Condo buyers should prepare for 'phantom' rent

[gei]

yeesh... what a stupid article

if condo buyers are not aware of this 'phantom rent' they should not be buying real estate in the first place

 

[longre]

yeesh... what a stupid article

if condo buyers are not aware of this 'phantom rent' they should not be buying real estate in the first place

^ Agree with gei

 

[cdr108]

Think about what you just said for a minute....if he had the money from another property, then why couldn't he afford the rent for a few months??? Doesn't make sense...

The main issue is why should he HAVE to pay 'rent' if he was able to pay the full price. This 'rent' isn't to his benefit and eating up his savings, which could be $2,000/m x 12 months like mot's situation.

And then there's the issue of paying for maintenance fees for amenities that aren't completed.

Yes, the occupancy fee is disclosed in the Sales Agreement but I've also been told my MANY sales agent that it shouldn't take more than 3 months. We all know how reliable those sources are.

There are many factors as stated in the comments from slow city bureacracy; incompetant builders who don't file property; builders who move a majority of their trades to another project once the building is 'substantially complete' so that buyers have no choice but to occupy a construction zone; etc, etc, are beyond the purchasers control, yet they are the ones bearing the cost.

It's ironic that you are against paying a landlord rent because it doesn't provide you any equity; however, you are totally comfortable with paying a developer 'phantom rent' which doesn't go towards your mortgage hence also provides no equity.

 

[longre]

^ he has to pay rent because the building is not registered and title cannot be legally transferred. What do you suggest is fair under the circumstances? A lender can't register a mortgage against the unit if the building doesn't have condominium status. I suppose a deal could be worked out where an all cash buyer would pay significantly less phantom rent but then he wouldn't have the cash and earning potential of the cash. I'm sure you follow my point.

Again, the builder wants the title registered more than the buyer! How do you propose this very common situation be addressed? Do you think it's fair for the buyer to occupy the suite for free? $2000 is an arbitrary number of no value. The suite could be $200,000-$2,000,000. We have no idea. A savy buyer would try and put in his contract that he doesn't have to take occupancy until the condo title is registered. I bet some developers would take that offer in today's catastrophic climate.

Again, when you buy something off a floor plan instead of something that's actually built and finished (as opposed to an active construction site) this is the reality that you face.

 

[TKTKTK]

A savy buyer would try and put in his contract that he doesn't have to take occupancy until the condo title is registered.

Why isn't this the norm?

The whole concept is stupid. The building is a condo, it's going to be registered as a condo. The piece of paper officiating that is so much less substantial than the giant bricks and mortar reality.

It's just red tape.

 

[cdr108]

^ he has to pay rent because the building is not registered and title cannot be legally transferred. What do you suggest is fair under the circumstances? A lender can't register a mortgage against the unit if the building doesn't have condominium status. I suppose a deal could be worked out where an all cash buyer would pay significantly less phantom rent but then he wouldn't have the cash and earning potential of the cash. I'm sure you follow my point.

Again, the builder wants the title registered more than the buyer! How do you propose this very common situation be addressed? Do you think it's fair for the buyer to occupy the suite for free? $2000 is an arbitrary number of no value. The suite could be $200,000-$2,000,000. We have no idea. A savy buyer would try and put in his contract that he doesn't have to take occupancy until the condo title is registered. I bet some developers would take that offer in today's catastrophic climate.

Again, when you buy something off a floor plan instead of something that's actually built and finished (as opposed to an active construction site) this is the reality that you face.

I guess you feel comfortable for paying rent in a construction zone.
I don't think the buyer should occupy the unit until the building has been registered.

As you noted, the building doesn't have condominium status so a mortgage can't be registered. I have heard many instances where the condo status has been held up because the builder has not completed construction to the satisfaction to be properly registered.

As long as the builder is getting the occupany fees, there is less incentive for them to rush to have the title registered since their costs are being covered by the buyers.

