Understanding "Interim Occupancy" March 1st, 2015
Thinking about buying a new condo? Great! Many people find living in a condo to be part of an exciting lifestyle.
They can offer enjoyable amenities (such as pools, hot tubs, gyms, concierge, theatre rooms), security, exciting locations (with proximity to public transportation, restaurants, shopping, and other city life), a resort like feel, amazing views (although not always!), and no snow shoveling or bringing garbage cans out to the curb.
While these are some of the positives, “interim occupancy” may be one of the negatives. Interim occupancy is not something that comes up in conversation very often, but if you are going to buy a new condo, it’s something you need to understand.
When you buy a new condo from the builder, you will have two closing dates. First, the ‘interim closing,’ followed by the ‘final closing.’ The time in-between is called the ‘interim occupancy’.
On the interim closing, you will invariably end up moving into the condo before you actually own it. Although you have moved in to your unit, you won’t have title (you don’t own it) until the next closing date, or the ‘final closing.’ For the final closing to occur, the builder, or 'declarant,' transfers ownership to the unit buyers.
So how long will it take after the interim closing to reach the final closing, and why is this period important to you? Well, as far as the time, there is no one answer; sometimes it may only take a month or two, while in other cases it can be around one year. As for why the time is important, please keep reading.
A factor in determing how long the interim occupancy peroid will be is 'where in the building your unit is located.' What floor will you be on? Generally, construction works its way from the lower floors to the upper floors. This means the lower floors move in first, and therefore they will have a longer interim occupancy than someone on a higher floor.
Since you don’t own the unit during the interim occupancy, you don’t have a mortgage. But unfortunately you don’t get to live for free!
During the interim occupancy, you will be responsible for the following:
- Monthly interest on any unpaid balance of the condo purchase price. This can be a large amount, depending on the purchase price, how much was put down, and what the interest rate will be (there are government limits to ensure the builder is not making a profit).
- Monthly estimate of property taxes. 1% of the purchase price is sometimes used as an estimate.
- Monthly estimate of your maintenance fees (check the condo documents).
So if you are one of the first people to move into the building, and it’s a long interim occupancy, you will end up paying out a fair bit of money. Money that is not coming off your mortgage, since you don’t have one yet. Although it's not really "rent," some people call this a rental period.
Something else to be aware of is the renting out of your unit during the interim occupancy. Some people have the intention to offset occupancy costs by renting out their unit during this period. This is not typically allowed, but you will need to check your condo documents regarding this issue. Sometimes, through the builder’s representation, rental programs may be offered.
As I always suggest, when you are going to look for a condo, take a real estate professional with you. You are spending too much money to make any mistakes or pay more than you should. A real estate professional who has experience with condos and builders contracts could prove invaluable. In addition, I always recommend you have a lawyer go through your agreement and the condo docs. If you don't have a (real estate) lawyer, I can suggest a few for you to choose from.
Congratulatinos to Nancy P. for identifying the photo from the February BLOG. The February photo was of the 'Keg Mansion' and was taken from the southbound lanes of Jarvis St. I did not get very many responses, so I guess people found that one tricky! The February prize was lunch at Holy Chuck! Mouth watering burgers in mid-town. There is a reason this place is usually packed, 1450 Yonge Street, west side of Yonge, just south of St. Clair. Check em' out!
Be the first to identify where the photo below was taken from, and win the March photo contest.
The March winner will be announced in the April BLOG. Check back on the 1st of every month for a new BLOG & Photo Contest.
Lets be thankfull February is now behind us!!!