July 2024
Prior to purchasing a condominium, prospective buyers are provided with a status certificate. To speed up the process for selling one unit, the seller obtained a status certificate prior to listing the unit for sale. Two months later the unit is purchased, which was three months after the status certificate was prepared by the condominium corporation. The status certificate was five months out of date.
Soon after, a special assessment in the amount of $30,000 is assessed for necessary repairs not identified on the status certificate.
The status certificate provides prospective buyers with information to make an informed decision about purchasing a condominium unit. A status certificate package, of which the status certificate is one component, can be hundreds of pages. It includes information about the finances of the condominium corporation, ongoing legal proceedings, proposed changes to the common elements, and other matters. There may be information about money owed to the corporation by the current unit owner or improper renovations.
An error or omission in a status certificate can prevent a condominium corporation from collecting a special assessment or monthly common expense from a new owner. Information in the status certificate is only valid as of the date it is prepared. That five-month-old status certificate would not have information on a special assessment that had not been announced or major repairs identified at a later date. Had the prospective buyer obtained a current status certificate, they would probably not have been responsible for paying the special assessment.
Preparing the status certificate (Condominium Corporations)
Status certificates are usually prepared by the condominium manager. Each should be reviewed by a second person with knowledge of the corporation and its records such as a current director before it is completed and delivered to a purchaser.
If a special assessment is anticipated but not yet certain, this should be noted on the status certificate. Deliberately hiding this information could make the corporation at fault for failing to disclose relevant financial information.
Include some detail in the status certificate such as restrictions on pets or smoking that would make a community inappropriate for some.
Reviewing the delivered status certificate (Prospective Purchasers)
Typically, the seller has 10 days to deliver the certificate and package after an offer is accepted. The potential purchaser then has two days to review the documents and possibly make requests or recommendations.
Review the status certificate. While it may be difficult to read and voluminous, it contains important information impacting what can be your single largest purchase. Do you smoke, have a pet, require storage space, or need parking for one or more vehicles? Your personal requirements are unique. Without reading the status certificate, you will not know if the unit and building has what you require.
Making such an expensive purchase without having a lawyer review the document is an unnecessary risk with so large a purchase
The current owner may have outstanding condo fees or taxes that must be paid. Illegal or unapproved renovations could be the responsibility of the purchaser if the corporation requires a suite be restored to a previous condition. Unapproved renovations may have caused damage to or removal of a load bearing wall which is expensive to repair. Awareness of a prior fire or flood may impact on a purchase offer. Financials may show an inadequate reserve fund or debt situation requiring an increase in condo fees or special assessment. There may be one or more costly lawsuits involving the corporation that may result in significant payments.
Have your lawyer review the status certificate. Making such an expensive purchase without having a lawyer review the document is an unnecessary risk with so large a purchase. The cost of a review is nominal in relation to the purchase price and can avoid unnecessary future problems.
Never rely on an old status certificate. Make sure its date is current.
Act on any warnings in the status certificate. If there is a major repair project planned or in process, ask for documents so you are aware of the timing, cost and if the reserve fund can support this work without a special assessment.
Purchase title insurance
Title insurance provides protection against a variety of potentially expensive issues. It may even cover the cost of a special assessment announced shortly after you purchase the unit.
The status certificate and package is provided to protect purchasers of units in condominium communities. It works best when the certificate is current and the package is read in its entirely by the prospective buyer and their lawyer.
