With the booming development that has taken place all over the province and a decreasing supply of freehold homes in our most densely populated cities, it is not surprising that condominium ownership has been soaring. While prospective buyers are enticed by the lower price tags and the variety of shared amenities that condominiums have to offer, you may find yourself wondering exactly who manages all the shared spaces – such as the gyms, pools, and game rooms – and whose responsibility is it to pay for their upkeep? All great questions, and all lead up to the importance of reviewing a vital document in any condominium transaction – the Status Certificate.
When you purchase a condominium unit you are purchasing more than just the unit itself; once your deal closes you become the registered owner of your unit, but you also receive a percentage of ownership in the condominium corporation, which makes you a part legal owner of all common areas.
The whole process of creating a condominium, and the vast rules that each condominium must follow are strictly governed by law. In Ontario, the Condominium Act dictates the process and prescribed rules, one such rule being that the condominium corporation must issue Status Certificates in specific circumstances.
A Status Certificate is described under the Condominium Act and is produced to verify the legal standing of the corporation. It can include, amongst other information, a statement of the common expenses, a statement of increase in the common expenses, and/or a statement of assessments that the board has levied against the unit. The status certificate will also outline whether any legal claims have been brought or awarded against the condominium corporation, whether any liens or tax arrears are charged against the property, and whether the condominium corporation is contemplating a special assessment.
After purchasing a unit in a condominium, the owner becomes an owner of their share of all financial aspects of the condominium. This is most commonly recognized in the owner’s responsibility to pay condominium fees to the respective condominium corporation. What many people do not know is that owners will also be responsible for paying out their share of any claims awarded against the condominium corporation and/or any arrears or liens that might be charged against a unit, which is commonly done through a procedure called a special assessment. The above information is essential to a real estate transaction as it outlines the financial status of the unit and of the condominium corporation as a whole.
A key component of purchasing a condominium unit is a lawyer’s review of the Status Certificate. A lawyer will be able to indicate whether you stand to face any extra costs that you would have otherwise been unaware of. In the event that the risk of such costs exist, your lawyer can negotiate the terms of the offer in order to limit your potential liability in future claims.
An unfavourable status certificate can also bring about potential issues with respect to your financing arrangements. Lenders may reject financing properties that show potential liabilities or concerns. Without the ability to review the Status Certificate, there’s no way of knowing just whether you will be able to close the deal.
Given all these details, it is no doubt that the document is an essential component to a condominium real estate transaction. As a purchaser of a condominium unit it is important to understand the significance of having a lawyer review the status certificate and the potential liability you may face if you decide to forgo this process.