March 2024
A status certificate provides information about the financial status of a residential unit and the condo corporation necessary to make an informed decision when considering the purchase of a condominium.
This approximately six-page document should be read by the prospective purchaser and their lawyer. Accompanying this certificate are other documents pertaining to the condominium corporation which can comprise 100 pages or more. This entire set of documents is the status certificate package.
A status certificate can only be relied on by the requesting individual and is only accurate as of the date issued. Older status certificates may not include the most current information.
Here are some items that should be looked at and may be identified by a real estate lawyer after reviewing a status certificate.
Board Vacancies
Paragraph 4 of the status certificate provides the names of the officers and directors of the corporation. Vacancies can be a sign or problems, dysfunctional board or poor succession planning.
Common Expense Arrears
Arrears by the current owner are disclosed in Paragraph 5 of the status certificate. These should be addressed prior to closing on the purchase.
Condo Fees Substantially Higher or Lower than Anticipated
Current monthly condo fees are identified in Paragraph 6 of the status certificate. Low fees can signify the corporation is not saving enough in their reserve fund or not undertaking necessary and preventative maintenance. Very low condo fees can be a sign that prior and current condo owners are expecting future owners to subsidize their costs for maintaining the home.
Anticipated Common Fee Increases
Paragraph 12 of the status certificate identifies any knowledge or circumstances known by the corporation that may result in increases in common fees except those relating to budgetary increases. If anticipated increases are noted, you can ask for details.
Reserve Fund Balance does not Match with Reserve Fund Study
Paragraph 13 of the status certificate states the balance of the reserve fund. This is money set aside by current and prior owners to pay for future major repairs and replacements of the common elements. This should be consistent with a reserve fund study completed every three years. If the numbers don’t match, inquire as to why. A major project may have recently been completed which will be reflected in the next reserve fund study.
Ongoing Legal Proceedings
Paragraphs 18 to 22 of the status certificate address any lawsuits involving the corporation. Litigation represents potential expenses for legal fees, damages or costs owing by the condominium corporation. This can require increases in common fees or a special assessment.
Unauthorized Alterations
Paragraph 23 of the status certificate identifies if there have been additions, alterations or improvements to the common elements made by the owner which will become the responsibility of the prospective purchaser. These may require additional insurance or other responsibilities depending on the terms of any agreement. If alterations are unapproved, the future purchaser may be required to remove them.
Insurance Deductibles, Standard Unit
Paragraph 26 requires the corporation to certify that they have all policies of insurance required by the Condo Act. This does not replace insurance that owners are required to purchase for protecting their personal items and unit improvements, and to pay the corporation’s insurance deductible. A separate certificate or memorandum of insurance for each of the current insurance policies must be provided with the status certificate package. Each certificate or memorandum should include the insurance deductible. A high deductible means that the corporation is self-insuring more repairs which can lead to unbudgeted expenses and increased costs for owners.
Cautions in Audited Financial Statements
The status certificate package includes additional documents, one of which is audited financial statements, as shown in Paragraph 33 of the status certificate. The auditor is required to state an opinion and any reservations about the financial statements which could signify poor or improper record keeping, or other concerns.
Building Restrictions
The condominium’s declaration and rules may include restrictions on how you can use the unit or common elements. There may be restrictions on pets, leasing, operation of home businesses and noises that may be unacceptable to some potential purchasers.
