Buyers of condo units will now earn interest on their deposits as per the Condominium Act, 1998. The current situation involves a prescribed interest rate change. According to Section 82(1) of the Condominium Act, 1998, the developer is obligated to provide the purchaser with interest at the prescribed rate on all funds paid toward the proposed unit’s purchase price or credited by the developer to the purchase price.
According to O Reg. 48/01, s,19 (1)
- (1) The prescribed rate of interest for the purpose of paragraph 1 of subsection 80 (4) of the Act shall be the rate of interest that the Bank of Canada has most recently reported as the chartered bank administered interest rate for a conventional one year mortgage as of the first of the month in which the purchaser assumes interim occupancy of a proposed unit or is required to do so under the agreement of purchase and sale. O. Reg. 48/01, s. 19 (1).
It means that the interest that you will get on your deposit is based on the bank rate of interest that the Bank of Canada for a 1 year mortgage. The July 2023 bank rate is 5.25%.
The interest will be calculated from the day you pay the money until the day you can move into the condo which is the occupancy date, as stated in your agreement with the developer. The interest will be payable on the day that the developer transfers the title to the purchaser or the day that the purchaser can take possession or occupancy of the condo as stated in the purchase agreement with the developer.
Interest becomes due and payable during interim occupancy. The developer has the choice to pay interest during final closing. Nevertheless, if interest on interim closing is not paid, it will accumulate interest at the prescribed rate until final closing, potentially increasing the amount owed to the purchaser.