The Interim Occupancy Date
So, you bought a new condo and you got your letter that you can move in. It has the term Interim Occupancy bolded with a move in date. This was the interim occupancy date.
You may be excited, but, for me, that wasn’t a pleasant notice. It was at the time, until I found out that’s when I had to pay the interim occupancy fee, sometimes called the phantom mortgage or phantom rent.
This happened to me around 2003 when I moved in to my first home. It a was a small, new condominium in Toronto. I actually bought the condo about 2 years earlier before it was built and around 2003 is when I moved in.
Apparently in Ontario, paying this phantom mortgage is normal and especially in Toronto. So, what is this phantom mortgage? This part is vague as it happened a long time ago, but, I had to pay the developer some kind of ongoing monthly fee for moving in. If I remember correctly, it was actually more than what my monthly mortgage amount was going to be! That’s right, I couldn’t advance my mortgage yet and so it didn’t pay down my mortgage. This of course was really upsetting. And this is what you should know about phantom mortgages and new condo purchases.
I’d like to share this with everyone so they aren’t caught off guard.
Although I hope real estate agents will inform buyers of this when purchasing a new condominium, since I know the developers don’t.
Since this happened a long time ago and I don’t have friends that have recently moved into a new condo, I did some internet searching to see if this is still happening. And yes, it still is. What’s even crazier is that supposedly this doesn’t happen in BC and possibly other provinces, although I haven’t looked into the other provinces. It’s an Ontario issue.
This interim occupancy fee is a monthly fee for moving into your new condo. It applies to pre-construction condos. I was told by the builder that because the condo was not registered yet, I could not receive title and therefore I could not get my mortgage since without title, I don’t own the condo yet.
To begin with, I purchased a new condo development in Davisville. I put down, I think, $20k.
At that point in time, I don’t have a mortgage as I don’t technically own the place yet.
I did get a pre-approval for a mortgage and knew what my mortgage payments would be.
After the deposit, some time went by and then I got a letter regarding my interim occupancy date and fees.
And after reading this over and over I got conflicted thoughts of being happy I can move it already and pissed I have to pay this monthly fee that doesn’t pay off my mortgage!
I was told by the builder that they didn’t know how long this fee would last because that’s up to how long the city takes to register the condo and get title, or something to that effect. Remember, I’m recalling something that happened to me in 2003.
This fee was maybe around $1,600 per month.
How about that? You have to pay a $1,600 fee indefinitely. I remember saying, how about if I don’t move in so I don’t have to pay this fee. Let me move in when you get title, so that I can get title as well.
Of course, the builder’s smart-ass answer was, well, you want to pay the fee and not enjoy your condo?
Of course not, you moron, I was thinking to myself.
Obviously that wasn’t the point of not moving in. I mentioned to the builder that I didn’t want to pay $1,600 per month in what amounts to rental fees (otherwise I would have just rented) which was more than my monthly mortgage amount was going to be.
Pros of the Interim Occupancy Fee
Anyways, apparently, this interim occupancy fee is a legitimate fee, from a legal standpoint. It’s stupid, but, it’s legal. What irks me is how it’s labelled as a pro on many real estate blogs. Seriously??? I paid $1600 a month even when I don’t want to is a pro? Now that’s the epitomy of a salesperson if you convince people that.
Some of the pros I see on real estate blogs are:
- You can’t expect a free ride
- You can’t live in the condo for free
- Your fee covers maintenance fees which keeps your condo clean and maintained. “Do you want to see your condo become ragged and worn down?”
- Your fee pays taxes
- The builder doesn’t make a profit on the fees (although a prominent real estate lawyer, Bob Aaron explains how they do make a profit even though it’s not allowed)
- The builder has the same goal as you in getting title as quickly as possible
- And a bunch of other nonsense. These “pros” are written by real estate agents who are salespeople. Salespeople know that you should make “pros” catered to the client. The fact that these “pros” don’t cater to the buyer at all means they really have no good explanation so they are spitting out garbage in the hopes that one of them will resonate with you. Seriously, just call a spade for a spade, okay. Don’t give me these garbage answers. Accept that it sucks for the buyer, warn them, and move on.
I mean really, why can’t I move in when the title is ready and it’s livable instead of moving in when it’s declared “livable” but not even completed yet? Why do I have to pay this fee when the city declares it livable even though I don’t own it? This would avoid all the buyer complaints, right? If anyone knows, please share insight into this process in the comments below.
I read on the Tarion website that the intent of the interim occupancy is to allow buyers to move in early.
And what if I don’t want to move in early? What if I would rather save my $1600 a month and move it when I own the place?
Oh, in that case, we’re going to force this “benefit” on you. It’s the law. That way, it’s still a benefit, right?
Let’s take this further and use the same scenario with your next biggest purchase, which may be your car.
Car Salesman: Great, you’ve bought your new car, here are your keys. You can start paying us when you drive off with it tomorrow. However, the fees don’t pay off your car, you’re only renting it from us.
