Interim Occupancy vs Final Closing: What Buyers Need to Know
When buying a pre-construction condo, it’s essential to understand two critical phases: interim occupancy and final closing. These terms can be confusing, but knowing the differences between them will help you navigate the purchasing process more effectively. In this article, we’ll break down the concepts, explain what each phase involves, and discuss how they impact you financially.
What is Interim Occupancy?
Interim Occupancy is a phase specific to pre-construction or newly built condominiums. This period starts when your unit is ready to be occupied, but the building isn’t fully complete or registered. Essentially, you can move in and start enjoying your new home even though you don’t officially own it yet.
Key Points About Interim Occupancy
Occupancy Fees: During interim occupancy, you’ll pay a fee to the builder instead of a mortgage. This fee often includes estimated property taxes, maintenance fees, and interest on the balance of the purchase price. Note that this is not an equity payment, meaning it doesn’t reduce the overall purchase price.
No Mortgage Yet: You don’t have a mortgage during this phase because the building isn’t registered. However, it’s an opportunity to move in while final touches are being completed.
Duration: The length of interim occupancy can vary. It might last a few months or up to a year, depending on how long it takes to register the building.
What is Final Closing?
Final Closing is when ownership is officially transferred to you, the buyer. It happens after the condominium has been registered with the local municipality, and the title of your unit is legally in your name. At this point, you secure a mortgage, pay any outstanding fees, and receive the keys to your new home.
Key Points About Final Closing
Mortgage Payments Begin: You start making mortgage payments to your lender once the final closing is completed.
Legal Transfer of Ownership: This is when the property title is transferred to you, and you become the official owner of the unit.
Additional Costs: During final closing, you’ll have to cover various costs such as legal fees, land transfer taxes, and any adjustments related to property taxes and maintenance fees.
Key Differences Between Interim Occupancy and Final Closing
To make the buying process easier to understand, let’s break down the key differences between interim occupancy and final closing:
| Aspect | Interim Occupancy | Final Closing |
| Ownership | Developer retains ownership | Ownership is transferred to the buyer |
| Payments | Occupancy fees (not building equity) | Mortgage payments (building equity) |
| Legal Status | No title transfer | Legal transfer of property title |
| Mortgage | No mortgage during this phase | Mortgage is established |
| Duration | Temporary period | Permanent, once the final closing is done |
Financial Implications to Consider
- Occupancy Fees vs. Mortgage Payments
During interim occupancy, you pay occupancy fees that don’t build equity. These fees can feel similar to paying rent. It’s crucial to budget for this phase since you won’t be building any ownership in your condo yet. Once the final closing occurs, these fees are replaced with mortgage payments, which contribute toward owning your home. - Additional Costs at Final Closing
Final closing often comes with unexpected expenses. Some costs to be prepared for include:
Legal Fees: You’ll need a real estate lawyer to handle the transfer of ownership.
Land Transfer Tax: This tax varies depending on your location and the price of the property.
Adjustments: These are reimbursements to the builder for prepaid costs, like property taxes or condo fees.
- Registration Delays
Be aware that delays in registration can extend the interim occupancy phase, leading to prolonged occupancy fees. It’s important to have a contingency plan in case of such delays. Understanding your contract and communicating with the developer can help manage expectations.
How to Prepare for Both Phases
- Understand Your Agreement
Before signing a purchase agreement for a pre-construction condo, thoroughly review the details related to interim occupancy and final closing. Know what you’ll be paying during interim occupancy and what’s expected during final closing. - Consult a Real Estate Lawyer
Hiring a knowledgeable real estate lawyer can make the entire process smoother. They can review your contract, help you understand your obligations, and ensure you’re not caught off guard by unexpected fees during final closing. - Secure Financing Early
While you don’t need a mortgage during interim occupancy, it’s wise to arrange your financing well in advance. Get pre-approved for a mortgage and keep your credit score healthy to avoid any last-minute financing issues when it’s time for final closing. - Plan for Final Closing Costs
Create a budget that includes all potential final closing costs. It’s best to have a financial cushion to cover these expenses and ensure a smooth transition from interim occupancy to full ownership.
Pros and Cons of Interim Occupancy and Final Closing
| Phase | Pros | Cons |
| Interim Occupancy | Move in earlier, time to adjust to the property, and delay mortgage payments | Occupancy fees don’t build equity, potential registration delays |
| Final Closing | Ownership is officially yours, equity building begins, access to full amenities | Higher upfront costs, mortgage payments begin |
Frequently Asked Questions
Can I sell my unit during interim occupancy?
No, you cannot sell your unit during the interim occupancy period because you don’t officially own the title. You can only sell once final closing has occurred and the title is in your name.
What happens if the registration is delayed?
If registration is delayed, the interim occupancy period may be extended. You’ll continue to pay occupancy fees until the final closing takes place.
How are occupancy fees calculated?
Occupancy fees typically include interest on the unpaid balance of the purchase price, estimated property taxes, and maintenance fees. They are not equivalent to mortgage payments and don’t contribute to equity.
Navigating interim occupancy and final closing can be challenging, but with the right preparation, you can make informed decisions. If you’re considering a pre-construction
condo, make sure you understand the process and your financial obligations. Contact luxeprecon today for expert guidance on your pre-construction in Toronto purchase and get the peace of mind you deserve!
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