There are some great advantages to living in a condominium. Any Canadian who’s ever had to shovel their way out of a blizzard would likely find that living in a condominium with an effective snow clearing service, or better still the magic of not having any driveway at all, sure has its perks.
In truth a condominium can be so much more than that. For many looking to enter the housing market, especially as first-time buyers, condominiums may be the more affordable purchasing option. Owners now have a piece of real property that will likely appreciate in value, and they are more likely to enter the market for a fraction of what they would have paid for a house.
Yet when you purchase a condominium, you’re not just buying a place to live. Condominiums are run by corporations, and you are effectively buying into a part of the corporation as well. The body that governs your condominium can play a significant role in your enjoyment of your property, so it’s important to learn more about the corporation at the same time that you’re investigating the property.
To learn more about the parts of your condominium that you can’t always see, you will need to thoroughly review the status certificate.
What is a status certificate?
In simple terms, a status certificate is a financial health check of a condominium as required by the Ontario Condominium Act. The status certificate is a report that contains full information on the financials of the condominium corporation, including the fees that you will owe, and any major expenses to come.
When you buy into a condominium you are not only buying your unit, but also buying a portion of the common areas used by all residents. This can include everything from a lobby and parking lot, to tennis courts and green space, to a swimming pool or other recreation areas. These areas do not come for free however – as an owner you are paying regular fees for their maintenance, as well as for any upgrades or improvements that are required.
While many condominiums are operated by third-party management companies, who often prepare the certificates themselves, such certificates are ultimately the responsibility of the condominium’s directors.
What information is in a status certificate?
A status certificate spells out specifically what you own and how much it will cost you. Besides your unit itself, it outlines the common expenses that owners pay in maintaining the condominium including maintenance of walkways and exterior grounds, cleaning services, elevator maintenance, security, and maintenance of any facilities.
The status certificate also contains the most recent financial reports, including audited financial statements, the current budget, and the status of the reserve fund. These numbers are crucial – even if the unit you want to purchase looks good, you likely do not want to buy into an overall failing business.
The status certificate informs owners of the condominium rules and by-laws. If there are any limitations on owners’ rights, such as restrictions on pets or on short-stay rentals, they will be outlined in the rules and by-laws. The by-laws also act as a sort of directive for the condominium directors, outlining how many directors are on the board and how board meetings are to be run.
The status certificate also speaks about any special assessments that are currently in place. Condominiums have major expenses, from regular cleaning and maintenance costs to repairs when things break down. However, if they are hit with a sizable bill and cannot afford it from existing funds, then they turn to the unit owners to make up the difference (i.e., a special assessment). The status certificate will inform buyers if there are any major charges on the horizon.
Why is it important to have a copy of the status certificate?
Simply put, the concerns when buying a condominium are different than when buying a house. Even if you never get to know your neighbours in a condo, you all have a shared financial responsibility of caring for the greater property, and as an owner you leave that responsibility in the hands of the condominium’s directors.
For a trained eye, a status certificate will serve as the directors’ report card. Are they doing a good job with maintaining the property? Have they been hit with any significant lawsuits which have put them in financial danger? Do the audited financial statements look good, or is there a note from the auditors about matters that should concern the owners? Is there a glaring financial deficit that you, as a future owner, will likely be forced to pay towards?
Remember, as good as an individual condo unit may look, the headaches that can come from a badly managed condominium corporation mean that no offer price is worth what you end up spending in added fees, costs, and stress.
How do I get a status certificate?
A status certificate is quite simple to obtain, and costs $100 inclusive of HST. Prospective buyers are urged to obtain a status certificate, which their real estate agent and/or lawyer will help them review. Lenders will likely want to review a status certificate as well, and they can form an integral part of the paperwork in the overall real estate transaction.
At Pavey Law we regularly work with condominium purchasers and sellers throughout the Cambridge, Kitchener, and Waterloo region. We frequently consult with buyers to help them review a status certificate, which can ultimately inform them on whether to proceed with their purchase. For clarity and the right advice, Contact us today to set up a consultation with one of our real estate lawyers.