Interim Closings: Things to Consider
"I bought a new condo from the builder!"
You might be very excited about buying a brand new condo, but uncertain about the next steps. Buying new from the builder can be a very frustrating process with the delays, colour selections, pre-delivery inspection, interim/occupancy closing, co-ordinating with the builder to fix items on your pre-delivery deficiencies list, and finally - the long awaited final closing.
Condominium Act (Ontario)
Pursuant to the Condominium Act (Ontario), 1998, S.O., 1998:
You have a 10-day cooling/rescission period to review your Agreement of Purchase and Sale. During this time, it is recommended that you have a real estate lawyer review the Agreement with you. Builder's Agreements are very one-sided and not "standard" (as you may believe). If you will need financing to purchase the condo, it is highly recommended that during this time, you obtain a mortgage pre-approval from your bank to ensure that you can successfully complete the purchase. Some builder's require proof of mortgage approval at the time of interim/occupancy closing. If there are any amendments (such as capping of adjustments, right to assign and lease, etc.) that you have requested from the builder, you need to have them signed back by the builder before the 10-day cooling/rescission period is over.
How to determine the 10-day period
In accordance with the Condominium Act (Ontario), 1998, S.O. 1998, Subsection 73(2): "To rescind an agreement of purchase and sale under this section, a purchaser or the purchaser's solicitor shall give a written notice of rescission to the declarant or to the declarant's solicitor who must receive the notice within 10 days of the latest of:
- The date that the purchaser receives the disclosure statement
- The date that the purchaser receives a copy of the applicable condominium guide under section 71.1
- The date that the purchaser receives a copy of the agreement of purchase and sale executed by the declarant and the purchaser"
Rescinding your Agreement of Purchase and Sale
If you decide not to go ahead with your purchase during the 10-day cooling/rescission period, you or your solicitor must provide WRITTEN notice to the builder or the builder's solicitor within that time. If you do not, your deal becomes firm. For the return of your deposit(s), you will need to contact the builder directly.
During the 10-day cooling/rescission period, you may elect to pay the entire Balance Due on Closing (or at that time you can request the option to pay an additional deposit in a desired amount - this option must be included in an Amendment to the Agreement of Purchase and Sale) on interim/occupancy closing. If you have extra cash available, you may wish to pay the entire Balance Due on Closing on interim/occupancy closing, to eliminate the interest component of the monthly occupancy fees. However, you need to take some precautions regarding deposit protection, because Tarion Warranty Corporation only provides deposit protection up to a certain amount. Please speak to your real estate lawyer regarding this.
Deposit protection
View Tarion Deposit Protection Information
OK, so my deal is firm now. Now what?
The first thing to know is that the terms "interim closing" and "occupancy closing" may be used interchangeably. Your occupancy closing date is the day that you will get possession of the unit, but not title. You will not own the condo at that time, rather you will be a "tenant". You do not require mortgage financing at this time, however, the builder may require a mortgage approval document in advance or at occupancy closing. It is important to make sure you follow deadlines (such as dates that the builder/builder's lawyer will cash your deposit cheques, dates for providing the builder with mortgage approval and dates to provide your lawyer information to the builder as well as title instructions) in your agreement to avoid being noted in default under the Agreement of Purchase and Sale.
Steps to take:
-
Retain a lawyer to assist you with the occupancy closing. There are very few builders that close occupancy closings directly with purchasers.
-
Is there a chance that you would want to pay a higher or additional deposit on occupancy closing? Some clients like to do this if they have extra cash on hand. Some builder's will allow you to pay more if you put in the request (keep in mind that they might charge you a fee). Basically, if you pay more on occupancy closing, you will reduce the interest component of the monthly occupancy fee. Let your lawyer know if this is something that you would like to look into. In a nutshell, if you reduce the interest component of the occupancy fee, your monthly occupancy fees will be lower.
Your monthly occupancy fee is composed of:
- Estimated property taxes
- Estimated common expenses
- Interest at the Bank of Canada rate on the deferred portion of your purchase price
You will pay the monthly occupancy fees between the occupancy date and the final closing date.
- Stay in touch with your builder. They should contact you for matters such as colour selection, delays in closing/occupancy closing dates and scheduling your pre-delivery inspection. If you believe that your occupancy closing is approaching and you haven't heard from the builder, you should give them a call.
Delay notices
We highly recommend that you open a file to save notices including delay notices from the builder. By doing so, it will be easier to claim delay compensation (if you are eligible) through Tarion Warranty Corporation later on.
Tarion Warranty Corporation
In most cases, builder's are required to be registered under Tarion Warranty Corporation.
Tarion has a wealth of useful information relating to your interim/occupancy closing. The link below relates to your pre-delivery inspection.
Learn about Pre-Delivery Inspections
What builder's typically require at the time of occupancy closing
- 12 post-dated cheques for the payment of monthly occupancy fees
- 1 certified cheque for the pro-rated closing month's occupancy fee
- 1 certified cheque for the additional deposit to be paid
- Some builder's require proof of insurance (usually for contents, betterment and third party liability insurance)
- Some builder's require proof of ability to pay the outstanding balance of the purchase price (such as a mortgage approval and bank statement, GICs, etc. totalling the deferred balance due on final closing)
- Set up of separately submetered utilities
