Rachel in Legal, HomeBuying, Condos
There is a very interesting period during the purchase of a new condominium that resembles something between ownership and renting...known as the interim occupancy period, this is the time in which the purchaser is required to live in the unit, but does not technically own it yet. This is often very challenging and stressful for new condominium purchasers, particularly if the builder does not register for months (meaning that you do not own your unit for months). One of the best ways to handle interim occupancy is to be knowledgeable about the process and how it affects you.
In the beginning, when you first review your agreement, you will come across two dates. The first date is the estimated date that you will have to move into the unit (the interim occupancy period). This date is selected by the builder and represents the estimated time that the units can be occupied by the future purchasers. This date can change, and you will usually be notified of changes by the builder. During this time, the whole of the building may not be finished (for example, the corridors may be getting painted), but you will be required to live in your unit.
The second date is unknown. It is the time at which the building has been registered and legal title can be transferred to you. The reason this date is unknown has to do with the fact that any number of delays can cause a hold-up in registration (the final step necessary for the builder to be able to convey the units to HomeBuyers involves actually registering in the Land Registry Office and requires approvals from provincial and regional governments, among others); however, the builder will usually notify you in writing about the various date changes, if any, and will definitely notify you as to when the transfer will actually be complete. Once the project and transfer is complete, you will be the proud and happy owner of a new condominium unit. It is the time between when you move into the unit and when you actually own the unit you are living in that can cause confusion and stress.
So where does the stress come from? It is usually the result of frustration. During the interim occupancy period mentioned above, you will be living in the unit, but do not technically own it. You will be required to pay to the builder an amount that is typically equal to interest on the outstanding balance of the purchase price. You should think of this as rent - some people like to call this the ‘phantom mortgage’ but this implies (to me, at least) that you are actually going to see something out of these payments. You are not, except the ability to live in your unit. These payments are in no way credited towards the purchase price of the unit. Other items that you will typically be paying for during this period are an estimated amount for common expenses and realty taxes and then, of course, there are utilities, etc. All of these payments are being made without the corresponding benefit of feeling the pride of ownership and accomplishment of making mortgage payments that tend to offset any negative emotions.
You are able to stipulate in your contract that the amount due to the builder can be paid in cash at the beginning of the interim closing period, but many new condominium purchasers do not have access to that kind of money. If you do, or even if you think you might, definitely include this provision in the agreement during the 10-day rescission period, if not already written in by the builder.
During this time, it can be helpful to remember that the builder is very likely doing everything possible to register the project and is probably as eager as you are to see the units transferred to their respective owners. During this stressful time, take a moment, look around and survey all that is about to be yours.
Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the area of real estate law.
can I rent the unit out during the interim occupancy period?
Posted by: Esther Man | September 24, 2009 at 09:08 AM