Paying cash on interim closing or final closing

[_jonas_]

My interim occupancy is coming up in the next few months and I have the funds available to pay for the entire cost of the unit (which I plan on occupying).

My question is, should I have my lawyer make an amendment to my contract so that I can pay off the condo at interim closing, or should I just wait until building registration/final closing?

I would like to pay at interim closing so that I don't have to be stuck with phantom rent during the months leading up to final closing. However, I was also advised that paying everything up front prior to building registration is a bad idea. Can anyone expand on this reason?

Any advice or feedback would be much appreciated!

 

[carturo15]

with the current low interest rates, wouldn't be better for you to take advantage of this and use your cash to make other investments?

 

[_jonas_]

with the current low interest rates, wouldn't be better for you to take advantage of this and use your cash to make other investments?

Yes, I've considered that as well. My investment advisor on the other hand offered the following alternatives:
1) Calculate how much I would have been paying a month on a mortgage and put this amount towards investments
2) Get a LoC (with an interest rate lower than the rate of return) amounting to the value of the property and put the funds in investments. Part of the interest generated on a monthly basis would be used to pay the LoC payments. Also, the loan used to purchase investments would be tax deductible.

 

[andrejeffry]

My question is, should I have my lawyer make an amendment to my contract so that I can pay off the condo at interim closing, or should I just wait until building registration/final closing?

You can't pay full at interim closing date, as registration is not ready to take place. In order to register the building/developer have to fulfill certain criterias.

What you can do is to make an amendment to move your interim closing date to days just before the building ready to register to avoid paying months of phantom rent

 

[_jonas_]

You can't pay full at interim closing date, as registration is not ready to take place. In order to register the building/developer have to fulfill certain criterias.

What you can do is to make an amendment to move your interim closing date to days just before the building ready to register to avoid paying months of phantom rent

Oh really? hmm.. I spoke with another purchaser in my building and he said that his contract was amended to show that he owes the entire balance outstanding on closing instead of just the remainder of the deposits. I'll have to ask again.

 

[mdot]

Oh really? hmm.. I spoke with another purchaser in my building and he said that his contract was amended to show that he owes the entire balance outstanding on closing instead of just the remainder of the deposits. I'll have to ask again.

The Condo Act allows you to pay out the full balance outstanding on your unit at interim closing. Builders cannot contract out of this provision of the Condo Act, so you should be able to get your APS amended.

 

[shelfun]

I don't have any "professional" comment/advice but here's my personal take.

I am one who do not like to have debt. My guess is that for most average people it's close to impossible to pay for a home without loan. My husband & I had arrange to pay 50% down on a condo under construction. We are hoping to save enough to pay more by the time it's ready for interim occupancy.

Should our income decrease for whatever reason, the last thing I want to worry about is the roof over my head. Let's say I'm able to pay $2k in mortgage & I only need to pay $1k cos of the smaller loan, I'll invest the other $1k every month (must have discipline). At any time, I can stop the investment if it's not feesible anymore (for whatever reason).

I read in some investment books that regular investments will give you better return in the long run unless you have impacable sense of timing.

Just my 2 cents worth.

 

[andrejeffry]

The Condo Act allows you to pay out the full balance outstanding on your unit at interim closing. Builders cannot contract out of this provision of the Condo Act, so you should be able to get your APS amended.

ok I stand corrected

 

[_jonas_]

The Condo Act allows you to pay out the full balance outstanding on your unit at interim closing. Builders cannot contract out of this provision of the Condo Act, so you should be able to get your APS amended.

Thanks for the info! I actually went through the condo act after you mentioned this and found the following:

"Right to pay in full

(3) Despite any provision to the contrary in the agreement of purchase and sale, before the expiry of the time period mentioned in subsection 73 (2) for rescinding the agreement, a purchaser may elect to pay in full, on assuming interim occupancy of the proposed unit, the balance of the purchase price remaining after deducting the amounts paid under the agreement before assuming interim occupancy. 1998, c. 19, s. 80 (3)." Link

and this:

"Purchasers of new units will have the right to pay the full purchase price of a unit on interim occupancy rather than pay interest costs to the declarant."

 

[mdot]

I would like to pay at interim closing so that I don't have to be stuck with phantom rent during the months leading up to final closing. However, I was also advised that paying everything up front prior to building registration is a bad idea. Can anyone expand on this reason?

Any advice or feedback would be much appreciated!

Some feel uncomfortable handing over a lot of money before they get title. Money paid at interim closing will likely be held in trust until the building is registered, but if it isn't the Tarion program will not cover deposit losses beyond $40,000, so if your interim closing payoff was not held in trust you could be in big trouble if something prevents the registration of the building.

 

[projectcontrol]

Thanks for the info! I actually went through the condo act after you mentioned this and found the following:

"Right to pay in full

(3) Despite any provision to the contrary in the agreement of purchase and sale, before the expiry of the time period mentioned in subsection 73 (2) for rescinding the agreement, a purchaser may elect to pay in full, on assuming interim occupancy of the proposed unit, the balance of the purchase price remaining after deducting the amounts paid under the agreement before assuming interim occupancy. 1998, c. 19, s. 80 (3)." Link

and this:

"Purchasers of new units will have the right to pay the full purchase price of a unit on interim occupancy rather than pay interest costs to the declarant."

The right to pay the full balance of the purchase price on interim occupancy exist only if the purchaser specify that in their agreement of purchaser and sale before the end of the 10 days cooling off period according to the condo act - see subsection 73 (2). If you don't have that provision specify in your agreement of purchase & sale, one way is request the vendor (builder) to consider allowing you to pay the full balance on interim closing.
In most cases, the vendor will not allowed it because their construction financing terms and condition is already in place to include the full balance for your unit.

 

[_jonas_]

The right to pay the full balance of the purchase price on interim occupancy exist only if the purchaser specify that in their agreement of purchaser and sale before the end of the 10 days cooling off period according to the condo act - see subsection 73 (2). If you don't have that provision specify in your agreement of purchase & sale, one way is request the vendor (builder) to consider allowing you to pay the full balance on interim closing.
In most cases, the vendor will not allowed it because their construction financing terms and condition is already in place to include the full balance for your unit.

Darn it.. I guess the only way I'll find out is when my lawyer gets in touch with the developer. I've asked him to do this already and he said it's not necessary until a month or two prior to occupancy. We'll see what happens.

Anyway, thanks everyone for the advice and feedback!

 

[AKS]

Does the buyer need consent from the builder to pay in full? It seems like under the new Condo Act, the buyer only needs to submit a letter within the 10 day cooling period to inform the builder about it.

NOTE: Now under the new Act, a purchaser (who has the available funds) can avoid paying interest during occupancy if a written notice is given to the builder during the 10 day "cooling-off period" that the cash balance of the purchase price will be paid upon the occupancy date. (A buyer who needs a mortgage cannot do this since a mortgage cannot be registered until the condominium corporation is registered).
http://www.homelegalcost.com/condoact.asp

 

[simuls]

What "new" Condo Act? It hasn't changed in a long time. Although there is one that passed 2nd reading that Rosario Marchese introduced.

 

[AKS]

it's not a new act. I don't know if the builders will allow you to do it. But the condo act says

Right to pay in full

(3) Despite any provision to the contrary in the agreement of purchase and sale, before the expiry of the time period mentioned in subsection 73 (2) for rescinding the agreement, a purchaser may elect to pay in full, on assuming interim occupancy of the proposed unit, the balance of the purchase price remaining after deducting the amounts paid under the agreement before assuming interim occupancy. 1998, c. 19, s. 80 (3).

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_98c19_e.htm#BK96