Guiding You Through The Complexities Of New Condo Occupancy Closings
When purchasing a new build condo unit, there will be two closings. The first one is referred to as “occupancy”. The second closing occurs after you register the unit.
When your unit is considered to be substantially completed you must take possession. Generally, a large portion of the building will remain a construction site and amenities will not be available.
In order to protect your legal rights against unforeseen circumstances or delays, the real estate lawyers of Blackburn Lawyers will make sure the terms of your agreement are clear, and enforced. We offer decades of experience to new condo owners in Richmond Hill, Ontario and throughout the GTA.
Deadlines For Your Deposits
At the time of occupancy you are required to pay the balance of your deposits (if any are still outstanding) and you will be required to deliver a series of post-dated cheques to the builder. These cheques constitute your occupancy fees and are made up of three components; your estimated common expenses, plus, your estimated property taxes, plus interest on the balance of the money you owe the builder. The interest rate you will be charged is determined by the Condominium Act and is the rate of a one year conventional mortgage as of the date of occupancy.
Since the interest component of your occupancy fee is interest only, you are not reducing the principal balance of the amount you owe during the occupancy period. The interest component generally forms the largest component of your occupancy fees. Therefore, if you intend to make a down payment larger than the minimum deposits called for in the agreement you should have a clause inserted in the agreement allowing you to pay a larger amount at the time of occupancy. You have an absolute right during the 10-day rescission period to insert this provision, but at any other time you would require the builder’s consent. They cannot be compelled to give you their consent (except during the rescission period) and if they do consent after the 10-day period, they will generally charge you a fee.
However, do not be confused. It is something you can do only if you will have the extra cash available on the occupancy date. It must not be money you are expecting to receive from a new mortgage you have arranged on your condominium as such a mortgage cannot come into existence until the time of the second closing which occurs after the condominium is registered.
You will receive no more interest on your deposits after the date of occupancy.
What You Can And Cannot Do During The Occupancy Period
The length of the occupancy period will vary but it is normally a period of several months.
During the occupancy period, only the buyer or a member of the buyer’s immediate family may occupy the unit (unless the builder agrees to allow someone else to occupy your unit). Remember however, in your agreement you have certified that you or an immediate family member will occupy the unit and you have agreed to assign the HST rebate to the builder.
If it is your intention to purchase the condominium as an investment property and have tenants occupy the unit you may not be allowed to have tenants until after registration.
A further complication arising with investment properties is that you are not permitted to assign the HST rebate to the builder as the contract obliges you to do. As a result, you will have to pay the amount of the rebate the builder would otherwise have received in addition to the other sums you owe to the builder.
Selling Or Renting Out The Condo Unit
If you keep the unit and do in fact rent it out you will be able to claim a refund of the rebate amount following closing. If, however you decide simply to sell the unit after registration the amount of the rebate you pay to the builder, cannot be refunded to you.
If it is your plan to sell the unit between the time you purchase it and the time of the occupancy or final closing (this type of sale is referred to as an assignment of your agreement of purchase) you will find the agreement of purchase prohibits you from doing so. If the builder will grant you the right to assign your agreement you will have to pay an administrative fee to the builder usually in the $3,000.00 to $4,000.00 range and you will remain responsible to complete the transaction in the event the person to whom you have assigned the agreement does not close the transaction.