Status Certificate: Uncovering The MUST-KNOW Details When Purchasing A Condo
Have you ever wondered what a Status Certificate is? Or why is it so important when purchasing a resale condominium? Or what are the repercussions if your lawyer doesn't review it? If so, you're in luck because this article will answer those questions and more!
So, if you're considering purchasing a resale condo or are already in the process of buying one, read this blog or watch the video linked below because you'll need to know how a status certificate can impact your decision to purchase a condo.
WHAT IS A STATUS CERTIFICATE?
A Status Certificate is a report that provides vital details about the condo unit and the current state of the condominium corporation. It enables buyers to make informed decisions on whether or not to purchase a unit in a particular condominium building by providing an overview of the condo corporation's financial health and crucial information about the actual unit itself.
And if you need to know what a condo corporation is, let's review it quickly so we're all on the same page. A condominium corporation is a legal entity that looks after the collective interest of all unit owners in a particular condominium.
When purchasing a resale condominium, you must request the status certificate via the condo corporation. A status certificate also includes these three items:
- The condo's enforceable Declaration
- By-laws
- and Rules that condo owners and occupiers (i.e. tenants & visitors) must follow.
When purchasing a condo in Ontario, you should ALWAYS review the status certificate. In fact, it should be a condition in your offer to be able to review the status certificate in a reasonable amount of time (typically ten days from receipt). This will allow you to identify any issues before the deal becomes firm.
Photo courtesy of Adobe
WHY IS A STATUS CERTIFICATE SO IMPORTANT
The status certificate is essential when purchasing a resale condominium because it will provide important details regarding the following:
- The status of the Condo unit's fees (e.g. are they up to date?)
- The status of the corporation's insurance
- The Reserve Fund
- Property management contracts
- Any legal proceedings or judgments the condo corporation is involved in
- Special assessments
- and more
Let's highlight 3 of these because they will considerably impact a buyer's decision to purchase a unit. We will dig deeper into Reserve Fund, Legal Proceedings/Judgments and Special Assessments.
RESERVE FUND
This is a special fund used solely for major repairs and replacement of common elements and assets of the corporation. It is mandatory for all condo corporations to establish and maintain a reserve fund. It is funded through a portion of the monthly condo fees owners pay. Funds collected are set aside for major repairs and maintenance of common elements and equipment. This fund is so important because it could pose a severe problem if it is underfunded. Inadequate funding can result in increased monthly condo fees or, even worse, a special assessment, which we will discuss in the next section.
Note that it is essential that a real estate lawyer carefully review the reserve fund balance along with its funding plan.
LEGAL PROCEEDINGS & JUDGEMENTS
Another reason why a status certificate is so important is that it will identify whether or not the condo corp is involved in any legal proceedings or judgments. This is critical information as it will ultimately determine if there are any pending lawsuits against the condo corp. Or if the condo corp has taken action to enforce a lien or to force owners/occupiers to comply with the Act, the Declaration, By-Laws or Rules. As always, have your real estate lawyer review the status certificate to identify whether or not there are any legal proceedings or judgments and the severity of any financial impacts.
SPECIAL ASSESSMENT
Special assessments are a result of reserve fund underfunding. For instance, if a situation occurs whereby immediate repairs need to be funded via the reserve fund (e.g. damages related to construction deficiencies), but there isn't enough money in the reserve fund to pay for repairs, then a special assessment would be charged to unit owners.
Owners are responsible for paying this fee over and above their monthly condo fees. Special assessments burden owners financially as the payment is not optional. And failing to pay will result in a lien against the unit. The board determines special assessments and does not require unit owner approval. Yet all owners are required to pay their proportional share of the assessment.
In order to identify if a condo corporation is subject to any special assessments, you will need to review the status certificate. A status certificate confirms current or planned special assessments, yet another reason why reviewing a status certificate is critical.
Photo courtesy of Adobe
"IT'S JUST TOO MUCH TO DEAL WITH"
Now, all this may seem overwhelming, but don't worry; your real estate agent will be able to guide you through the process.
Your agent will be able to obtain a current copy of the status certificate and help answer some of the important questions, like
- Are the unit's condo fees up to date
- Is the reserve fund adequately funded?
- Are there any legal issues involving the condo corp?
- Is there a pending special assessment?
Your agent may even go one step further and try to obtain a copy of the Board Meeting's minutes. This will provide info regarding the condo corporation's past, current and upcoming financial & legal issues if any.
However, even with the help of your realtor, you will still need expert legal advice. Your agent will be able to get you started by answering these questions, but always, ALWAYS have your real estate lawyer review the status certificate and provide you with a final opinion.
QUESTIONS?
If you still have questions regarding status certificates or real estate in general, don't hesitate to contact my team directly at [email protected] or call our office in Toronto at 437-388-3733.
*Header photo courtesy of Adobe