 

[condoboy]

Why isn't this the norm?

The whole concept is stupid. The building is a condo, it's going to be registered as a condo. The piece of paper officiating that is so much less substantial than the giant bricks and mortar reality.

It's just red tape.

It is stupid...but without title ownership of the unit (registered with the government), you could have a thousand skyscrapers "bricks and mortar" you still wouldn't be able to close your deal!

 

[TKTKTK]

It is stupid...but without title ownership of the unit (registered with the government), you could have a thousand skyscrapers "bricks and mortar" you still wouldn't be able to close your deal!

Absolutely. Which is why it's ridiculous that consumers put up with those shenanigans.

There needs to be a massive overhaul in the way that Condos are administered. We wouldn't tolerate these kinds of uncertainties with any other product - nevermind one that costs over $200,000.

 

[mdot]

Why isn't this the norm?

The whole concept is stupid. The building is a condo, it's going to be registered as a condo. The piece of paper officiating that is so much less substantial than the giant bricks and mortar reality.

It's just red tape.

Anyone who thinks the concept is stupid should avoid buying a preconstruction condo unit. Generally people buy preconstruction because its cheaper than buying a resale (not really true anymore but it was a few of years ago), so its a bit over the top to complain this much about interim occupancy fees when that's the tradeoff you accept when you try to get a unit at a discount.

I think what the person at Star has to remember is that they likely purchased their unit for a much lower price than they could have secured on a similar unit offered by a reputable builder.

Star was priced much lower than competing buildings in the neighborhood as there's a definite risk going with an untested builder. I can understand being upset with the length of the interim occupancy period, but if you want to reduce the risk of a long occupancy, buy in a small building (or a unit on a very high floor if you're a high-rise lover) or one that is offered by a good builder. Such a unit will cost significantly more, but if you really hate the idea of paying a phantom mortgage and the uncertainty associated with going with a shoddy builder then the extra money is worth it.

I get being mad at the builder if they are purposely delaying occupancy to squeeze rent out of you, but this doesn't happen often as builders stand to gain a lot more through closing on time and cashing in on their profits than they do from collecting rent.

 

[Mot]

^ he has to pay rent because the building is not registered and title cannot be legally transferred. What do you suggest is fair under the circumstances? A lender can't register a mortgage against the unit if the building doesn't have condominium status. I suppose a deal could be worked out where an all cash buyer would pay significantly less phantom rent but then he wouldn't have the cash and earning potential of the cash. I'm sure you follow my point.

Again, the builder wants the title registered more than the buyer! How do you propose this very common situation be addressed? Do you think it's fair for the buyer to occupy the suite for free? $2000 is an arbitrary number of no value. The suite could be $200,000-$2,000,000. We have no idea. A savy buyer would try and put in his contract that he doesn't have to take occupancy until the condo title is registered. I bet some developers would take that offer in today's catastrophic climate.

Again, when you buy something off a floor plan instead of something that's actually built and finished (as opposed to an active construction site) this is the reality that you face.

For your reference the suite cost $250K. Now the current mortgage rates are far lower than the 7.35% they are using to factor their fee, it's robbery by the developers to use the much higher bank rate than the conventional mortgages rates people are paying. I knew about it but only expected it for a few months, not a year. Do I expect to live here for free, hell no, did I expect to be ripped off, hell no... but I am.

I am provinding this information to help others not so people can put their noses in the air about how much smarter than they than the rest of us. I was told and expected registration last spring, early summer at latest. The builder, my lawyer, and the real estate sales people all said so. I am now looking at next spring and my builder still can't figure out how to properly submit the documents needed for the process. I know because I check with the city on a weekly basis. I am sharing this so others learn from it.

One thing is true, the money I am loosing in the phantom rent could been used to buy a Tridel and this would not be happening. Buyer beware.

