Can someone explain "Occupancy Rent" to me?

[Lagerstatten.ca]

Hi,

We're getting close to taking possession of our townhouse and just got an email from our lawyer explaining the fees. This is the part of his email that concerns me:


Because the condominium plan isn’t registered yet, the Vendor’s lawyer cannot send the Transfer of Land, so you are required to take possession of the premises under an Occupancy Agreement until the condominium plan is registered and the Transfer of Land is delivered. Of course any funds not required will be returned to you.



Legal Account $1,001.15
Occupancy Rent $250,454.44 x 3.740% x 40/365 = $1,026.52
Total: $2027.67


What is the Occupancy Rent? And will I get that back?

Thanks to whomever can explain this to me!

[Cos]

my understanding of this is that your complex isnt done yet, and the developer wont submit it to title until the complex is complete. Until that time you cannot own any land (because it doesnt legally exist yet) but have an agreement that you WILL own the land.

Sort of the same idea as there is a condo board in place that reports to the developer until the complex is done.



Unless I am totally mis-understanding what they are saying.

[Rarasaurus]

For a condo to be registered it has to get occupancy from the city on the entire building. While the floors above are being constructed the developer charges you interest on the money you owe (which they are paying), along with a portion of the property tax and condo fees. Essentially you are paying interest on their mortgage the same as you would be on your own. When the city gives occupancy to the entire building you will be registered and at that point get title and your own mortgage. You will not get this money back in the same way you would not get the interest you pay on your own mortgage back. Buying on the lower floors of a building means you will pay these fees till building is registered but it is essentially the same as paying your own mortgage without putting anything towards the principal.

Edit: Based on the calculation above they assume you will not get title for 40 days. You will be in the exact same place in two months if you put 5 dollars extra on your mortgage when you get it because initially you are paying almost entirely interest and very little towards principal.

[skandalouz_08]

I believe both of the above posters are right.

What you should do though is talk to your lawyer about it. Its their job to explain it to you. Or if you went through a realtor they should also be able to explain it to you.

[barmanjay]

AFAIK:

Until the condo docs are registered and title can be released

you will essentially be paying "rent" to the developer/builder

However this "rent" should be deducted from the agreed purchase price and once title is transferred the adjusted price will be paid out by the lawyer who is holding your funds.

The difference will be sent back to you, as you are paying rent in the meantime to the developer/builder.




* I have never run into this situation,.. I'm trying to recall from all my readings a few years ago.

[Lagerstatten.ca]

Thanks for all the info! But yeah basically it'll be paying a combo of what Rarasaurus and Barmanjay said. Just "rent" until you get title. If I get title in less than 40 days then I'll get a portion of the funds paid in return, then I would then resume my mortgage as normal.

Thanks again!