November 18th 2024
When purchasing a pre-construction condominium in Ontario, it's essential to understand the financial obligations during the interim occupancy period—the phase between moving into your unit and the official transfer of ownership. This newsletter will explore some of the common requirements that purchasers of new builds will need to know when purchasing a pre-construction condo unit.
The buyer of any pre-construction condo is entitled to a Statement of Critical Dates. These dates will include an initial estimated date when your unit will be ready for occupancy. It is important to note that a builder can set three (3) further amended occupancy dates with at least ninety (90) days written notice to the purchaser. If the occupancy date is delayed beyond the firm occupancy date, you will be entitled to delay compensation unless the delay is deemed “unavoidable”. If you are facing delay in your closing, its important to speak with a lawyer to discuss your possible entitlements. If you are interested in seeing a calculation for yourself visit -> https://www.tarion.com/builders/critical-dates-calculator
Purchasers may be surprised at the work involved in being prepared for interim occupancy. Often, builders will require proof of your financial ability to close the deal, post-dated cheques for common expenses or a PAD agreement, proof of liability insurance, and payment of interest on the remaining purchase price after deducting any deposits you've made. The interest rates typically align with the Bank of Canada's conventional one-year mortgage rate as of the first of the month when you assume occupancy. Purchasers are also required to pay estimated property taxes on the unit as well, despite not having legal ownership. In total, these amounts are significant, and purchasers are well advised to budget accordingly.
Purchasers may elect to pay the remaining amount of their purchase price instead of covering the Bank of Canada interest rate on the remaining purchase price. This is relevant for individuals who are selling a property and have sufficient cash to pay for their condo outright. However, there are restrictions. The Condominium Act (Ontario) states in section 80(3) that a purchaser must make this election “before the expiry of the time period…for rescinding the agreement”. This is quite a strict clause, given the rescission period for a contract is only ten (10) days after the latest of (a) receiving a mandatory disclosure statement (b) receiving a condominium guide, or (c) receiving a fully executed contract. If you wish to avoid or minimize the financial impact of payment of the interest on your remaining purchase price, you are encouraged to speak with a trusted real estate professional as soon as possible.
I hope this newsletter has been informative. If you have any questions about this article or have a purchase coming up and wish to work with a trusted real estate lawyer, consider Liddiard Law.
Michael Liddiard, BA MA JD
Liddiard Law Professional Corporation
michael@liddiardlaw.ca