Should you have a professional review the status certificate and other supporting documents before making an offer on a condominium unit? Or should you make the offer conditional on a satisfactory review?

While this notion might seem like a luxury in a sellers’ market, with a great deal of pressure on buyers to purchase quickly and waive conditions, note that with rising interest rates and an inflationary spiral, it seems the market is more balanced than it has been in a long time. Understanding what you are getting into is critical to your future. You are not buying minor consumer goods such as a toaster, and what you do could affect the rest of your life.

Specialized practice

Lawyers and accountants with specialized practice experience in this area can often offer valuable insight into the presence or absence of financial warning signs, restrictions or rules you might not notice, and a myriad of other matters that you may not understand.

There may be rules precluding pets, or worse, only small dogs and you have a beautiful 80-pound golden retriever that cannot move in with you. Or perhaps there are no rules about noise, and your condo is located beside a heavy metal band member who practices all night.

What kind of financial warning signs? Is the corporation involved in any major lawsuits? Is the current owner of a unit you’re considering up to date on fees owing? If it’s an older building, what repairs may be needed? It is the longer-term management of reserve funds and repairs that could represent the largest financial implications and issues with respect to these matters.

Significant implications

There could be significant implications for the monthly fees associated with ownership in a condominium, as well as the possibility of special assessments (one-off requirements to pay a sum of money to the condominium corporation to help it cover a shortfall or ongoing repair costs), something that’s more likely where a reserve fund has been poorly managed.

What is a reserve fund?

All condominiums must have at least one reserve fund account where the funds collected from a portion of the maintenance fees owners pay are banked and held in reserve to finance the major repairs and renovations of the common elements of the condominium corporation. Items such as exterior walls and roofing, hallways, elevators, reception, pipes, plumbing, conduits, electrical rooms, security or recreational facilities; all these will have to undergo major repairs and replacement at some point.

When you buy a condominium unit, you are also committing to contribute a share of the funds necessary to keep those common element assets in safe and working shape. This includes not only their current operation and upkeep, but also the cost of their future repair and replacement. That can amount to a significant portion of your monthly fees, perhaps even the majority, particularly where governing boards of the condominium corporations have sought to delay the cost of fund accumulation disproportionately onto future owners.

Important documents

While your share of that obligation as an owner is limited, the total dollar figure it could represent has no limit. The forecasting of those major projects and the accumulation of the funds necessary to finance them are essential to the long-term viability of the condominium, and to ensuring that the burden of those projected costs is spread as evenly as possible over time.

Pertaining to the documents received, the package is called a “Disclosure Statement,” and there is much more than the Status Certificate. There is the Declaration, and all the attachments, such as Bylaws and Rules. Most packages are in the 60- to 80-page range. There is so much information, that you really need to consider retaining someone to review it all, so you at least get the highlights. You need to read them yourself as well. On our website, schwarzlaw.ca, there are many articles dealing with the various parts of the Disclosure Statement.