Thinking of purchasing a condo…how important are status certificates really? We’ve collaborated with Alexander Tershakowec from Burych Lawyer, to get some basic information on what you need to know.
Q: What is a status certificate and why does it matter?
A: A Status Certificate is actually a package of documents provided by the Condominium. These packages are typically 150+ pages and contain things such as the Condominium’s yearly budget, last year’s financial statements, bylaws, declaration, rules and reserve fund study. All of these documents give us a snapshot of the Condominium, including their finances. When you purchase a unit in a Condominium, you are becoming a part-owner – reviewing the Status Certificate allows us to determine whether you are about to walk into a financial nightmare.
Q: What are the most important components of a status certificate to be aware of when buying into a condominium corporation?
A: Financials are usually number one on the list. Buyers want to know how well the Condominium is handling their yearly budget, whether the Condominium’s reserve fund is healthy and the general financial picture. A Condominium struggling financially will see significant increases in their monthly fees. You will also want to review the rules of Condominium. This will tell you what it is like to live there – whether there are restrictions on the type of pets allowed or if barbeques are allowed on the balcony.
Q: Is the status certificate as important for a freehold home with small maintenance fees for things like a mutual road?
A: Yes. If you are obtaining a mortgage, all banks require that a Status Certificate be obtained and reviewed prior to closing. As lawyers, we have an obligation to notify the bank if there are serious concerns with the Status Certificate. Depending on the seriousness of the issue, the bank may reduce the amount being loaned or cancel the mortgage completely. You should always obtain a Status Certificate as a condition to the purchase.
Q: Is seeing notice of kitec plumbing or asbestos in a condo’s building materials a deal breaker in advising your clients to move forward with a purchase?
A: Not necessarily. We can only advise about the various risks and costs involved – ultimately, the choice is up to the buyer. Kitec plumbing is worrisome because it can lead to pipes prematurely failing, causing serious water damage. Condominiums with Kitec plumbing are actively requiring unit owners to replace all of the Kitec plumbing inside of their unit at the unit owner’s cost. Some buyers have used this to their advantage to negotiate a reduction in the purchase price while others have walked away from the purchase completely. Everyone has different risk tolerances.
“When you purchase a unit in a Condominium, you are becoming a part-owner”
Many people don’t realize that when you buy a condo you aren’t just buying the space within your walls, but a percentage of the building as a whole. You become what is called “tenants in common” and are responsible for your share of the building as a whole. The responsibility extends far beyond just your walls so it is important to know and understand the health of the building to gauge whether a condo is worth investing in.
The information being provided is strictly for educational purposes and is not to be construed as legal advice. Should you require any sort of legal advice, please consult with a lawyer.
Thinking of purchasing or selling a home? Contact Alexander to see how he can help ensure you’re legally protected.