The importance of a Condominium Status Certificate
September 26, 2019
If you’re working with a realtor to purchase a resale condo, or are buying a pre-construction unit in a new condominium, chances are you have heard the words ‘Status Certificate’ a few times. What is a Status Certificate and why is it so important?
WHAT IS A STATUS CERTIFICATE?
A Status Certificate forms part of the condominium disclosure documents, which also include the condo by-laws, declaration, rules, and certificate of insurance (the “Disclosure”). The condominium corporation (the condo corp.) provides the disclosure to purchasers who are interested in buying a resale unit managed by the condo corp. and in the context of new construction, the full package of condominium documents are provided together with the Agreement of Purchase and Sale to enable the prospective purchaser to review same within the 10-day cooling off period.
WHAT SHOULD I LOOK FOR IN THE STATUS CERTIFICATE?
Common Expenses
Common expenses are a monthly fee that unit owners pay to maintain the condominium’s common elements. Common expenses can include maintenance fees, building insurance, central air conditioning, and water.
A buyer should first check to ensure that what is listed as being included in the common expenses in the Agreement of Purchase and Sale are the same as what is listed as included in the Status Certificate. Sometimes these enclosures can differ.
The Status Certificate should also list whether there will be an increase in common expenses for the current fiscal year. This is important for purchasers because it may impact your budget in the coming year.
Budget
It is common for the condo corp. not to list whether the budget will result in a surplus or deficit. However, the Status Certificate should outline whether the common expenses for the unit have increased, or not, in the current fiscal year.
The condo corp. will also list whether the board has levied any special assessments for the year. The Status Certificate will list whether the condo corp. has any knowledge of circumstances that may increase the common expenses for the unit during the budgeted period. Here, you may find a problem like outdated plumbing, insulation, or major repairs like the roof or balconies of the building. In the event of unanticipated expenditures, the corporation may have to increase common expenses or provide for a special assessment. This will once again impact the purchaser’s budget and factor into their decision process.
Reserve Fund
The Condominium Act, 1998 requires that all condominiums have a reserve fund. The reserve fund is used to pay for major repairs and replacements to the condominium’s common elements. Part of the owner’s monthly common expense fee goes towards the reserve fund each month.
The Status Certificate will list an approximate value of the reserve fund as of the date of the Status Certificate. As a potential owner, you should look for a reserve fund healthy enough to pay for any scheduled or unscheduled repairs and replacements to the condominium’s common elements. If a reserve fund is too low, its more likely that owners will be hit with a special assessment for repairs.
If a reserve fund study has been done and a plan for funding the reserve fund was completed, this will also show in the Status Certificate. Any future dates for a reserve fund study will be noted here.
Litigation
This section outlines whether the condo corp. is subject to any litigation. If there is litigation, there may be an increased risk of a special assessment. This may also result in an increase in common expenses. It is important to know the full extent of the litigation and to understand the liability unit owners may face.
Rules
The condominium may have restrictions on lifestyle choices that include things like pets, barbecues, balconies, patios, awnings, gardens, and smoking. Before you make the decision to purchase a condo, it’s important to read the condo rules and understand how they may affect your lifestyle.
Declaration/ By-Laws
It is important to review the Declaration and Description pertaining to the unit, including any exclusive use common elements areas, to determine whether or not the seller or any previous owner has carried out a structural change to the unit or modified the common elements in circumstances where the board has not given its prior written consent. It is also recommended to do an inspection of the unit to see whether a breach of the Declaration, by-laws and/or the rules has occurred as the new purchaser may be responsible.
WHY YOU NEED A LAWYER
As per the Condominium Act, 1998, a purchaser buying a resale unit should receive the Status Certificate within 10 days of requesting it. In today’s market, conditions in Agreements of Purchase and Sale relating to the review of Status Certificates are typically two days. In some cases, purchasers are making offers without a condition for Status Certificate review. However, a Status Certificate is extremely important, and it is imperative you have it reviewed by your lawyer.You will be able to make a clearer decision once you understand both the financial and legal health of the condo corp.
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