Understanding Occupancy Fees and Interim Occupancy for New Condo Purchases in Ontario

By Slonee Malhotra

Purchasers of new condo units in Ontario need to be aware that closing involves a two-part process:

1. Interim Closing (also known as “Occupancy Closing” or “Occupancy”); and
2. Final Closing.

Occupancy Fees are a necessary component of Interim Closing and this article will provide the reader with additional information on the applicable Occupancy Fee.

What is Interim Occupancy?

When a builder sells a condo unit before the development has been completed, the agreement of purchase and sale between the builder and the purchaser (i.e. you) will require an Occupancy period. This means that the purchaser acquires the right to enjoy the use of their unit before the development is complete and the title can fully be transferred to the purchaser.[1] Once the title has been transferred, the Occupancy period ends and the purchaser becomes the unit owner. This Occupancy period can last months, or sometimes years depending on the outstanding requirements of the development.

For example, if you purchased, say, a unit on the 6^th floor of a 25-storey condo building before the whole building had been completed, you would be entitled to move in and enjoy your unit (provided that Occupancy is granted by the building department) while the remaining units were being finished.

What are Occupancy Fees?

These are a necessary component of Interim Closing. Unfortunately for purchasers, there is no way of getting around these.

Occupancy Fees are made up of three components:[2]

1. Interest on the Outstanding Purchase Price;
2. Estimated Property Taxes; and
3. Estimated Monthly Condo/Maintenance Fees.

Occupancy Fees are not credited to the purchase price. Such fees are essentially “rent” that is paid to the builder for the right to occupy the unit until the development is complete and title is transferred.

However, it is important to note that, under section 80(4) of the Condominium Act in Ontario, builders are strictly prohibited from profiting off of Occupancy Fees.[3]

How is the Interest Rate on Occupancy Fees Determined?

The builder is permitted to charge interest on the unpaid balance of the purchase price of the unit. For example, if you paid a 15% deposit down for your unit, the builder could charge you interest on the remaining 85% until it is paid in-full or until the Interim Occupancy period ends.

The interest on the outstanding purchase price is based off of the current Bank of Canada interest rate for conventional 1-year mortgages.[4] As of May 21, 2025, the interest rate is 6.09%.[5] It is important to know that this rate changes constantly and the builder will use the rate that is in place on the first day of the month that occupancy takes place.

Depending on the price of your condo, your Occupancy Fee could amount to several thousand dollars each month. Essentially, by paying the Occupancy Fees, one can expect to pay a monthly fee to the builder close to or greater than the mortgage amount.

How to Minimize Your Occupancy Fees

Ideally you want to pay the least amount of this “phantom rent” you possibly can. There are a few ways to tackle this.

If you have the ability to pay the full amount for your condo upfront in cash, the funds would be paid into the builder’s trust account and this would entirely eliminate component 1 of the Occupancy Fee (the interest on the outstanding purchase price). Understandably, however, not everyone has the means to take advantage of this option.

You could also pay down the full 20% down payment on Occupancy if the original deposit collected was less than 20%. This would reduce the total amount of interest you owe under component 1.

Finally, if you simply want to reduce your fees and you do not care about being one of the first to be able to access and enjoy your unit, you may be able to opt for a unit that will be constructed later in the development. Most builders reserve completion of the upper units until after the lower units are constructed, so it may be strategic for you to sign up to purchase a unit on a higher floor, making the Occupancy period shorter. However, there is the caveat that the purchase price usually increases per floor, so upper units can be more expensive than lower ones. In many cases the units that are constructed last (thus having the shortest Occupancy period) are the penthouse units, which are often the most expensive.