Understanding Interim Occupancy Fees: Why Your Payments Might Be Higher Than Expected
If you’ve recently received an interim statement of adjustments for your new condominium, you
might be feeling some “sticker shock” regarding your occupancy fees. As a real estate lawyer,
I’ve been receiving many calls lately from concerned buyers who are finding these costs to be
much higher than they initially anticipated.
Here is a breakdown of what these fees are, why they have increased so significantly, and how
you can prepare for your move-in date.
What is an Occupancy Fee?
When you buy a new construction condo, there is often a period between the day you move in
and the day you officially own the unit. This happens because the building is ready for
residents, but the condominium declaration has not yet been registered to transfer ownership
to you.
During this interim period, you are effectively renting your unit from the builder. You have the
right to live there, even if some common elements are not yet finished, but you do not yet hold
the title.
The Three Components of Your Fee
Your interim occupancy agreement details exactly how your monthly payment is calculated. It is
comprised of three main parts:
● Estimated Realty Taxes: An estimate of the property taxes for your unit.
● Common Expenses: Your contribution to the building’s maintenance and operations.
● Interest on the Unpaid Balance: This is the interest you must pay the builder on the
remaining purchase price of your home.
Why are fees so high right at times?
The primary driver of the “price shocks” is the interest rate. several years ago, interest
rates for these calculations were hovering around 2.5% to 3%. In the years that followed, many buyers are saw rates as high as 8%.
When higher interest rates are used on the unpaid balance of your purchase price, the monthly
cost can be substantial:
● $750,000 Unpaid Balance: You could be looking at approximately $5,000 per month in
interest alone.
● $1,000,000 Unpaid Balance: The interest expense could rise to roughly $6,650 per
month.
These figures are in addition to your realty taxes and common expenses.
How to Prepare
While these fees are technically outlined in your original agreement, the rapid change in interest
rates can catch you off guard. To avoid surprises:
- Review your Interim Statement: Look closely at the interest rate and the unpaid balance
listed by your builder. - Budget Ahead: If your occupancy date is approaching in the next few months, use
current interest rates to estimate your monthly carrying costs. - Consult a Professional: These agreements can be complex and are not one-size-fits-all.
Note: This post is intended for informational purposes and does not constitute
legal advice for your specific condominium purchase.
If you would like me to review your specific occupancy agreement or help you navigate your
upcoming closing, please feel free to reach out to my office directly.
