If purchasing a newly built condominium is something you are considering, you should know that brand new condominiums are closed in a unique way. When you buy a brand new condominium, there are two closings. This column will provide some background information regarding these closings to help you understand how your transaction will be closed.

Normally, when you purchase a resale property, either a house or a condominium, the Agreement of Purchase and Sale will include a closing date. This is the day when legal documents, keys and funds are exchanged between the buyer and seller. However, when a consumer buys a brand new condominium, the Agreement will include both an occupancy closing date and a final closing date. These dates are quite different and are the reason why it is often said that brand new condominiums have a dual closing.

The occupancy or interim closing date is the first date on which the owner may move into and occupy the condominium unit. However, this is not the date on which the purchaser becomes the legal owner of the condominium. Instead, the purchaser assumes legal ownership on the final closing date. On this date, the purchaser receives a deed to the condominium, thereby making them the registered owner. Between the occupancy closing and the final closing, the purchaser is only an occupant of the unit and will be obliged to comply with the terms of his or her occupancy agreement with the builder. Among other things, the occupancy agreement usually outlines financial obligations towards the builder between the interim and final closings. It is important to understand that upon the interim closing you will pay the builder only a portion of the purchase price of the condominium. The remaining amount will be payable on the final closing date.

One may wonder about the reason behind these two closings. Newly built condominiums have two closings dates because as of the interim closing date, the underlying condominium corporation has not yet been created. As a result, the purchaser cannot obtain legal title at that time by way of a deed to the unit. The deed will be registered only upon final closing, when the condominium corporation has been created. This can only occur when the condominium declaration (the legal documents that create the condominium) has been registered. The time period between the interim and final closing is usually three or four months, but it can be longer if the builder encounters problems registering the condominium declaration.

On interim closing, the builder receives only a portion of the full sale price.

These funds go towards the debt the builder incurred when building the condominium. It would be unfair for the builder to have to wait until final closing to collect any money from purchasers. This is especially true because buildings are ready for occupancy on the interim closing date. The builder receives the outstanding balance of the purchase price on final closing, when most purchasers arrange for a mortgage to finance their purchase.

Buying a newly built condominium is quite different from buying other properties. It is important to understand the difference so you can budget accordingly. Additionally, it is always wise to consult an experienced real estate lawyer before making any commitments.