 

[TKTKTK]

Anyone who thinks the concept is stupid should avoid buying a preconstruction condo unit. Generally people buy preconstruction because its cheaper than buying a resale (not really true anymore but it was a few of years ago), so its a bit over the top to complain this much about interim occupancy fees when that's the tradeoff you accept when you try to get a unit at a discount.

You're only excusing poor industry practices, which is why they've been allowed to continue. There are still plenty of reasons to offer preconstruction condos at a discount, the uncertainty of when your building will be successfully registered as the condo that it is shouldn't be one of them. The occupancy fee is essentially an incalculable additional fee; will your new condo cost you $2,000 or $24,000 (or more?) beyond the agreed purchase price?

Condo owners in this city should be taking it to the streets, not taking it lying down.

 

[AKS]

I read somewhere there's a law in place to force builders to close within a 6 month period or face a penalty, so future pre-occupancy situation should be better.

I can understand Mot's situation. I was in a similar but luckier situation. I was one of the last to move in so final closing was around 7 months and I was unhappy about it. But look on the bright side, at least you're paying less than the people in the penthouse or those who have 400k at 7.35% of interest to pay.

I can sympathize with those who can't even close for a year because sometimes they have a good mortgage rate locked in which is about to expire but they can't take the mortgage yet because the building isn't registered. Course I can't really blame the builder completely, it was all politics between cityplace, go train and the city. When I purchased, I never thought this situation would occur. I was told Cityplace had a good relationship with the city. So much for that, took a whole year to close since the first person moved in.

 

[longre]

For your reference the suite cost $250K. Now the current mortgage rates are far lower than the 7.35% they are using to factor their fee, it's robbery by the developers to use the much higher bank rate than the conventional mortgages rates people are paying. I knew about it but only expected it for a few months, not a year. Do I expect to live here for free, hell no, did I expect to be ripped off, hell no... but I am.

I am provinding this information to help others not so people can put their noses in the air about how much smarter than they than the rest of us. I was told and expected registration last spring, early summer at latest. The builder, my lawyer, and the real estate sales people all said so. I am now looking at next spring and my builder still can't figure out how to properly submit the documents needed for the process. I know because I check with the city on a weekly basis. I am sharing this so others learn from it.

One thing is true, the money I am loosing in the phantom rent could been used to buy a Tridel and this would not be happening. Buyer beware.

You're paying $2000 in phantom rent on a $250,000 unit?

Ok, let's look at that:

$250,000 @ 6% = $1,250 in interest
$250,000 @1.1%= $230 in property tax
750 sq. ft. @$.50/sq. ft. = $325 in condo fees
Insurance = $100

________
$1,905/month

You're not exactly getting hosed friend! Also, who covers the utility costs?

Either way, the issue really is whether you should be forced to move in when the building isn't properly completed. The condo docs contain all this info and if your lawyer carefully explained this to you you would/should have been aware of the risk.

 

[androiduk]

After reading this, I think if I was buying a new condo I would ask the bank to include any payments incurred up to the point of registration in the mortgage. Anyway Mot, it's worthwhile you started this thread. Buying a condo for the first time must be incredibly complicated and salespeople are not always forthcoming about all the in and outs of the deal. I am kind of surprised the banks don't bring it up since it can be onerous if your not prepared for it.

 

[AKS]

After reading this, I think if I was buying a new condo I would ask the bank to include any payments incurred up to the point of registration in the mortgage. Anyway Mot, it's worthwhile you started this thread. Buying a condo for the first time must be incredibly complicated and salespeople are not always forthcoming about all the in and outs of the deal. I am kind of surprised the banks don't bring it up since it can be onerous if your not prepared for it.

I don't think you have a choice in the matter to ask the bank to include any payments incurred up to the point of registration. The builder is borrowing it on your behalf unless you know of a way around it. I paid around $7200 in interest which I didn't need to cuz I had the full amount to pay it off. Paying the bank at 7.35% interest and the bank paying me 3% interest back doesn't really save me much. Plus there's tax on the 3% interest earned.