An occupancy fee is the monthly payment a pre-construction condo buyer makes to the developer during interim occupancy, before they legally own the unit, and it is not rent, because the buyer isn’t renting anything — they’re paying to occupy a unit they’ve already agreed to buy.
Buyers sometimes call it “phantom rent”, and the nickname captures the real complaint: “You’re paying to live there, but you don’t own the unit yet and you’re not building equity — it’s not a mortgage payment” either. It isn’t rent in the legal sense — there’s no landlord-tenant relationship or Residential Tenancies Act protection — and it isn’t a mortgage payment, because there’s no mortgage yet, since there’s no title to secure one against.
The fee is a formula, not a flat number the developer sets at will. It “typically approximates (a) interest on the unpaid balance of the purchase price, (b) an estimate of the municipal property taxes for the unit, and (c) an estimate of the monthly common expenses (condo fees)” — three separate estimates bundled into one monthly charge, none of which the buyer controls.
The detail that catches buyers off guard at closing: this money generally “does not reduce what you owe on final closing”. Every occupancy-fee payment made during a twelve- or twenty-month interim occupancy period disappears from the ledger the moment final closing happens — none of it counts as a deposit or a payment toward the purchase price.
A buyer’s occupancy fee is calculated as roughly $1,800/month interest on the unpaid balance, $250/month estimated property tax, and $320/month estimated condo fees — about $2,370/month total. Over sixteen months of interim occupancy before the building registers, that’s $37,920 paid to the developer, none of which reduces the amount owed at final closing. The buyer who understood this going in budgeted for it as a genuine carrying cost on top of a mortgage that hasn’t started yet; the buyer who assumed it worked like rent-to-own was budgeting for a different transaction than the one they signed.
See also: interim occupancy, assignment sales and the new home HST rebate.
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