Here is what Shaffiq Dar, one of the respected and trusted real estate lawyers that we work with tells us is about the necessity of making the Agreement for the purchase of a condominium unit conditional on the review of a status certificate.
Importance of Status Certificate
Section 76 of the Condominium Act, Ontario states that within 10 days after receiving a request for a status certificate (and subject to receiving payment for the same), the condominium corporation shall provide a status certificate, most importantly containing the following:
ABOUT THE CONDO
- Basic Condo Information
- Legal description of the unit and any parking and locker
ABOUT THE CONDOMINIUM BUILDING
- Contact information for the Board of Directors and Property Managers
- Whether the unit is current or in arrears in paying the monthly maintenance fees (or the common expenses)
- If there is any special assessment on the unit or building. A special assessment is sometimes levied on condominium owners when extra funds are required to pay for repairs, budget shortfalls or boosting the reserve fund.
- Special assessments can be one-time costs (e.g. $10,000 per unit) or can be spread over a number of years (e.g. an extra $200 a month for the next 3 years).
- Percentage of units that were reported as tenanted in the previous calendar year.
- This can be an important factor when deciding to buy a condominium. Buildings that have a high owner-resident ratio tend to have fewer issues and be better maintained.
- Financial and Insurance Information
- Copy of the current budget
- Details of any increases in common elements or special assessments in the current year
- Audited financial statements for the previous year
INSURANCE & AGREEMENTS
- Certificate of insurance for the building
- Any requirements on the individual owners to get unit or liability insurance
- List of all agreements the building is party to (e.g. management agreement, rental agreements)
- How much money is in the Reserve Fund.
- A portion of every common element fee is paid into the reserve fund each month. Having an adequate amount of money in the reserve fund is essential to having a financially healthy condominium corporation.
- A summary of the Reserve Fund Study.
- A Reserve Fund study is mandated by law for all condominiums in Ontario and usually occurs every 3 years. The purpose of the study is to have a professional examine all the main systems (e.g. heating, electrical, plumbing) and physical structures (garage, balconies, windows, common elements) and besides it provides a reasonable expectation as to when they will need to be replaced or repaired and an estimated cost.
- Legal Information in the Status Certificate
- Details of any judgments against the corporation
- Information on any pending lawsuits (both against and by the corporation) – for example, the corporation might be getting sued by an owner for a slip and fall accident, or the corporation might be suing the original builder for deficiencies in the building
RULES & BYLAWS
- Rules, Bylaws, and Regulations in the Status Certificate. The rules and bylaws will generally cover:
- Pet restrictions and rules
- Visitor rules and visitor parking
- Rules surrounding renting out your unit (for example, most condominiums now have a minimum term requirement of 6 months if you are renting out your unit and will have restrictions on short-term rentals such as for Airbnb)
- Use of the common elements
- Requirements if you want to make alterations or renovations to your unit
- Decor rules – often there are rules restricting the kind or colour of window coverings, what you can store on your balcony, etc.
- Parking and locker rules (e.g. you can only rent a locker to someone who lives in the building)
- Balconies and terraces (e.g. no barbeques allowed on balconies)
The rationale behind the importance of status certificate is that it provides basic and essential information concerning the financial status of a unit and of the condominium corporation.
Most importantly, its main purpose is to inform a prospective owner of the monthly common expenses, of any large increases that are anticipated, of any special assessment that is being contemplated by the board, and any arrears or lien that a particular suite might have.
What else is included in a Status Certificate?
In addition, it contains the condo declaration, by-laws, budget, reserve fund, insurance, management contract, rules, minutes of the last annual general meeting, and mention of any lawsuit involving the corporation. It will allow a potential purchaser of a condominium unit to have as much information as possible about their unit as well as the physical and fiscal situation of a condominium corporation.
The status certificate will also allow prospective owners to find out what the rules are, such as whether pets are allowed or if there are any restrictions on smoking.
Why is it important for a Buyer to know about any Special Assessment?
As soon as the board of directors of a condominium corporation becomes aware that a steep increase in the common expenses is forthcoming or a special assessment is to be levied, or a large expenditure will significantly reduce the reserve fund, this information has to be included in the status certificate. If the potential purchaser is aware if any forthcoming increase in common expenses or special assessment, he or she might decide against buying the unit or might ask for a reduction in the price of the unit.
If the information is not included in the status certificate and the purchaser finds out after closing that there will be a large increase in the common expenses or that a special assessment is levied, the purchaser may refuse to pay or may bring an action against the condominium corporation.
Having the status certificate reviewed by a real estate lawyer is a critical part of buying a condominium.
Credit: Shaffiq Dar, RealCorp Law Professional Corporation, www.real-corp-law.com