What is status Certificate?
A status certificate (formerly known as an Estoppel) is a report on the current state of a condominium corporation, prepared by the Board of Directors, which offers a financial snapshot of the well-being of the building and information on those who run it.
“Since you’re buying a unit in a building and not a whole property, it’s a good idea to see how the building is managed, if there are pending lawsuits and what the financial situation is like,”.
When buying a resale condo, it’s extremely important you obtain a copy of, and carefully review, the status certificate with your lawyer before being locked into your purchase.
Typically, a status certificate is part of a package that also includes the condominium declaration (outlining the building’s by-laws, rules and regulations), a copy of the insurance certificate, financial statements and a summary of the most recent reserve fund study.
Many offers on resale condominiums are conditional upon the review of a status certificate package by the buyer and his or her lawyer. This clause is not part of the standard agreement, however, and should be added to an offer by your realtor.
“I put it into all my contracts,” said Savel, “because you don’t want to end up with a client in a place that has a bad situation going on with the management.”
What information can I find in a status certificate package?
A status certificate discloses information to a potential buyer about the condominium corporation’s management structure, common expenses, the current budget, any legal issues or proceedings, unit leases, insurance, upcoming repairs or maintenance and the corporation’s reserve fund; as outlined in Section 76 of Ontario’s Condominium Act.
The financial statements outline expenditures, receipts and the current year’s budget (including estimated costs and reserve fund information) which gives you—and your lawyer—a good indication of how fiscally healthy the property is.
A reserve fund study is commissioned every three years by a condominium’s Board of Directors, and it determines what major repairs need to be done, the timeline for them and whether or not the reserve fund has enough money to cover these costs.
“If it’s an older building, and if there are outstanding repairs or things that need to be done there’s a chance [the condo corporation] may increase fees,” said Savel, “so a good real estate lawyer will look for signs there may be an increase in maintenance fees [when reviewing the package].”
You’ll also find information outlining whether or not the corporation is involved in any lawsuits, the building’s insurance policy and whether any special assessments are being considered or will be taking place.
Within the declaration, you’ll find information on any restrictions, such as a “no pets” clause, and what rules you must follow when using common areas such as a swimming pool, work-out facility or party room.
How do I get a status certificate?
Anyone can order a condo corporation’s status certificate by providing a written request and paying the $100 fee, however this is typically only done when there is a prospective buyer of a resale condo unit. Whether the buyer or seller pays this fee is negotiable, and the standard varies by area. For instance, the seller typically pays for the status certificate in Toronto, but it Ottawa it’s typical for the buyer to pay.
“Even this can come down to the negotiating skill of the realtor,” said Savel. “If I’m representing a seller and have three buyers coming in, I might suggest a buyer improves their offer by offering to pay this fee.”
After submitting the request, you should receive the status certificate package within 10 days, though some condo corporations will rush the order for a fee. Once received, you and your lawyer typically have 48 to 72 hours to look over the documents and come to a decision, though this is also negotiable.
Why do I need a status certificate?
Since a condo unit is subject to additional rules and regulations—as well as managed by a Board of Directors—there’s an entirely different set of concerns for a prospective buyer than there is when purchasing a house.
You’ll want to ensure the Board of Directors is being fiscally responsible, that their budget is balanced, and that there is money in the reserve fund for any upcoming repairs. An unbalanced budget or depleted reserve fund is a red flag, and you could be on the hook for increased maintenance fees to cover repair costs.
You’ll also find out if there are any lawsuits against the corporation or unsettled legal issues. However, the presence of a legal case that has yet to be settled isn’t always sign you should back out according to Savel, especially if it’s a good deal on the unit.
“One example case I had was when the problem had been rectified, but the [legal] case just hadn’t officially closed yet,” he said, “so it wasn’t a big concern. A few months later, the prices on units in the building had gone up.”
Savel notes it’s important to get your lawyer or realtor to contact the property manager and get as much information as possible before making a decision.
Since a condo corporation makes the rules about balcony barbecues, pets, and common areas, it’s important to fully read the declaration in the status package to ensure their by-laws and regulations are a fit for you.
A status certificate outlines all this information and more for you upfront, so there are no surprises later on down the line. This is why it’s important to work with you realtor to ensure your offer is conditional upon a legal review of the status certificate package.
Source: Alyssa Furtado