As a result of the recent rise in interest rates, purchasers of condominium units will now receive interest on their deposits. A proposed change to the Condominium Act regulations that was to come into effect on January 1, 2023, was revoked on October 21, 2022. These proposed regulations would have resulted in further increases interest payments on deposits.
Prescribed rate of interest increase – this applies now
Section 82(1) of the Condominium Act, 1998 (the “Act”), provides that the declarant shall pay interest at the prescribed rate to the purchaser on all money that a person pays on account of the purchase price of a proposed unit or that the declarant credits to the purchase price of a proposed unit. O. Reg. 48/01 Section 19(3) defines the prescribed rate of interest as follows:
- For the period from April 1 to September 30 of each year, 2% per annum below the bank rate at the end of March 31 of that year; and
- For the period from October 1 of each year to March 31 in the following year, 2% per annum below the bank rate at the end of September 30 immediately before that October.
What is the “bank rate”?
Section 19(2) of O. Reg. 48/01 provides that the bank rate established by the Bank of Canada as the minimum rate at which the Bank of Canada makes short-term advances to members of the Canadian Payments Association. As of July 13, 2022, the bank rate was increased to 2.75%.
When is Interest Payable?
Sections 82(4)-(5) of the Act provides that interest at the prescribed rate is due and payable on interim occupancy. The declarant has the option of paying interest on final closing, however the interest owing on interim closing will then bear interest at the prescribed rate and accrue to final closing, thereby increasing the amount owing to a purchaser.
