Owning a new unit on a newly built condominium sounds exciting. However, for new owners out there, the right to lease during the occupancy period might sound new.
What does it mean to lease during occupancy? We’ll discuss the rights and obligations of the owner, potential tenant, and developer. We’ll also look at the pros and cons of leasing out your condo unit during the occupancy period.
The right to lease during occupancy: what it means
One of the questions that the buyer of a new condo can raise is their right to lease during the occupancy period.
To answer this, we need to first understand what an occupancy period is and whether this period applies to all properties.
Next, we need to know how to determine whether the buyer has a right to lease during the occupancy period or not.
Interim occupancy period
When buying a new condo unit, there are two periods that buyers must be aware of:
- occupancy closing date: the time when the buyer can occupy the unit - when the keys to the unit are given to the buyer
- final closing date: the time when the buyer becomes the true owner of the unit - when the title to the condo unit is transferred to the buyer
The interim occupancy period is that time between these two closings. It is when the buyer can occupy the unit but does not technically own it yet because of factors like construction and registration.
For example, the regulatory body for constructing condos may deem it safe to occupy the units already. However, its full construction is not yet finished, or there are registration requirements that must still be completed.
Also called “occupancy” for short, the interim occupancy period only applies to newly built condos, not to other real properties.
Know more about the right to lease during the occupancy in this video:
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Occupancy fees
Whether you have the right to lease during the occupancy period or not, you may still be required to pay the occupancy fees.
Occupancy fees are payment for your right to occupy and use the condo unit that you own during the interim occupancy period. This is not deducted from the principal amount that you owe to the condo. This is a separate fee charged during the occupancy.
Right to lease during the occupancy
So, the question remains, when do you have a right to lease during the occupancy period? It all depends on your contract with your condo developer.
In some cases, your contract may have a clause on the right to lease during occupancy. This will allow you to lease or rent out your unit during this period. Be wary of some of its terms, which may still require consent from the developer.
In other cases, your contract may not have such a clause, but you may be allowed by your condo developer to rent out your unit during occupancy if you just ask them.
The occupancy period ends after the final closing date. This means that you can now do whatever you want with your unit, including leasing it out to someone else.
When in doubt, consult a property leasing lawyer. Presenting to them your case, plus your contract, they can advise you whether you have the right to lease during the occupancy period.
Advantages of leasing during occupancy
Here are some of the advantages of leasing during the occupancy period:
- additional income: as a condo unit buyer, this will be additional passive revenue for you if you do not want to occupy it yet during the occupancy period
- offset the occupancy fees: your additional income from renting out your condo can be used to pay occupancy fees
Disadvantages of leasing during occupancy
On the other hand, there are also disadvantages when you’re renting out your condo unit during the occupancy period:
- lower rent fees: since the condo is not yet finished, or some amenities are to be completed, you may have to charge lower rent fees to find a tenant
- real estate agent fees: you may have to hire a real estate agent if you’re struggling to find a tenant, which can cost you additional expenses
Obligations of owner, tenant, and developer during occupancy
If you decide to lease during the occupancy period, you must meet certain rights and obligations as a landlord.
At the same time, your tenant also enjoys some privileges and responsibilities when renting your unit during this period.
Your relationship with your tenant is best explained in your lease contract for rental property. In drafting your contract, you may want to consult a property leasing lawyer.
Here are some of your responsibilities when leasing out your unit during the occupancy period:
- respect your tenant’s right to peacefully enjoy and use the property
- do some major maintenance and repair work
- follow your contract’s terms as to eviction, rent increases, and lease termination
Your tenant also enjoys some rights, such as:
- paying the rent on time, as agreed in the contract (e.g. when and how to pay)
- informing the landlord of repairs that must be done in the unit
- keeping the unit in good condition during the period of the lease
Your condo developer also has some obligations, not just to your tenant, but also to you as an owner. Some of these obligations include:
- to complete the promised amenities
- to ensure that the necessary utilities are available for occupancy
- to address any problems until the closing date
Know your right to lease during occupancy
Understanding your right to lease during occupancy is important if you plan to rent out your new condo during this period. While you can make extra money and cover some costs by renting out your unit early, there are a few scenarios to watch out for. For example, due to limited amenities, you may need to lower your rent. Finding a tenant can be a challenge too.
To make sure everything goes smoothly, talk to a property leasing lawyer. They can help you understand your contract better, giving you peace of mind as a property owner and landlord.
For other details on this right to lease during occupancy in Canada, hear more from the Lexpert-ranked best property leasing lawyers in Canada.