If you’re planning on purchasing a condominium unit, it is vital that you have a real estate lawyer review your status certificate. Unlike the vast majority of freehold properties, when purchasing a unit in a condominium, you are also buying a “share” of the common elements and must abide by the Condominium Corporation’s governing documents. Once you purchase a unit, the Condominium Corporation has a considerable amount of power over the monthly common element fees, so it is imperative that you know if you are buying into a healthy Condominium Corporation. The financial health of the Condominium Corporation will determine its marketability and as such, you want to ensure that you are purchasing into a financially healthy condominium.  

What is a Status Certificate?

A status certificate is a document that gives an overview of the current state and health of the Corporation at the time it is issued. The status certificate is often prepared by the Corporation’s property manager and is supplemented by several documents, which give further insight into the current condition of the Corporation. In accordance with Section 76 of the Condominium Act, the following is information that the Corporation must include in their status certificate package:

1. a statement of the common expenses for the unit and the default, if any, in payment of the common expenses;
2. a statement of the increase, if any, in the common expenses for the unit that the board has declared since the date of the budget of the corporation for the current fiscal year and the reason for the increase;
3. a statement of the assessments, if any, that the board has levied against the unit since the date of the budget of the corporation for the current fiscal year to increase the contribution to the reserve fund and the reason for the assessments;
4. a statement of the address for service of the corporation;
5. a statement of the names and address for service of the directors and officers of the corporation;
6. a copy of the current declaration, by-laws and rules;
7. a copy of all applications made under section 109 to amend the declaration for which the court has not made an order;
8. a statement of all outstanding judgments against the corporation and the status of all legal actions to which the corporation is a party.

Are Status Certificate Reviews Mandatory?

Although tremendously important, it is not mandatory for you to obtain or have your Status Certificate reviewed by a lawyer. Nevertheless, to limit their risk, most lending institutions may make it a requirement for your status certificate to be reviewed.  

When Should a Status Certificate Be Reviewed?

The best time to have a status certificate reviewed is before you put in a firm offer for the unit. This allows your lawyer and real estate agent to include favourable provisions in your Agreement of Purchase and Sale that may reduce any risks associated with the unit and Condominium Corporation. For example, if the unit is default of common expense payments, your lawyer may recommend including a provision that the Vendor is to pay out same before closing. If the Vendors are not agreeable to such provisions, you still have the option to withdraw from the transaction.

If you are unable to have your status reviewed before making a firm offer, you should ensure that your Agreement of Purchase and Sale is conditional on your lawyer reviewing the status certificate. If the status certificate reveals issues and the Vendors are not agreeable to an amendment, you can still legally withdraw from the transaction.

If you have your status certificate reviewed after your offer is firm, you run the risk of not being able to address any issues contained in the status certificate and accommodating documents. Vendors may be unwilling to sign any amendments and you will be legally obligated to close the transaction.

What Does a Lawyer Look for When Reviewing a Status Certificate?

When looking through a status certificate package, lawyers look for a variety of indicators. Firstly, in the status certificate itself, without limitation, lawyers will look for the following information:

• Ensure the unit number and address are correct;
• Note any parking or lockers conveyed with the unit;
• Determine the monthly common expense amount for the current fiscal year and whether the unit is in default of same;
• Whether common expenses have been increased or any special assessments have been levied in the current fiscal year;
• Any legal judgements against the Corporation or ongoing legal disputes that may result in increased common expenses;
• Overview of the budget and reserve fund of the Corporation;
• Whether the Corporation has adequate insurance in place.

The governing documents of the Corporation with also be reviewed to highlight any provisions that may interfere with your use and enjoyment of the property. For example, many Corporations have restrictions on the number of pets, if any, that are permissible. It is important to review these documents so prospective purchasers are aware of any restrictions.

Lawyers will also review the Corporation’s budget, audit, financial statements and reserve fund study. Although much of this information goes beyond the scope of a real estate lawyer, there are still many indicators to look for to ensure the Corporation is financially responsible and in a healthy state. This may include noting any large increases in liabilities, observing future funding recommendations, noting expected future increases to common expenses and determining whether the Corporation has been following their budget.

Your lawyer’s objective when viewing the status certificate is to disclose any deficiencies or areas of concern so that you can make the most informed decision possible. A good real estate lawyer will often follow up with the Corporation on potential issues to gather further information or seek a solution. Your lawyer, however, will not provide a conclusive opinion on whether you should proceed with the transaction, nor will they provide in-depth financial insights. It is imperative that prospective purchasers review the status certificate themselves, as at the end of the day, you are the one making the final decision.

A good lawyer, knowledgeable in condominium purchases, is essential for having a smooth real estate transaction. If you are looking to purchase a property or wish to have your status certificate reviewed, please contact Paria Rad, lawyer at Woitzik Polsinelli LLP at 905-668-4486 ext. 230 or at paria@durhamlawyer.ca

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”

This blog was co-authored by Jaimin Panesar*