12 May 2017
Bette Ursini

A brand-new condo building is going up in a neighbourhood you’ve wanted to live in. This is great news for you, right? You can get in on the early pricing for a new condo and move into a brand-new building. It can be an exciting time. If this is your first time buying a condo in a to-be-built building, there are some important factors to take into consideration.

When a new condo building is under construction, it is technically not considered a condominium. There is a process that the developer must go through for the building to be registered as a “condominium”. While you can move into your new unit before construction of the building is fully complete, you technically do not own your unit until the building is registered.

How it works

This approvals process for the building to be registered as a condominium can only happen once the first unit in the building is occupied and can take about six months on average, though sometimes less. When it comes to taking possession of your new condo, the developer will typically provide you with an approximate move-in date. However, when that time comes, moving into your new unit doesn’t mean you technically own it. There is a period between your occupancy date, or when you get possession of your unit, and when the building becomes registered. This is called an interim occupancy period.

What it means

During this interim period, you won’t be able to start paying your mortgage as you don’t own the unit just yet. Instead, you would pay an “occupancy fee” to the developer. Now, as your mortgage has yet to come into effect, you may be wondering why you are paying someone else to occupy a property you have purchased. What you are actually paying for are estimated maintenance fees for your unit, your portion of the property taxes, and interest payments on the balance owed of the purchase price of your unit (your purchase price minus your down payment). It means you can move-in and live in your unit, you just won’t be an official condo owner for a short period of time.

Additional things to consider

  • If you are buying a unit from a private seller in a new building that has yet to be registered, you would be paying the Land Transfer Tax on the sale, unless this is your first home purchase. If you are selling the unit, you don’t pay this tax.
  • Units on higher floors are completed and move-in ready closer to the date when the building becomes registered. The higher up your unit is, the shorter the interim occupancy period. The lower your unit, the sooner you can move-in.
  • Many buyers will wait until the building is registered to sell their investment property. This is partially because they feel the unit is more of an attractive piece of real estate with a completed building, a beautiful lobby, and all the building amenities. This means that when a building becomes registered, many units can go on sale at the same time, giving you a good opportunity to look at multiple units in a preferred building.