What to look for in a Status Certificate
Disclaimer: Please note that opinions and information herein (and elsewhere on this website) is general information and is not to be considered legal advice. Please contact a Kitchener real estate lawyer for advice in relation to your specific scenario.
WHAT TO LOOK FOR IN A STATUS CERTIFICATE
If you’ve come to this page while searching for information on a status certificate, it is likely that you are involved in purchasing a condominium either as a prospective buyer or a realtor. This package of documents shared by the condominium corporation is often the subject of many questions, deadlines and processes involving a number of parties. As a real estate lawyer in Kitchener, I see status certificates as a critical document that requires a review. It provides very important information on a variety of things some of which are listed below.
What is a status certificate, what does it include?
In exchange for a fee ($ 100 +), a prospective buyer is provided a package of documents referred to as the status certificate. This contains documents including the condominium by-laws, condominium declaration, the budget, and rules of the condominium corporation and a summary document. Real estate agents will often (highly suggested) make their client’s offer conditional on review of a status certificate by a lawyer. Review of these documents allows the buyer to cross-check information provided by the seller. For example, if the seller indicates a certain amount for montly common expenses and the status shows a higher amount (perhaps due to a recent increase in condominium fees), the buyer can be better prepared for the true costs involved.
What are the risks in NOT reviewing a status?
There are many risks. As a starting point, you do not have a financial snapshot of the condominium and its affairs. The status will reveal if the condominium corporation is involved in any law suits or other legal proceedings. A lawsuit may very well impact the finances of the corporation so additional details may need to be explored. It will also disclose whether the current owner is up to date in paying the common elements (maintenance fees as it is sometimes referred to as) and whether the condominium corporation has placed any liens on the property due to arrears of such payments or unauthorized changes to the unit. Certainly, one would want to know this information upfront and make an informed decision.
What other documents are included in a status?
The status certificate would also include reserve fund study. This is a study required to be completed under the governing legislation and is prepared in conjunction by engineers and accountants. Every few years, a certified professional (engineer) is required to attend provide an opinion on the major components to see which items require repair and replacement. As a result of the report, the corporation is not only able to budget but also to project how much money is to be allocated into a reserve fund (sort of like a long term savings account) for the years to come. General thought is that more is better !
Follow the rules
Although most clients understand the concept that purchase of a condominium would come with certain rules, it is important to review them. Are there restrictions on pets? Short-term rentals (airbnb) or student rental, parking etc. When it comes to these rules, a prospective buyer should understand them in advance of the purchase.
What else would one find out?
You may get some sense into how many units are rentals rather than being owner occupied. This could certainly impact a potential purchase decision. You also want to know which utilities, if any, are covered by the monthly common expenses. More and more utilities now, especially in newer condominiums are being separately metered which means you would pay fees for these utilities on top. Understanding of this allows will allow one to budget properly. Also, if the condominium is facing issues or in bad financial shape, a special assessment may be imposed on the unit owners. This is where additional fees may be required from unit owners to cover some type of shortfall. Very important to know this upfront.
Remember, there is no magic wand one can wave to know if it’s a ‘good purchase or not’ but reviewing this document can give some insight into what you are getting into. The point is, there’s a lot involved and it is best to have the status certificate reviewed and provide adequate time to conduct the review.
VRS Law is a Kitchener-Waterloo Law firm and assists clients purchasing, selling, refinancing real estate property including condominiums which require the review of status certificates. We also help clients with their estate planning and estate administration needs. In other words, we assist those looking to prepare their wills, power of attorneys and receive assistance with probate or executor related services.