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When deciding to buy a condo, you generally have two choices: a pre-construction condo or a resale condo. While resale condos are convenient in that they’re move-in ready, you may find the idea of a brand-new condo with modern features and amenities more appealing.

If you opt for a pre-construction condo, you can reasonably expect to take ownership of your unit 1 – 2 years into the future. And that’s assuming there aren’t any significant construction delays.

As with a conventional resale condo purchase, you must consider the down payment, closing costs, and the type of mortgage you’ll use to finance your purchase. But unlike a resale condo, there’s an additional factor you need to be aware of called interim occupancy, which is unique to pre-construction condos.

What Is Interim Occupancy?

Interim occupancy is the time period where you take possession of your condo but don’t yet retain ownership rights. Once your unit is deemed livable, the developer may permit you to move in, even though construction on the rest of the building is still ongoing. During the interim occupancy phase, you can live in your condo, but the title of ownership remains with the developer. As long as the developer still has work to complete on the property, the ownership rights can’t be transferred to you. 

Interim occupancy allows you to move in before construction is fully complete, enabling you to get a head start organizing your belongings and furnishing your unit.

Because you technically don’t own your unit during the occupancy phase, you’re effectively the developer’s tenant. You must pay them a monthly fee, similar to a rental charge, for the duration of the occupancy. 

Before the occupancy date, the developer will arrange with you to conduct an inspection of your unit, where you can note any deficiencies and incomplete work that needs to be done. The developer will also provide you with details about setting up utilities and notify you of the official occupancy date, which is the day you can legally move into your unit.

Once you’re satisfied with the state of your unit and agree to move in, you’ll have to sign the interim occupancy agreement. Be prepared to supply additional items needed to finalize the contract, such as proof of home insurance, one or more pieces of identification, and post-dated cheques to cover the monthly occupancy fees. When you’ve completed and submitted the necessary paperwork, the developer will let you know where to pick up the keys to your unit.

Final Closing

Once the developer completes construction on the condo, the occupancy period ends, and final closing begins. During final closing, the condo building gets registered with the Land Registry Office, and your unit officially becomes your legal property on the closing date. Interim occupancy fees cease, and your mortgage payments begin.

Overview Of Interim Occupancy vs. Final Closing

Interim OccupancyFinal Closing
A temporary period where you can move into your condo unit, but not yet possess ownership rights.The title of ownership is transferred from the developer to you; the unit becomes your legal property.
Your unit is complete but construction on the rest of the building is still ongoing.The entire building is fully complete and registered with the Land Registry Office.
The interim occupancy period is longer for units on the lower floors as they’re completed first during construction.Final closing takes place at the same time for all units in the building.
You’re obligated to pay the developer monthly interim occupancy fees.Interim occupancy fees end, and your mortgage payments commence.

Interim Occupancy Fees

During the interim occupancy phase, the developer is still the legal owner of the condo building. As a result, you’re under obligation to pay a fee for the use of the unit, which is similar to the rental charge a tenant would pay a landlord.

You’re required to pay the interim occupancy fees to the developer monthly. The fee amount is based on three factors:

  1. Property tax – based on an estimate and allocated monthly.
  2. Common expenses – encompasses various costs incurred to maintain the building, much like the condo fees you’ll be responsible for paying once you gain ownership of your unit.
  3. Interest on the unpaid balance of the price of your unit – this component covers the developer’s interest costs owed to the bank for your unit.

Developers face strict rules in terms of what they can charge for occupancy fees. The Condominium Act prohibits developers from generating a profit off these fees – they can only set an amount sufficient to cover expenses during the remainder of the construction period. If they overcharge you and realize any profit, they must return the excess funds to you.

Renting During Interim Occupancy Period

Renting out your unit during the interim occupancy period is possible, but it can be complicated.

Get Permission Right Away

Firstly, you must obtain permission from the developer to rent out your unit to another tenant. As the developer is legally the owner during this phase, they get the final say. It’s wise to get authorization from the developer as soon as possible, preferably before signing the Purchase and Sale Agreement.

Consider The HST New Housing Rebate

Secondly, leasing your unit to a tenant effectively revokes your status as the primary resident – your unit functions as an investment rather than a personal living space in the eyes of the Canada Revenue Agency (CRA). As a result, you won’t qualify for the HST New Housing Rebate and will have to pay the total sales tax amount upfront during the final closing. The inability to claim this rebate can cost you thousands of dollars extra that the rebate would have ordinarily offset.

Don’t Forget About The GST/HST New Residential Rental Property Rebate

Luckily, there’s another rebate you can use called GST/HST New Residential Rental Property Rebate (NRRP). This rebate is tailored specifically for property owners whose status as investors precludes them from qualifying for the New Housing Rebate. If you rent out your unit for at least a year, you’re entitled to receive a refund on a portion of the sales tax paid. However, you’ll have to be patient, as the funds won’t arrive in your bank account until a few months after the final closing. To claim the NRRP rebate, you must file Form GST524 – GST/HST New Residential Rental Property Rebate Application with the CRA and meet all the eligibility criteria.

Frequently Asked Questions

How long does Interim Occupancy last?

Typically, interim occupancy periods last 3 – 8 months. In some cases, it could last a year or more.

Do you need a mortgage during Interim Occupancy? 

No, you’re not required to have a mortgage during the interim occupancy period. Since you’re not yet the legal owner of your unit, you’re not obligated to make any mortgage payments. However, you must secure a mortgage by the final closing date, during which the transfer of ownership takes place.

Why do condo developers want the interim occupancy period to end quickly? 

Condo developers have a vested interest in minimizing the length of the occupancy period because they can only realize a profit once they register the building with the local city or municipality. The developer can only register the building once construction is fully complete and owners have begun making mortgage payments.

Bottom Line

It’s no secret that many condo projects experience delays. It could be years before the developer hands you the keys to your unit, and most homebuyers would prefer not to wait that long. Interim occupancy allows you to move in and get settled as soon as your unit is ready. 

You may be subject to loud noise during the occupancy period as the construction crew completes work on the building, and some amenities may not be available to you. But for the most part, you can go about your day as though you legally own the unit.

The main drawback of the interim occupancy is the monthly fees you must pay to the developer. Not surprisingly, a short occupancy phase is preferable to a long one, as this means less money leaving your pocket. For this reason, you should look to purchase a pre-construction condo from a seasoned developer with a stellar track record of completing projects on time.

Mark Gregorski avatar on Loans Canada
Mark Gregorski

Mark is a writer who specializes in writing content for companies in the financial services industry. He has written articles about personal finance, mortgages, and real estate and is passionate about educating people on how to make smart financial decisions. Mark graduated from the Northern Alberta Institute of Technology with a degree in finance and has more than ten years' experience as an accountant. Outside of writing, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.

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