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When buying a condo, you generally have two choices: a pre-construction condo or a resale condo. While resale condos are convenient because they’re move-in ready, you may find a brand-new condo more appealing due to its cost, features and amenities. 

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.

Key Points

  • Interim occupancy allows you to move into your newly constructed condo before the entire construction is complete.
  • The developer will retain ownership rights, with you serving as somewhat of a tenant until final closing.
  • Official mortgage payments to your lender won’t begin until after final closing.
  • Until final closing, you’ll make monthly payments to the developer, which will serve as a type of rent.

What Is Interim Occupancy?

Interim occupancy is the time period when 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. 

Move In Before Official Completion Of Construction

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. This allows you to fast-track your ability to move into your new condo, rather than waiting a year or more before the complex is complete and ownership is transferred to you.

Interim Occupancy Fees Are Made To The Builder

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 to use the unit, which is similar to the rental charge a tenant would pay a landlord.

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

  1. Property taxes – These taxes are based on an estimate and are allocated monthly.
  2. Common expenses – This 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 regarding what they can charge for occupancy fees. The Condominium Act prohibits developers from generating a profit from 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.

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.

Interim Occupancy Agreement Required

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

The following chart outlines the differences between an interim occupancy and a final closing:

Interim OccupancyFinal Closing
A temporary period where you can move into your condo unit, but don’t 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 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 simultaneously 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.

Renting During Interim Occupancy Period

Many condo owners buy condos specifically to rent them out. While renting out your unit during the interim occupancy period is possible, it can be complicated. Keep the following factors under consideration if you intend to use your condo as an investment property.

Get Permission Right Away

Firstly, you must obtain permission from the developer to rent out your unit to another tenant. 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 GST/HST New Housing Rebate

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 GST/ST 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.

Claim 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 can receive a refund on a portion of the sales tax paid. However, you’ll have to be patient. 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.

Important Dates To Understand

Your purchase agreement with the builder will include a Statement of Critical Dates, which details important dates, including the following:

  • First Tentative Interim Occupancy Date – This is the initial date your unit could be ready for Interim Occupancy Closing.
  • Notice of a Delay Beyond the First Tentative Occupancy Date – This is the latest date when the builder can notify you of any delays to the initial Tentative Occupancy Date.
  • Outside Occupancy Date – This is the last date the builder can delay the Interim Occupancy Closing. Several delays may occur until this date.
  • The Purchaser’s Termination Period – If the builder does not complete your unit by the Outside Occupancy Date, you have the right to terminate the agreement within a certain time as specified in the contract.

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. Most homebuyers would prefer not to wait that long. Interim occupancy allows you to move in and settle as soon as your unit is ready. Don’t forget to consider the monthly fees you must pay the developer, especially if the interim occupancy period lasts a long time.

Interim Occupancy Frequently Asked Questions

How long does interim occupancy last?

Typically, interim occupancy periods last 3 to 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.

What is the “outside occupancy date”?

The outside occupancy date is the latest date that the builder agrees to provide occupancy to the buyer. This date will be specified in the Statement of Critical Dates. If the builder does not give you occupancy within this time frame for any reason other than your breach of the contract, the purchase agreement may be terminated.
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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