Buying a pre-construction condo in Ontario can be a smart way to get into the real estate market. You get a brand-new unit with modern finishes, and you often have time to save more before final closing.
But the process is different from buying a resale home. One of the biggest differences is something many first-time condo buyers don’t expect—interim occupancy.
When you buy a pre-construction condo, there are two key stages before you officially own the unit: interim occupancy and final closing. These stages affect your rights, your payments, and how soon you can call the condo your own.
Understanding how this works is important, especially before you sign the agreement.
This article breaks it down in simple terms so you know what to expect and how to prepare.
What is Interim Occupancy?
Interim occupancy happens when the builder allows you to move into the unit before the building is officially registered. This stage can last for several months, depending on how long it takes for the rest of the building to be completed and for the condo corporation to be formally created.
Your individual unit must be fully built and safe to live in, but the rest of the building might still be under construction. For example, other floors, common areas, or amenities may not yet be ready. The City has to give you an Occupancy Permit before you can move in. This shows that your unit meets all the standards and is safe for living in.
During interim occupancy, you don’t legally own the condo yet. Title to the unit hasn’t been transferred to you, but you can live in the space.
This is common in high-rise condos where some units are ready while others are still under construction.
When Does Interim Occupancy Begin?
The timing of your interim occupancy is outlined in the Agreement of Purchase and Sale you signed with the builder. One important part of that agreement is called the Statement of Critical Dates. It explains when your unit might be ready and what happens if there are delays.
You’ll see the First Tentative Occupancy Date listed. That’s the earliest date your unit could be available for move-in. If the builder expects a delay, they must give you written notice within a set period. That’s called the Notice Period for Delay.
The agreement also sets out something called the Outside Occupancy Date. This is the final date by which the builder must let you move in.
Delays are fairly common in pre-construction projects. That’s why it’s so important to understand these dates and what they mean. Once the builder is confident your unit is ready, they will set a Firm Interim Occupancy Date and notify you of your upcoming move-in.
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Interim Occupancy Costs
During this period, you’ll pay a monthly interim occupancy fee to the builder. This fee typically covers:
- Interest on the Unpaid Balance: This is the interest on the remaining amount of your purchase price that hasn’t been paid yet. The rate is set by the Ontario Condominium Act and is based on the Bank of Canada’s prescribed interest rate.
- Estimated Property Taxes: Since you are occupying the unit, you are responsible for property taxes. These are estimated amounts, as the exact figures aren’t determined until the building is registered.
- Projected Maintenance Fees: These are estimated costs for maintaining the building’s common areas and amenities. The actual fees may vary once the condominium corporation is established.
It’s important to note that these occupancy fees do not contribute towards your mortgage or the equity of your unit. They are separate from your eventual ownership costs.
Do You Pay a Mortgage During Interim Occupancy?
No, you don’t pay your mortgage yet. But you will pay the builder a monthly fee. This fee typically includes interest on the unpaid balance of the unit, an estimate of property taxes, and maintenance fees. It’s often called “occupancy fees.” Keep in mind, these payments don’t go toward your mortgage or your final purchase price.
This can come as a surprise to many buyers. The law in Ontario, through the Condominium Act, allows developers to charge these fees until final closing.
What Happens If I Can’t Pay The Interim Occupancy Fees?
Failing to pay interim occupancy fees can lead to penalties and may delay your final closing. The builder might take legal action to recover the unpaid fees, which could affect your credit score and complicate the closing process.
It’s important to stay on top of these payments to ensure a smooth transition to ownership.
When Does Final Closing Happen?
Final closing is when you officially become the legal owner of your pre-construction condo. Unlike interim occupancy, where you can live in the unit but don’t yet own it, final closing is when the title is transferred to your name and your mortgage begins.
This stage only happens after the entire building is complete and registered as a condominium corporation. Once registered, your lawyer will receive notice of the final closing date. From that point, you’ll need to get ready to make all final payments and complete the ownership transfer.
What Happens at Final Closing?
At final closing, you’ll:
- Pay the remaining balance of your purchase price.
- Secure your mortgage, if applicable.
- Cover closing costs, which may include land transfer taxes, legal fees, and other adjustments.
- Assume full ownership of your unit, allowing you to sell, lease, or make changes as you wish.
Only after final closing can your name go on title, and you can officially call the unit yours.
Final Closing Costs
Once the building is fully constructed and registered, the final closing process begins. Final closing costs can add up to approximately 1.5% to 5% of your condo’s purchase price, depending on various factors like location and unit value.
At this stage, several costs come into play:
- Balance of Purchase Price: This is the amount you still owe after your deposit. In most cases, it’s paid using mortgage funds from your lender.
- Legal Fees and Disbursements: You will need a lawyer to handle the closing process, including title transfer and registration. Legal fees can range from $1,000 to $2,500, depending on the complexity of the transaction.
- Land Transfer Tax: This tax is calculated based on the purchase price of your condo. In Ontario, the rates are tiered, and if your property is in Toronto, an additional municipal land transfer tax applies. First-time homebuyers may be eligible for rebates.
- Development Charges and Levies: These are fees that municipalities charge developers to help pay for infrastructure and services. Sometimes, these costs are passed on to the buyer at closing.
- Title Insurance: This insurance protects you against potential issues with the property’s title, such as liens or encumbrances. It’s a one-time fee paid at closing.
- Adjustments: These are costs that may have been prepaid by the builder, such as property taxes or utility bills, which you will need to reimburse on a prorated basis.
Why It’s Important to Be Prepared?
Final closing comes with a lot of moving parts. If you’re not ready, delays can lead to penalties or legal issues. This is why having an experienced real estate lawyer is key. Your lawyer will review your final statement of adjustments, explain any charges, and make sure everything is handled correctly.
Buying a pre-construction condo is more complex than buying resale. Knowing what to expect at final closing helps you stay informed and avoid costly surprises.
Key Differences Between Interim Occupancy and Final Closing
Takeaway
Buying a pre-construction condo in Ontario comes with its own set of steps and timelines.
Interim occupancy and final closing each have unique rules, responsibilities, and costs. While there may be extra waiting and planning involved, this process gives you a chance to move into a brand-new unit and prepare financially before full ownership. It helps to stay informed, review your agreement carefully, and work with a lawyer who understands the process well.
With the right support from a real estate lawyer and clear expectations, buying a pre-construction condo can be a smooth experience.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
