Overview of Process

 When a consumer purchases a new condominium unit in Ontario and they move into the unit, they are unaware that condominium ownership is a two-part phase. In Ontario there are two closings when consumers are purchasing a new unit in a condominium:

  1. The Interim Closing – during this phase, the consumer will occupy (“Occupancy”) the unit that may be suited for habitation but does not hold title of the unit;
  2. The Final Closing – during this phase, the title or ownership will be transferred from the builder to the consumer/purchaser.

 The Occupancy period (the time between Occupancy and the Final Closing) is governed by the “Interim Occupancy Agreement” that is typically attached to the Agreement of Purchase of Sale (“APS”). During the initial stage (from when the APS is signed until the Interim Closing), the purchaser will often pay the builder the down payment portion of the total purchase price through various deposit payments.

Prior to the Interim Closing, the APS usually calls for a Pre-delivery Inspection also known as a “PDI.” The purpose of the PDI is for the builder and purchaser to walk-through the unit to make sure the work in the unit was done in a workmanlike manner and to point out any deficiencies which are to be repaired. During the Interim Closing, documentation is exchanged resulting in possession being passed onto the purchaser. Based on historical data, the purchaser may be in this phase for a few months to a year until the Final Closing.

Upon occupancy, the builder is able to charge the purchaser the monthly occupancy fee – which is outlined by a number of factors by the government to prevent the builder from making profit during this phase. The purchaser is also able to pay the remainder balance of the purchase price (after taking into account the previously provided deposits) upon Occupancy. Some purchasers may be enticed to do so because doing so may help reduce the interim occupancy fee. The occupancy fee is made up of interest on the unpaid balance of the purchase price, an estimate on the property/land taxes for the unit, and a common expense contribution in order for the building to keep running (common expenses would include costs such as elevators, the lobby, security, parking, etc). The first phase is referred to as interim occupancy because it allows for a builder to complete construction while also arranging an orderly move-in process for all purchasers by providing possession of units to the purchasers.

There are three laws that protect purchasers when buying and living in a condominium. The Condominium Act outlines certain duties that the builder must adhere to during the interim occupancy period. It regulates the way in which condo corporations are created, owned and governed. The Condominium Management Services Act outlines the rules that condo managers and management companies must follow. Lastly, the Ontario New Home Warranties Plan Act establishes deposit protection, a warranty program that protects purchasers, and direction on resolving disputes with builders. The warranty program usually comes into play after the Final Closing if there are deficiencies or issues with the unit.

When purchasing a newly built unit in a condominium, purchasers have the following rights:

  • The right to cancel the purchase within 10 days – known as the “cooling off period”
  • The right to cancel a sales agreement within 10 days after any substantial changes to the disclosure statement
  • When cancelling, the builder must refund any and all deposit plus interest that may be payable
  • When making a deposit, the builder must keep all funds held in trust
  • A builder is unable to terminate the purchase and sale agreement without the consent of the purchaser of a court order

Purchasers are entitled to receive a warranty when they purchase a newly built unit in a condominium in Ontario. The Tarion Warranty Corporation is able to give purchasers information regarding warranty coverage, and is able to reconcile a dispute with a builder under the Ontario New Home Warranties Plan Act. On final closing, the purchaser will receive title of the unit.

Vellani Law is a law firm specializing in new build purchases. We can help provide advice right from the get go prior to signing the Agreement and Purchase and Sale and reviewing and disclosure documents provided by the builder which provide details about the condo project. Additionally, we can help with interim / occupancy closings and eventually your final closing when title is transferred to you.

Vellani Law helps clients from Hamilton to Toronto and all areas in-between.