Status certificates invaluable for potential condo buyers
By AdvocateDaily.com Staff
A status certificate provides security for prospective condominium purchasers by alerting them to potential issues that could end up adding to their costs, Toronto real estate lawyer Lisa Laredo tells AdvocateDaily.com.
“If you want to see how the condominium corporation runs the property, you should look at the status certificate, which includes the financial statement, budget and reserve fund, to get an overview of how it is spending your money,” says Laredo, principal of Laredo Law.
A status certificate is available upon request to potential buyers of resale condos, and is made up of several documents that provide “an overview of the condominium,” she says, including common expenses or maintenance fees.
“You will know from the status certificate whether the maintenance fees have been paid by the owner or whether there are any arrears,” Laredo explains. “It will also tell you how much the maintenance fees are for a unit, so you can decide if that's an expense you can afford.”
The certificate will also include information on what’s covered in the maintenance fees, such as cable, hydro and other utilities, and will let prospective buyers know if common expenses are expected to rise in the current fiscal year, she adds.
To get a detailed understanding of how a condo is managed, Laredo recommends examining the condo corporation’s financial statement and budget. These documents will outline a number of items, including:
- whether the condo corporation is meeting its financial obligations;
- any special expenses that will be passed on to the unit owners;
- any unpaid condominium fees;
- whether payment of the corporation’s property taxes is up to date; and
- whether there’s going to be a special assessment due to an increase in repairs, or not enough money for repairs or improvements to the building.
“The financial statement will outline what the operating costs are, what money is going into the reserve fund, what repairs have been done, what may need to be repaired in the future and what those potential costs would be,” Laredo says. “It’s crucial to be thorough.”
The reserve fund, which is sustained through a portion of every unit owner’s monthly common expenses, is in place to cover the cost of replacing components in the building. The status certificate also includes a reserve fund study, which evaluates the projected replacement cost for major items such as elevators, underground parking, roof membranes, pipes and electrical work.
“In the reserve fund, you can see the balance and whether it exceeds the anticipated expenditures to be made in the current fiscal year and whether the board anticipates if the fund will be adequate,” she says.
Another important item in a status certificate is whether there are any legal claims against the property, such as a claim against the builders or liability for slip-and-fall accidents.
“Are there any legal proceedings at the moment? Are there any judgments against the condo corporation? Are there any outstanding judgments? Has an inspector or administrator been appointed by the Superior Court? Does the corporation’s insurance policy cover any of this?” Laredo says. “If insurance covers it, you have less to worry about.”
Other things to watch for, she says, include:
- the number of units being leased in the building versus those occupied by the owners. If a large number of units are being leased, it could mean many residents are indifferent to the long-term condition of the building;
- possible substantial changes to the common elements or services of the building. For example, a building might be planning to install separate metering for its utilities, which could lead to unexpected costs;
- the amount of insurance for the development, and what is covered under the policy; and
- the condo corporation’s declaration, bylaws, and rules and regulations to learn, for example, if pets are allowed, how much visitor parking is available, as well as how the board of directors is elected and when meetings are held.
Laredo says split or stacked townhouses can bring their own challenges. They may be freehold, but often there are common elements, which make them condos.
“Oftentimes, you have these agreements that if there are any additions or modifications made by the owner that cause a structural change to the unit, the owner may be responsible to remove the addition if there wasn’t consent from the board beforehand,” she says.
Prospective buyers of stacked townhouses and regular condos should always ask the vendor if any structural changes or additions were made because sometimes a survey isn’t available, Laredo says. “If you buy this property, it may fall to you to put it back to its original state.”