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Condominium Purchases and Status Certificate Review:
Purchasing a condominium involves legal and financial considerations that are different from purchasing a freehold property. When you purchase a condominium unit, you are generally acquiring ownership of your individual unit together with an interest in the condominium's common elements. You also become subject to the condominium corporation's governing documents, rules, financial obligations, and other requirements that may affect the ownership and use of your property.
For this reason, careful review of the condominium documentation can be an important part of a condominium purchase.
At Sahib Law, we assist purchasers with condominium transactions and, where applicable, review the Status Certificate and accompanying condominium documents to help our clients understand matters that may affect their proposed purchase.
What Is a Status Certificate?
A Status Certificate is an important source of information concerning a condominium corporation and, in particular, the unit being purchased. The Status Certificate package may contain financial, legal, insurance, and governance information concerning the condominium corporation, together with documents governing the rights and responsibilities of unit owners.
Depending upon the condominium and the documents provided, the Status Certificate package may include:
- The condominium declaration;
- By-laws and rules;
- Current budget and financial information;
- Information concerning common expenses;
- Reserve fund information;
- The condominium corporation's insurance information;
- Information regarding legal proceedings involving the condominium corporation;
- Information regarding agreements affecting the condominium;
- Information concerning the particular unit;
- Notices or information concerning anticipated changes or expenditures; and
- Other documents and information required or provided as part of the Status Certificate package.
Why Is a Status Certificate Review Important?
The purchase price of a condominium is only one aspect of the financial commitment involved in condominium ownership. A purchaser may also be responsible for monthly common expenses and may be affected by the condominium corporation's financial condition, reserve fund, major repairs, special assessments, insurance arrangements, and other obligations.
A Status Certificate review may help identify matters that a purchaser should consider before becoming legally obligated to complete the transaction. Where the Agreement of Purchase and Sale contain a condition permitting the purchaser's lawyer to review the Status Certificate, it is important to obtain the documents and legal advice within the time specified in the Agreement.
What We Review
When reviewing a Status Certificate package, we may consider a number of matters relevant to the proposed purchase, including the following:
Common Expenses
We review the information provided concerning the unit's common expenses and whether the Status Certificate discloses any arrears relating to the unit.
We may also consider information concerning increases in common expenses or other financial matters disclosed in the documents.
Reserve Fund
A condominium corporation generally maintains a reserve fund to assist with the cost of major repairs and replacement of common elements and assets of the corporation. The Status Certificate package may contain information concerning the reserve fund and related financial matters. Where available, we review the relevant documentation for matters that may warrant the purchaser's attention.
The adequacy of a reserve fund can be an important consideration because significant future repairs or insufficient funding may potentially contribute to increased common expenses or special assessments.
Special Assessments
A special assessment may require unit owners to contribute additional amounts beyond their regular monthly common expenses. We review the Status Certificate for information concerning any disclosed existing or anticipated special assessments. A significant special assessment can affect the overall cost of purchasing and owning the condominium and should be considered before the transaction becomes unconditional.
Condominium Corporation's Financial Information
Where financial information is included in the Status Certificate package, we may review it from the perspective of the proposed real estate transaction and identify matters disclosed in the documents that may require further consideration. Depending upon the circumstances, significant financial issues may affect a purchaser's decision to proceed with the transaction and require the advice from the Financial Experts.
Legal Proceedings
We review the Status Certificate for disclosed information concerning legal proceedings involving the condominium corporation. The existence of litigation does not necessarily mean that a purchaser should not proceed. However, depending upon the nature and potential financial consequences of the proceeding, it may be an important consideration for a prospective purchaser.
Insurance
We review the insurance information provided with the Status Certificate package. The Condominium corporation insurance does not necessarily provide all of the insurance protection required by an individual unit owner. Purchasers should arrange appropriate insurance for their unit and personal circumstances and should discuss their particular insurance requirements with a qualified insurance professional.
Declaration, By-Laws and Rules
Condominium ownership is subject to the condominium's Declaration, By-Laws and Rules. These documents can contain restrictions and obligations affecting how a unit and the common elements may be used.
Depending upon the condominium, these provisions may address matters such as:
- Pets;
- Parking and storage;
- Use of balconies and common areas;
- Renovations and alterations;
- Leasing or occupancy of units;
- Noise and nuisance;
- Use of amenities;
- Moving procedures;
- Short-term rentals; and
- Other restrictions affecting owners and occupants.
If a particular use or feature is important to you—for example, keeping a pet, renting the unit, operating a business from the unit, using a particular parking space, or undertaking renovations—you should advise us so that the relevant condominium documents can be considered in light of your particular concerns.
Unit-Specific Information
The Status Certificate may also disclose information specifically affecting the unit being purchased, including common expense arrears or other matters involving the unit.
Unit-specific issues can be particularly important because a purchaser should understand whether there are disclosed financial or legal matters associated with the unit before completing the purchase.
New and Pre-Construction Condominiums
The purchase of a new or pre-construction condominium can involve additional considerations beyond those involved in the purchase of a resale condominium. The Agreement of Purchase and Sale may be lengthy and may contain provisions concerning adjustments, occupancy, closing costs, development charges, changes to the project, parking and lockers, interim occupancy, and other builder-related matters. Purchasers of new condominiums should obtain legal advice as early as possible and, where applicable, within any statutory or contractual review period.
Status Certificate Condition in the Agreement of Purchase and Sale
When purchasing a resale condominium, an Agreement of Purchase and Sale may contain a condition allowing the purchaser to obtain and review a Status Certificate with their lawyer.
These conditions normally contain a specific deadline. Missing the deadline may affect the purchaser's rights under the Agreement. We therefore recommend that purchasers provide the Agreement of Purchase and Sale and the complete Status Certificate package to our office as soon as they are received, rather than waiting until the end of the review period.
Our Status Certificate Review
At Sahib Law, our objective is to explain the relevant legal information in understandable terms so that you can make an informed decision about your proposed condominium purchase.
Following our review, we can discuss significant matters disclosed in the Status Certificate package, answer your questions concerning the legal documentation, and advise you about issues that may require further attention before you proceed with the transaction. The significance of any particular issue depends upon the circumstances of the condominium, the unit being purchased, the Agreement of Purchase and Sale, and the purchaser's individual requirements.
Important Limitations
A lawyer's review of a Status Certificate and condominium documents is primarily a legal review of the documentation provided. It is not a building inspection, engineering assessment, environmental assessment, appraisal, or independent audit of the condominium corporation's financial records or the physical condition of the building or a market value. Where the documents disclose technical, structural, engineering, insurance, accounting, or other specialized concerns, a purchaser may be advised to obtain appropriate professional advice before proceeding.
Contact Sahib Law Before Your Status Certificate Condition Expires
If you are considering purchasing a condominium, early legal advice can help you understand both the Agreement of Purchase and Sale and the condominium documents before important contractual deadlines expire.
Sahib Law provides legal assistance with resale condominium purchases, Status Certificate reviews, new and pre-construction condominium transactions, assignments, mortgage financing, and condominium closings throughout Toronto, the Greater Toronto Area, and other communities in Ontario.
Contact Sahib Law as early as possible after entering into an Agreement of Purchase and Sale, particularly where your purchase is conditional upon the satisfactory review of a Status Certificate.
Understand the condominium before you complete the purchase.