If you are considering the purchase of a resale residential condominium, it is important to ensure that any offer to purchase you make is conditional on your lawyer’s review of the status certificate. This column will examine what a status certificate is and why a buyer needs to have it reviewed and approved before making an offer firm and binding.
The status certificate is a document that is prepared and issued by the condominium corporation. The condominium corporation charges a fee of $100 to issue the status certificate and it normally takes up to 10 days for it to be issued. Almost every condominium resale agreement contains a clause which makes it conditional on the buyer reviewing the status certificate with a lawyer and being satisfied with its contents. The importance of this document cannot be overlooked.
The status certificate and related condominium documents answer many hidden questions about the unit and the condominium building. Here are some of the more important points that a status certificate and condominium documents will disclose:
- What are the monthly common expenses and has the seller paid the monthly common expenses or are there arrears?
- Is the condominium corporation considering levying a special assessment against the unit owners to pay for repairs, replacement or improvements to the building?
- Is the condominium corporation involved in a lawsuit?
- Does the condominium’s declaration or rules contain any restrictions which would prohibit owners from having any pets?
- What is the amount of the condominium corporation’s reserve fund and when was the last reserve fund study completed?
- Is the condominium corporation professionally managed and does it have a budget and up-to-date financial statements?
- Is there a record of any unauthorized repairs to the condominium unit?
- Do the parking and locker units in the Agreement of Purchase and Sale correspond to those set out in the status certificate?
The status certificate and condominium documents will answer these questions and many more that need to be carefully considered before the Agreement becomes firm and binding. Without knowing this information a buyer is at risk of purchasing a condominium which could result in many problems, issues and costs to the buyer.
A properly drafted Agreement with the usual “conditional on status approval” clause will allow the buyer’s lawyer to review the status certificate and related condominium documents while the offer is conditional. The lawyer can then discuss its findings with the buyer so that the buyer can make an informed decision to go ahead with the purchase or not. In most cases, the status certificate, while not always perfect in every aspect, will be acceptable to the buyer who will then decide to waive the condition, thus making the offer to purchase firm. In some cases, however, the status certificate may disclose an issue which the buyer may not be willing to accept and the buyer may cancel the Agreement.
The importance of the review of a status certificate cannot be overstated and should never be overlooked even in the situation of a hot real estate market.
Article Provided by Lorne Shuman – (Isenberg & Shuman)