I was speaking to a client of mine just the other day – a first time home buyer – who was remarking on how much of the process was a learning experience for him.
It can be something that realtors take for granted, despite the fact that we deal with the buying and selling process every day, and much of it feels intuitive; there are many things the average buyer or seller requires clarity on.
This can be true for first-time buyers, but it can also be true of those seasoned in real estate transactions. A lot has changed in how real estate transactions work in Toronto over the past couple of decades.
As a result, it’s the job of a good Realtor to explain all the relevant processes, terminology and considerations to their client to ensure they are fully prepared to act on what is likely the largest financial transaction of their life.
One such example of this was a dialogue I had was a conversation I had with a buyer who purchased their first condo last month. This individual asked me to clarify the difference between the closing date and the possession date, as these were two terms they had heard thrown out over the course of our buying process and negotiations.
It was a fair question – both terms had been used to refer to the same date in this case, so I thought it would be worthwhile to outline the differences.
Does Closing Date = Possession Date?
In your average real estate transaction in Toronto, closing date and possession date can be used synonymously. More often than not, they land on the same day. Further, they are almost always used to describe the same concept to a buyer or seller, the day the property is transferred and assumes utility and ownership of the property.
However, it’s important to understand and differentiate the differences.
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What Does Closing Date Mean in Real Estate?
The closing date is the date in which a sale in real estate is finalized, and ownership is legally transferred from one party to another. The money is exchanged (often with the assistance of a mortgage from the bank, which goes in effect that day), and the seller receives the proceeds of the sale in exchange for the buyer receiving ownership of the house in title.
This is also the day when all the paperwork for the transaction is finalized, both from the perspective of the lawyers for both parties and the ownership records for the requisite governing bodies.
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What Does Possession Date Mean in Real Estate?
In contrast, the possession date is the date where the buyer of the property can actually move into the house and begin to get the utility of living in or using the property. The buyer will receive the keys, and they will get access to the property and dwellings on the property, and have control over the use of the property.
What’s the Difference Between Closing and Possession?
You might be asking, “Aren’t those two things going to happen on the same day?” In almost every case where residential real estate is transacted, that is correct. A buyer will receive the keys after the property legally closes (the closing date), and will be able to move into the property that night if they so choose (possession date).
Even if they choose not to move in that day, if the agreement states they have unabated access as of closing, the possession date would still be considered the same day as closing, even if the physical occupation doesn’t begin.
Do you have more questions about buying a home in Toronto? Check these posts out next:
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When Closing and Possession Happen on Different Days
While rare, there are some examples of transactions where the closing doesn’t land on the same day as occupancy.
The most common example of that would be the purchase of a new-build property. Buying a condominium directly from the developer often comes with an agreement that, as soon as your unit is completed and can safely be used, the occupancy period begins and an “occupancy fee” starts being charged (a different topic for a different time). However, the property doesn’t actually close until the entire building is completed and the condo corporation is officially registered, at which point the transaction is finalized legally, “closes”, and ownership transfers from the developer to the new buyer.
In certain other cases, such as a seller needing additional time to move out, or a tenanted unit needing to be given the requisite legal notice to vacate for personal use, the occupancy date can occur after the closing date.
For example, the property closes on January 15th; however, the tenant is going to be in the unit until the end of the sixty-day notice, which expires on January 31st, or the buyer needs three additional days to move out completely, and the occupancy date becomes January 18th. While these examples are rare, they can happen. They do, however, present additional complications, such as responsibilities of utility usage and payment, insurance coverage, and challenges if the agreed-upon delayed occupancy is not able to be met.
Moving up or downsizing? Read more about whether it’s better to buy a home first or sell first.
It’s Important to Be an Educated Buyer or Seller
More often than not, closing date and occupancy date can be used to refer to the same date, and mean effectively the same thing. However, there is a difference between the two terms, and understanding those differences will ensure that a party to a real estate transaction will be prepared to take on any challenges that come their way throughout the process and are equipped to navigate a closing no matter how conventional or otherwise.
If you have any questions on closing dates, occupancy, nuances of possession of tenanted properties or anything related to the real estate transaction in Toronto, please do not hesitate to reach out. We’re always happy to chat, and love hearing from you.
Get in touch today by calling 416.642.2660, emailing admin@torontorealtygroup.com, or filling out the from on this page.
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