Unlike purchasing a house, when buying a condominium, you must review and understand the status certificate before signing an offer. Otherwise, you should include a condition in your offer that will allow you and a lawyer to examine it.
But what is a Status Certificate and why is it important?
A Status Certificate is a document issued by the property manager (the company or individual in charge of servicing the condominium corporation) to buyers of resale condominiums. Status certificates include a variety of important information regarding the unit, the building, the condominium corporation's finances, rules, and regulations as well as any planned or past construction or repairs and any potential issues that may require remediation. The status certificate will provide a snapshot of the unit and the building at the time the certificate is issued, which is also important to lenders.
The review of a Status Certificate is a requirement when you buy a condominium, but why? Among other things, the certificate will:
- Provide information on whether the current unit owner is in default of paying the monthly common expenses (condo fee) - if so, you will be responsible for them as the new owner.
- Confirm that the property includes a parking space and a locker, along with their location. Agents can verify if the information matches what was stated in the MLS listing.
- Indicate the common element fee, which your agent can confirm if it is the same as the one stated on the MLS listing.
- Confirm whether pets are allowed, and what sort of rules and restrictions exist with respect to pets.
- State whether short-term rentals are allowed.
- Provide an estimate of the number of units that are leased in the condominium.
- Establish the rules and regulations of the condo corporation.
- Provide the details and contact information of property management, and members of the board for the condominium corporation.
- Set-up official procedures and documents to be completed by the new owner: registration, setting-up the utilities, elevator bookings, etc.
In addition to the above, other aspects will be included in the status certificate and should be reviewed thoroughly by a lawyer:
- Concerns (if any) regarding construction, damage, or legal matters, to which the unit owner is a party, and which affect the condo corporation and other unit owners.
- If there are any legal issues relating to the condominium, for instance the status certificate would indicate if the corporation is a party to any litigation or judgment.
- Assessments levied or imposed by the condominium corporation (if any): An assessment is a charge that the corporation imposes on unit owners and must be paid. The purpose of these funds is to pay for expenses not covered by the reserve fund, either because the fund is insufficient, or because the expenditures were not anticipated.
- An increase in the contribution to the reserve fund from the monthly maintenance fee is anticipated. This is not a total increase to the monthly maintenance fee, but it serves as a guide for future increases.
- The current financial statements of the corporation and whether they are on track as per the budget.
- Details regarding the corporation's reserve fund and whether the company has experienced any problems in maintaining the minimum reserve fund.
- A projection of future reserve fund requirements based on the most recent engineering study.
- The current contribution per unit from the monthly maintenance fee to the reserve fund.
- The expected anticipated increase in the contribution to the reserve fund from the monthly maintenance fee – this is not the total increase to the monthly maintenance fee, but it serves as a guidance for expected increases.
- Details and validity of the insurance coverage offered by the corporation: what is covered and what is not, such as floor upgrades, high-end appliances, and many items beyond the standard scope of the construction.
If you are considering purchasing a condominium, always check with your Realtor to ensure that you have reviewed and understood the status certificate of your prospective condo before submitting an offer.
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