The Status Certificate: Don't buy a Condo without one.
Tuesday May 03rd, 2022
Today’s hot real estate market has created many Buyers for few condo properties with the result being that multiple offers are often the norm. To ensure that your offer will be accepted, a Buyer may submit an offer without the usual clause of making the offer conditional on a lawyer’s review of the Condominium’s Status certificate and related condominium documents. While such an offer may improve the chances of your offer being accepted by a Seller, there are risks in submitting an offer without a condition on Status Certificate review.
When purchasing a condominium unit, a Buyer acquires the unit as well as a proportionate interest in the condominium corporation. The purchase price may also include an owned (deeded) locker and/or a parking spot. To ensure that both the condominium unit and the condominium corporation are in good standing, a prudent Buyer should, when possible, make their offer conditional on a lawyer’s review of the Status Certificate and related condominium documents. With a conditional offer, if the lawyer or you, the Buyer, is not satisfied with the contents of the Status Certificate, you can cancel the transaction and get your deposit back. Without your lawyer reviewing the Status Certifiate, you may be buying into any defects or deficiencies that would have otherwise been revealed.
The Status Certificate is a set of documents issued by the condominium corporation. It discloses important information about the current state of the condominium unit and the condominium corporation and building as a whole. The Status Certificate and related condominium documents typically indicate:
- the amount of the monthly common expenses and whether or not the Seller is in arrears of the common expenses
- the legal description of the unit and any parking or locker units
- whether or not the parking or locker units are owned or are exclusive use
- the amount of the condominium corporation’s reserve fund which is a fund necessary for major repairs or replacements and whether or not the reserve fund is adequate
- whether the condominium corporation has conducted a Reserve Fund study
- whether the condominium corporation is contemplating an increase in the monthly common expenses or a special assessment to pay for unanticipated expenses
- whether the condominium corporation is a party to any lawsuits or litigation
- whether the budget of the condominium corporation is accurate
- when the last set of audited financial statements have been produced
- whether or not the condominium corporation has a record of the unit being subject to a section 98 Agreement relating to additions, alterations or improvements to the unit or common elements
- all of the rules on the condominium including, rental restrictions, pet restrictions and smoking restrictions
When an offer is conditional on a lawyer’s review of the Status Certificate, your lawyer will not only review the Status Certificate but also other important documents that should accompany the Status Certificate including the condominium’s Declaration, By-laws, Agreements, Budget, Reserve Fund Study, Rules and the latest Audited Financial Statements. Based on the information provided, you and your lawyer can make a knowledgeable decision as to whether or not to proceed with the purchase and waive the Status Certificate condition to create a 'firm deal'. If you are planning to participate in a multiple offer/bidding scenario, having your lawyer review the Status Certificate prior to the offer date, will allow you to confidently omit a Status Certificate condition to make your offer as attractive as possible.
By failing to make the offer conditional on a Status Certificate review, a Buyer may be going in blind without knowing the full scope of the problems that may exist with both the unit itself or the total condominium building. For instance, following closing, a Buyer could be faced with a number of costly problems, including:
- significant increases to monthly common expenses
- special assessments against the unit owners which is a lump sum payment required to pay for repairs to the condominium building
- costs to repair a condominium building which may be in need of costly repairs such as water proofing or underground garage repairs
- costs to restore unauthorized repairs which may have been made by a previous owner without the approval of the Condominium Corporation
- future unmarketability or decrease in the value of the property due to age or deterioration
In our current market, many Buyers are getting caught up in the buying frenzy and are submitting unconditional offers without realizing the risks of doing so. As a result, a Buyer who submits an unconditional offer may be unable to cancel a transaction and be forced to close, only to be faced with unexpected costs after closing. As your Realtor, I enquire about the availability of the Status Certificate so that we can have it reviewed by your lawyer prior to submitting an offer. This allows you to make an informed decision before you make an offer without a Status Certificate condition.
It's crucial that you know these risks before making an offer which is not conditional on a Status Certificate review. Failing to plan ahead can result in unwanted surprises and costs.