Pre-Construction Condo Closing in Ontario: Interim Occupancy, the PDI, and Tarion Warranty Explained

Step 1: Interim Occupancy — You Move In, But You Don't Own It Yet

Pre-construction condo towers are typically occupied floor by floor. Once your floor is approved for occupancy but the whole building has not yet been registered as a condominium corporation, the builder gives you an occupancy date. You can move in, finish, or rent the unit — but title still sits with the builder.

This period can last anywhere from a few weeks to well over a year. In high-rises, lower floors often take occupancy long before upper floors. The key thing to understand: you are living there, but your mortgage has not started and you are not yet the legal owner.

Step 2: Understand the Three Parts of Your Occupancy Fee

The monthly occupancy fee you pay during interim occupancy is not a mortgage payment, does not reduce the purchase price, and builds no equity. According to multiple Ontario real estate sources, it is made up of three components:

• Interest on the unpaid balance — the builder charges interest on the portion of the purchase price you have not yet paid (the large amount due at final closing). This is not your personal mortgage rate; it is set with reference to the Bank of Canada’s one-year conventional mortgage rate.
• Estimated property taxes — an estimate based on comparable units, not the city’s actual assessed amount.
• Estimated common-element contribution (maintenance fee) — your unit’s projected monthly share of the building’s shared costs: cleaning, landscaping, security, and utilities for common areas.

Because none of this money goes toward principal or equity, it is called “phantom rent.” The longer your interim occupancy runs, the more you pay with nothing to show for it — so always ask, before you buy, how long the interim occupancy period is expected to last.

Step 3: The Pre-Delivery Inspection (PDI) — Your One Formal Walk-Through Before the Keys

Before you take possession, the builder is required to conduct a thorough, floor-by-floor walk-through with you (or your designate). This is the Pre-Delivery Inspection, or PDI. According to Tarion, it is one of your first opportunities to view the completed unit before possession and to document problems, and the builder will also show you how to operate systems like ventilation, plumbing, and heating.

During the PDI, identify anything damaged, incomplete, or missing, anything not operating properly, or anything you cannot assess because it is obscured. Inside, look for chipped or cracked tiles, scratches on countertops or mirrors, floor and wall damage, and doors and windows that don’t open, close, or lock properly. Everything must be recorded on the PDI Form, which you sign — this form is the key record for future Tarion warranty claims, so take photos of every issue. Tarion publishes a downloadable PDI checklist; print it and bring it.

The builder’s PDI is a procedural walk-through, not a professional inspection. If your budget allows, consider bringing a licensed home inspector (验房师) at your own cost — they often catch structural, HVAC, or waterproofing issues an untrained eye misses.

Tarion Warranty: The 1-Year / 2-Year / 7-Year Structure

Every new home in Ontario, including condo units, comes with a statutory Tarion warranty. According to Tarion, coverage begins when you sign the Agreement of Purchase and Sale and lasts up to seven years — and it stays with the home even if it is sold. After you take possession, coverage is divided into three tiers:

• One-year warranty — covers defects in workmanship and materials and guarantees the home meets the Ontario Building Code.
• Two-year warranty — extends coverage to items such as water penetration and the heating and electrical systems.
• Seven-year warranty — covers Major Structural Defects (MSD), running from the date you take possession to the seventh anniversary of that date.

According to Tarion, the aggregate maximum MSD coverage for a condominium unit is $300,000. On top of this come pre-possession protections — deposit protection and delayed-occupancy compensation — covered below.

According to Tarion, condominium deposits must be held in trust under the Condominium Act, and Tarion provides deposit protection of up to $20,000 plus a limited amount of accrued interest, including money you put toward upgrades and extras.

On timing: you and the builder agree on a Firm Occupancy Date. According to Tarion, the builder must give at least 90 days’ written notice to change or extend an occupancy date. If the agreed date is not met, the builder must pay delayed-occupancy compensation up to a maximum of $7,500, which includes $150 per day for direct living expenses (accommodation and meals, no receipts required). If the builder fails to give adequate notice of a delay, you are entitled to a further $1,500 ($150 × 10 days). Note that during an “unavoidable delay” — a strike, fire, act of God, or pandemic — the builder may extend deadlines without paying compensation.

Many buyers are caught off guard at final closing by a stack of closing adjustments and levies. The commonly overlooked ones:

• Development charges and levies — municipal charges the builder passes on to you, which can run into the thousands or tens of thousands. Negotiate a cap on these in your agreement; without one, they are an open-ended cost at closing.
• HST — pre-construction prices usually include HST and assume you qualify for the new-housing or rental rebate. If your intended use doesn’t qualify, you may owe a substantial amount. Confirm before your use changes.
• Other items — the Tarion enrolment fee, utility meter hook-ups, the builder’s lawyer administration fee, two months of occupancy fees held as a reserve, and land transfer tax.

These costs and cap clauses all live in your Agreement of Purchase and Sale — have a real estate lawyer review the agreement clause by clause before you commit (ideally within the cooling-off period). Pre-construction agreements are far more complex than resale contracts; the development-charge cap, HST assumptions, and delay provisions all deserve professional scrutiny.

Is the occupancy fee a mortgage payment? Does it count toward my purchase price?

Neither. The occupancy fee is made up of interest on the unpaid balance, estimated property taxes, and an estimated common-element contribution. It does not reduce principal or build equity, which is why it is called "phantom rent." Your actual mortgage begins only at final closing, when title transfers to you.

How long does interim occupancy usually last?

There is no fixed length — it can run from a few weeks to well over a year. In high-rises, lower floors often take occupancy long before upper floors, and final closing can only happen once the entire building is complete and registered as a condominium corporation. Ask the builder for the expected interim occupancy period before you buy, since it determines how much occupancy fee you'll pay.

Do I have to attend the PDI? Can someone go for me?

The PDI is a builder-required walk-through before possession, and you or your designate must attend and sign the PDI Form. It is the key record for future Tarion warranty claims, so go through it item by item and take photos. If your budget allows, you can bring a licensed home inspector at your own cost to catch professional-level issues.

When does the Tarion 7-year warranty start?

According to Tarion, the seven-year Major Structural Defect warranty runs from the date you take possession (interim occupancy / receiving keys) to the seventh anniversary of that date. Overall coverage begins when you sign the Agreement of Purchase and Sale and stays with the home if it's sold.

If the builder delays my move-in, do I get compensated?

According to Tarion, if the agreed Firm Occupancy Date is not met, the builder must pay delayed-occupancy compensation up to $7,500, including $150 per day for living expenses, plus a further $1,500 if adequate notice wasn't given. However, "unavoidable delays" such as strikes, acts of God, or a pandemic do not trigger compensation.