When you purchase a brand new condo and finally get the keys to your suite, many buyers are surprised to find out that their new home is not theirs yet. Although this is an exciting phase in the new home ownership process, it is actually not the “ownership” phase. It’s called “interim occupancy” and it allows a builder to finish construction while also organizing an orderly move-in process for what could be hundreds of buyers. And with so many moving parts, this takes time, coordination and money to be done properly.
I’ve noticed lately a lot of talk about interim occupancy, mostly in the news but also from some homeowners who have contacted Tarion with questions on this subject. Some of what I’ve read and heard misinterprets the intent of what is a practical way to get buyers into their homes faster while also allowing the builder to continue to complete the building. While Tarion does not have oversight over interim occupancy (it is covered in the Condominium Act) it is part of the new home buying process, and I believe it deserves some clarification.
When a building is declared fit for occupancy by the municipality, condo buyers can start moving in, usually beginning with the lowest floors, as the builder works his or her way up to complete each suite as well as the common elements. None of the buyers are technically taking ownership yet, and they will all have to wait for some time before they do. But for the meantime, buyers can enjoy their new homes and some of the amenities as well. For those on the lowest floors, that usually means they get to move in sooner, but will have a longer interim occupancy period than those above them.
In order to live in your new condo before you own it, the developer or vendor will charge an interim occupancy fee. The fee is made up of three parts: interest on the unpaid balance of the purchase price of your condo, an estimate on the municipal taxes for your unit, and a projected common expense contribution to keep the building running. The fee is usually charged monthly and requested in the form of post-dated cheques made out to the developer or vendor. It’s a misconception that a builder profits or has any benefit to gain from extending this phase in the building of a condo. In fact, there are stipulations in the Condominium Act around the calculation of the occupancy fees which attempt to prevent the developer from making a profit. Furthermore, it is in a builder’s best interest to transfer title as soon as possible. Builders make their money when they are able to provide title and register the project – which can only be done when the building is complete.
But even though a builder profits only after this phase is complete, interim occupancy may last a while. Many buyers, especially on the lower floors, will likely be moving into a construction zone. The common areas may not be complete, and even some of the amenities may still be under construction. But the building should be safe for living, as a municipal inspector will have inspected the building and determined that it is fit for occupancy. Some of the requirements for occupancy include safe access to the unit, running water, sanitary facilities and a functional kitchen.
Over the years, Tarion has heard from some condo buyers that feel their units have been granted occupancy but are not yet fit for habitation. If you feel your builder has moved you in to a new building that is not fit for occupancy, call Tarion. We have helped homeowners in the past when we agree that their buildings are not safe for occupancy, and have worked with their builder to speed up some of the essential work.
Another important part of interim occupancy is the warranty process. As soon as you are granted occupancy of your unit, your one-, two- and seven-year warranties begin. You can fill out your first warranty form within the first 30 days of occupancy. The warranty on the common elements of your building will not begin until your condominium is registered.
If you are a condo buyer that is currently living in the “interim occupancy” period, I assure you that you and your builder both share the same goal – to get your building registered as soon as possible. And when you do finally get to experience the “ownership” part of the new homeownership process, your building should be complete, your amenities ready to use and you can finally enjoy all the benefits of your new home. If you have any questions as a new condo owner, you can always contact Tarion.
Source Tarion: For more than 40 years, Tarion has provided new home warranty protection to more than two million Ontario homes. We serve new home buyers and new home owners by ensuring that one of their life’s biggest investments is protected. Almost every new home in the province is covered by a new home warranty. This warranty protection is provided by Ontario’s builders and lasts up to seven years. It is backstopped by Tarion. More than 365,000 homes are currently enrolled in the warranty program. Every year about 50,000 new homes are enrolled.