New Buyers Beware: Escalating Condo Occupancy Fees

By Sheila O’Hearn, Zoocasa

Buyers who’ve managed to get in on unfinished condo projects in a market where sales are exceeding supply in the GTA real estate market, might not want to uncork the champagne bottle quite yet. Are you prepared for the financial impact of occupancy fees on your budget?

Purchasers of units in larger projects will doubtless find themselves in an interim occupancy situation (aka phantom rent) for a full year – maybe even two! Phantom rent means exactly what it suggests: paying rent to stay in your hard-earned suite until developers are ready to register the build. This occupancy fee is estimated between $10,000 and $12,000 before ownership title is obtained and mortgage payments can begin.

Phantom rent, however, isn’t the only music to be bravely faced.




While projects are being constructed to minimize capital costs to stay competitive on selling prices, the projected outlook is that building systems will likely require maintenance, repair and replacement earlier than in the past. The heads-up is that condo fees, AFTER the first year of operation, are likely to escalate quickly.

The occupancy fee includes three fees, identified as

  • maintenance fees
  • property taxes
  • interest on balance owed (typically 80 per cent, but can vary depending on your deposit structure)

The amount of occupancy fees is roughly equal to the interest on the amount outstanding on the purchase price. For example, a $500,000 condo with 25 per cent down means you must pay monthly occupancy fees roughly equal to interest payments on $375,000.

Property Tax Confusion

One source notes that calculating the correct amount owing for property tax can be problematic, leading to errors of over-payment or under-payment. The Act accounts for this error allowance by mandating that the developer must refund the purchaser for any over-payment, made as a result of miscalculation. Similarly, if the developer has under-calculated the monthly tax portion owing, then the purchaser must pay back the difference to the developer.

This margin of error in calculating the property tax portion of the occupancy fee could cost condo purchasers thousands of extra dollars, if they’re not wary. Developers are urged, therefore, to calculate the tax in the same way the City of Toronto does, and purchasers are advised to ensure their lawyers are alerted to this problem, when they scrutinize tax calculations used by developers for occupancy fees.

Should buyers be discouraged from buying into sizzling Toronto condo market? The consensus is no. Historically, occupancy fees are “normal” and there is no way around it, and the supply problem is not likely to improve any time soon and, in fact, could drive condo prices even higher. With foresight, however, potential buyers are wise to take the opportunity to learn how deeply they might have to reach into their financial pockets, so they can make informed decisions about whether to try and buy into the condo market now, or wait.

Zoocasa is a real estate brokerage based in Toronto.

Sheila O’Hearn is a freelance and creative writer, and has worn many hats throughout her career, from general staff reporter to magazine editor. She has a keen interest in business entrepreneurship and currently writes for several outlets. Visit her at LinkedIn for more info.

You may also be interested in: Should You Buy a Condo on Concept?


Writer: Sheila O’Hearn 

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