Why is a Status Certificate Important?

 

I was helping an investor from Switzerland who was looking to purchase a property in Toronto and after months of searching we thought we had finally found the perfect place. It was a beautiful condo in downtown Toronto, with uninhibited views of Lake Ontario and the city centre. Despite my client’s insistence to submit an offer as soon as possible - and a part of me wanting to oblige - I insisted we wait for the Status Certificate first. But, that did not stop us from drafting the offer in the meantime, while we had a lawyer review the Status Certificate. A mere formality. Except when it isn’t. 

The lawyer contacted me a few days after we sent over the Status Certificate to give me some shocking news. The condo corporation of the building we were planning on submitting an offer to, was currently in an active seven-figure lawsuit with the developer. And although the outcome of the lawsuit was unclear at this point (of course it was) even the condo corporation was successful, we learned they were already on the hook for an enormous amount of legal fees.

Thus, condo owners would be liable for their proportionate share of the costs, including any incurred with remedying the building deficiencies. Simply waiting and checking the Status Certificate first, and reviewed by a lawyer, prior to submitting an offer on a property saved my client from what probably would have been a disaster investment.

 

The moral of the story is that is that having someone you trust to do your due diligence is imperative in protecting you from purchasing properties that not only have a checkered past, but also could be subject to special assessments that you should have factored into your decision. 

And here’s some more cool information about what a Status Certificate actually is 

 

A Status Certificate is a document issued pursuant to Section 76 of the Ontario Condo Act that provides basic, but essential, information concerning the financial status of a condo unit and the respective condominium corporation. With the rise of condo sales in the GTA, the words “Status Certificate” always seems to draw a confused look on both the seller’s and buyer’s face. This is primarily due to the fact however, that they simply are not aware of a Status Certificate or have never received an explanation on the importance of it. 

In a transaction, it is the seller’s responsibility to order the Status Certificate and it will usually take up to ten days to receive. Once received, it is important that a lawyer review the Status Certificate prior to submitting an offer for a unit. The main purpose of the Status Certificate is to inform a prospective owner of: the condo fees, any upcoming large increases in the condo fees, any special assessments being contemplated by the condo’s board, and any arrears or liens that a particular unit could have. Additionally, it contains the condo declaration, by-laws, reserve fund, budget, insurance, management contract, rules, date of the next annual general meeting, and any lawsuit involving the corporation. The Status Certificate gives potential buyers of condo units as much information as possible about the unit. The certificate also covers the rules of the building, such as any pet restrictions or whether pets are even allowed in the first place.

With the rise of sales in the Toronto’s condo market through an offer night, buyers should be aware of their responsibilities prior to submitting an offer in. These units tend to be listed below market value in order to create a buzz around the unit (or more infamously known as, a bidding war) in hopes of getting an offer above market value. In offer night scenarios, the unit’s Status Certificate will be available prior to the offer night; therefore, the buyer should have their lawyer review it to find out all the necessary information in order to make a decision on whether to move forward with a clean offer.

Purchasing a condo can be very exciting and comes with plenty of home ownership benefits. A condo purchase may look straightforward and appealing, but be sure to protect yourself prior to making an offer, and have the Status Certificate checked as you “shouldn’t judge a book by its cover”.

 

Thanks for reading!