer as well as the buyers. These include:
- The developer shall take care of any repair and maintenance of the property and the unit in the same way as he would after the units get formally registered.
- The developer may withhold permission to an assignment of the right to occupy the unit.
- The developer may charge a reasonable fee for permitting any work of the occupancy.
- The developer must inform the buyer in writing of the date and information of the registration.
- On the date of Interim Occupancy, the buyer pays the entire balance of the purchase price, so as to reduce the Interim occupancy fees charged by the developer.
When Does The Interim Occupancy Period End?
When the building gets registered with the Land Registry Office and the builder registers and transfers the ownership to the individual unit buyer, the Interim Occupancy Period comes to an end, marking the closing on the property. As soon as you close on your property, you get the deed of your property. You can now rent or sell your unit or start making payments towards your mortgage.
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