What is a Status Certificate, and why do I need to review it?
What is a Status Certificate?
A status certificate is a report prepared by a condominium corporation which gives an important look at the current affairs of a condominium. In Ontario, status certificates have a standard form. The certificate itself is typically only 3-5 pages long, but the supporting documents such as financial statements, reserve fund audits, by-laws and other disclosures typically approach or exceed 100 pages of material.
Key disclosures in a status certificate include:
The names of the condominium corporation’s directors and officers
Confirmation of the common expenses for the units being purchased, as well as confirmation whether the current owner is up to date their payments
Whether any special assessments are outstanding, as well as whether the corporation is aware of circumstances which could give rise to a special assessment
A copy of the condominium corporation’s current insurance certificate
A copy of the most recent study of the condominium corporation’s reserve fund, as well as confirmation that the corporation is (or is not) following the recommendations made in that study
A copy of the current budget for the condominium corporation
Copies of the condominium corporation’s declaration, by-laws, and rules
Who pays for the status certificate?
Your agreement of purchase and sale will determine whether the seller or the buyer is responsible for the cost of ordering a status certificate. In most (but not all) transactions, the seller of a condominium will provide a current status certificate to the buyer at their expense. Most condominium corporations charge between $100 and $300 to provide a status certificate.
What will my lawyer tell me about a status certificate?
The contents of every status certificate are unique, as are the needs and particular concerns of each buyer. As a result, different disclosures in a status certificate may be more or less relevant for different buyers, and your lawyer should tailor their review based on your particular situation. In general, however, a lawyer’s review of a status certificate will typically comment on:
Whether the dwelling unit as well as any parking or locker units described in the agreement of purchase and sale match those described in the status certificate
Whether the current owner is in arrears of their common expenses, and if so, what steps of enforcement the condominium corporation has taken to collect those arrears
Whether a special assessment is being contemplated by the condominium corporation
Any lawsuits or similar proceedings that the condominium corporation is involved in
Whether the most recent reserve fund audit was conducted within the legally required timeframe, and whether the condominium corporation accepted the recommendations of that audit
What will my lawyer not tell me about a status certificate?
Your lawyer’s role shouldn’t be to tell you whether to proceed with a transaction or not. Instead, your lawyer’s role should be to point out the legal implications of the various parts of the status certificate, and provide important context as to how items in the status certificate may impact you.
Lawyers typically are not also accountants, and so your lawyer will typically not be able to provide specific guidance or advice as to the financial statements provided in a status certificate.
Condominium corporations are complex entities with substantial budgets, and interactions with large numbers of people. It’s not uncommon for a condominium to be involved in a lawsuit, or to need to levy a special assessment, or even for a seller to be in arrears of their common expenses. When these issues are disclosed in a status certificate it’s your lawyer’s role to highlight them and explain their impact and strategies to protect you as a buyer. With that advice, a buyer can determine whether they are comfortable with proceeding with the purchase.
Should I read the status certificate myself?
Absolutely: the status certificate should be considered mandatory reading for any purchaser. You may focus on different areas than those covered in your lawyer’s review, and your reading of the documents might give rise to important questions to discuss with your lawyer.
One of the most important areas a potential purchaser may want to focus on in their own review is the condominium rules: your lawyer may not have a particular legal opinion on the rules, but the rules do play a critical role in governing the day-to-day life in a condominium.
How does the status certificate review fit into a typical residential resale transaction?
The agreement of purchase and sale determines who is to provide the status certificate and at what point in the transaction.
Traditionally, most condominium agreements of purchase and sale were “conditional” on the review of the status certificate. In this scenario, the buyer and seller would enter into an agreement of purchase and sale setting the terms of the transaction, and one of those terms would give the seller a number of days to order a status certificate. Once received, then buyer would then have a number of days to review the status certificate with their lawyer, and the buyer could then choose whether to proceed with the transaction or to end the transaction and take back their deposit.
In recent years, and especially in markets where sellers are in a stronger position, sellers may not be willing to enter into an agreement of purchase and sale that is conditional on a status certificate review. Instead, a seller might order a status certificate ahead of listing a property for sale, and will then provide the status certificate to any interested buyers. The buyers can then review the status certificate with their lawyer ahead of making an offer to purchase the property from the seller. This arrangement can result in extra costs for a buyer, as it may result in the review of multiple status certificates before successfully entering into an agreement of purchase and sale.
If you have any questions about status certificates, please contact us to discuss.