Buyer: Wow, thanks! And why aren’t my payments paying off the car?
Car Salesman: Because you don’t technically own it yet. It isn’t registered with the Ministry of Transportation yet, there is a backlog.
Buyer: So, I can take it tomorrow if I pay you a rental fee?
Car Salesman: That’s correct. Plus HST and the interest on the loan I’m using to finish building the car for you.
Buyer: Oh, okay, in that case, I’ll take it after it’s registered with the Ministry.
Car Salesman: Sure, but, you’ll still have to pay me a rental fee, HST, and interest.
Car Salesman: Because the car has been declared “drivable”, even though we still need to add speakers, car mats, back door handles, and the wipers need fixing. There’s no free ride. You can’t have your “drivable” car for free.
Buyer: But, I’m not going to drive it or take it until it’s registered.
Car Salesman: I understand. But, there’s no free ride. (The stupidest and most annoying, bloody answer I read on real estate agents’ websites.)
Buyer: How is it a free ride? I’m not taking the car.
Car Salesman: It’s the law.
Buyer: What the f^%$(#.
Okay, I better stop here before my article gets vulgar.
So the final response was, it’s legal. And that brings me back to, yes, it’s legal, but, it’s still stupid, at least to the buyer. Maybe there is a reason to it, and that’s something I would love to know. Laws can get changed when they are unfair, dated, stupid, or serves a political purpose. I’ve heard other cities and places around the world can do it, why not Toronto?
If you have bought a new condominium, please comment below. Share with me and other readers your experience with the phantom mortgage and interim occupancy. Did it exist for you if you’re outside of Ontario? How long did you pay this fee? Or is this a uniquely Toronto or Ontario issue? This is regarding new, pre-construction homes.
How does Interim Occupancy Work?
According to Tarion (provides the new home warranty program in Ontario), when a building is considered fit for living by the municipality, then the purchasers can move in. And in order for you, the purchaser, to move in, the developer charges a fee composed of 3 components:
- Interest on the unpaid balance of the purchase price of your condo
- An estimate on the municipal taxes for your unit
- Projected common expense contribution
This is when the developer will send you their letter indicating that you can move in. And this is when you will also start paying the fee. And remember, this fee does not pay down your mortgage.
Anyways, after doing a bit of searching online, I did see a comment regarding the banks causing this issue because they advance the loan in installments based on sales in the condominium. If anyone can elaborate on this and how it relates to the phantom rent, please share your comment below.
So, when do you really own the condo? It’s the final closing date. And it’s when the condo can register the building and transfer ownership to you. At that point, you actually own the condo because you have title of your place.
At this time, you can actually get your mortgage and start paying it off. (Related article: How to Payoff Your Mortgage Faster). But, until you get title, you legally don’t own your place yet.
See this recent story below about interim occupancy fees and why this Canadian couple walked away from a $140,000 deposit and felt relieved! All because of crazy interim occupancy fees from their developer, Fusion Homes.
Think about that. How insane must their situation have been for them to feel relieved to give up $140,000? This is the result of interim occupancy fees and current interest rates.
There is a point in the video that a lawyer says “this is rare”. Note that these stupid occupancy fees is not rare, it happens 100% of the time for new construction. What is rare is possibly the magnitude (amount of money) of this situation. I haven’t bought a home in about 12 years, but, after looking into the amount your deposits are insured today, I read on the Tarion website that the insured amount on deposits for homes is up to $60,000 for homes less than $600,000 and 10% for homes over $600,000 up to a maximum of $100,000.
I took a screenshot below from the Tarion website.
Source: Tarion website, Nov. 24, 2023.
As such, I would not put more than either $60k or $100k for a home, depending on the situation, if I were to buy a home.
Personally, after buying a new condo, I would never buy a new condo or home again. I would just buy resale. The risk is too much and dealing with a new home builder is just a pain that I do not want to go through that again. I’d rather sit in those free “90 minute” Florida or Mexican timeshare seminars than deal with a new home builder. New home builders comparatively speaking makes a new car salesman sit in a throne, not just a pedestal.
And regarding the “rare” part, is it really rare or does the real estate lawyer not want to scare anymore buyers away since the market is pretty bad right now. Maybe the amount of lost deposit is rare, but, the frustration of paying these interim occupancy is not rare. Just see all the comments I got below. And my blog is not even popular! I get very few visitors but the few who do come to my site definitely seem to compelled to share their pain regarding interim occupancy fees.
I haven’t even written on this blog for years, except for updating this article today (Nov. 24, 2023) after reading this story.
First sentence from the video: “It is a modern day horror story.”
Not really, it happened to me in 2003. It’s an ongoing horror story.
And notice that the videos from CTV are between 1k and 44k views from a quick look at their videos. When it involves Trudeau it can be around 50k or more. And with Xi (China) and Trudeau it’s over 100k views.
But, this video is over 260k views in 2 days only!