If you’ve only bought and/or sold a single-family home or freehold townhouse, you’ve likely never had to deal with a Status Certificate. For condo buyers and sellers, on the other hand, these documents are an important part of their real estate transactions.
What Exactly is a Status Certificate?
Simply put, a Status Certificate is a document that provides fundamental information about the financial state of a condo and the condo corporation that governs it. The main focus of this document is to provide valuable insight into the fees that owners need to pay every month, any potential increases that will be coming into effect some time soon as a result of a special assessment, and any liens that a specific unit in the complex might have.
A Status Certificate will also stipulate the condo corporation’s budget, by-laws, reserve fund, insurance, rules, minutes of the last annual general meeting (AGM), and any lawsuit that the corporation may be involved in. It’s usually a pretty lengthy document that will need to be reviewed before a sale of a unit in the complex is finalized.
Why is a Status Certificate So Important?
When drafting up a purchase agreement, buyer agents will include a clause that makes the contract contingent upon review of the Status Certificate by the buyer’s lawyer. This will provide the attorney with enough time to read through the document to ensure the condo corporation is healthy and that the buyer won’t be buying into a corporation that will inevitably cost them more money than they originally anticipated.
Just like with any other type of contract, it’s essential that buyers are armed with as much information as possible before sealing the deal, and finding out every detail about a condo corporation can be done with a thorough review of the Status Certificate. This document will tell buyers everything there is to know about the unit they are purchasing as well as the financial and physical situation of a building.
Buyers will certainly want to know how much they will be responsible for paying in condo fees. They’ll also want to know what the rules are surrounding various things, including pets, BBQ’s on balconies, smoking areas, whether or not parking and a locker is owned, who the property manager is, whether the reserve fund is adequate to cover future repairs, and so forth, as these will all ultimately have an impact on buyers’ enjoyment of the unit.
It’s ultimately the condo board's legal responsibility to keep a Status Certificate up-to-date. The items within Status Certificates are typically checked on an annual basis when the fiscal structure of the condo will be changing. For example, if the condo fees will be increasing by a certain percentage or a special assessment needs to be levied, this information must be included in a Status Certificate right away. If not, the condo board will be responsible for this omission.
Obtaining a Status Certificate Upon the Sale of a Unit
When the owner of a condo unit lists the place for sale and a qualified buyer submits an offer with a clause to review the Status Certificate, it is typically the responsibility of the seller to obtain it from their condos management company, though the buyer may sometimes request it themselves directly from management. It usually takes about one week to 10 days to obtain the Status Certificate, which costs approximately $100 + HST paid to the management company.
Real estate deals for condos should always be conditional on the buyer’s attorney being satisfied after looking over the Status Certificate. In particular, the lawyer will want to make sure that the reserve fund has enough money to carry out repairs that are needed in the near future. It’s not necessarily the amount in the fund that’s important; rather, it’s whether or not the anticipated repair costs can be covered. For instance, a reserve fund with $1 million might sound like a hefty amount, but it would be considered inadequate if the building needs $2 million worth of repairs.
Sometimes the Canada Mortgage & Housing Corp. (CMHC) can deny mortgage insurance for buyers if they aren’t satisfied with a condo’s financials. Other times a condo board might need to borrow money to cover repairs if the reserve fund doesn’t have enough. This money will then have to be paid back over time through an increase in monthly maintenance fees.
Advice For Buyers and Sellers
Real estate professionals will always advise their buyer clients to ask for a Status Certificate to find out what’s in it, as this will ultimately affect the continued enjoyment of the unit after the deal is done. Sellers should also find out what their Status Certificate will say before listing their units on the market in order to be adequately prepared for any negative contents that could jeopardize their sale.
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