Buying a Condominium in Today’s Market ? Think Twice Before Making an Unconditional Offer
COVID-19 has certainly not prevented the real estate market to rise. In fact, since the pandemic, the real estate market has been hotter than ever. However, a hot real estate market, comes with a larger price. Properties are being sold way above the listing price and Purchasers are making unconditional offers without conducting any due diligences (i.e without conditions pertaining to financing, inspection, water potability testing, Condominium Status Certificate review, etc.). This has left many Purchasers experiencing issues with their closings and potentially facing a lawsuit as a result of not being able to close their purchase transaction.
Of particular popularity in this hot market are condominiums.
When purchasing a condominium, a Purchaser will want to ensure that there is a condition that his/her lawyer review a Status Certificate/condominium documents. The consequences of excluding such condition in your Agreement of Purchase and Sale can be fatal.
What is a Status Certificate ?
A Status Certificate is a document prepared by the Condominium Corporation which reports on the financial and legal status of the Condominium Corporation. Pursuant to the Condominium Act, a status certificate must report the following information:
- Condominium fees for the unit and any payment default by the current owner of the unit;
- Increases in the condominium fees for the unit since the Budget for the fiscal year;
- Any special assessments that the Condominium Corporation has levied against the unit since the Budget for the fiscal year, to increase contributions to the reserve fund or general operations fund;
- The current Declaration, By-Law and Rules/Regulations;
- All applications to amend the Declaration for which a Court has not made an Order;
- All outstanding Judgments against the Condominium Corporation and the status of all legal proceedings to which the Corporation is a party;
- The Condominium Corporation’s Budget for the fiscal year, the last annual audited financial statements and the auditor’s report on the statements;
- Most reserve fund study and updates;
- The reserve fund balance no earlier than at the end of a month within 90 days of the status certificate;
- Current plans to increase the reserve fund;
- A statement of any additions, alterations or improvements to the common elements, those changes in the assets of the Condominium Corporation and those changes in a service of the said Corporation that are substantial that the Condominium Corporation has proposed but not implemented;
- The number of leased units during the fiscal year; and
- A statement of any amounts that the Condominium Act requires to be added to the condominium fees for the unit.
Should you buy a condominium without a Status Certificate/condominium documents?
Although there is no legal obligation for a Purchaser to obtain and have a lawyer review a Status Certificate/condominium documents when purchasing a condominium, proceeding without same is ill-advised and risky. Not only can the information revealed in the Status Certificate and accompanying documents affect a Purchaser’s use and enjoyment of the property (i.e restrictions on smoking in the condominium building, restrictions on having pets, limitations on renovating a unit, not having ownership of a parking/locker unit, etc.), but it can affect your finances.
If a Purchaser is obtaining financing through a financial institution/lender to purchase the home, the financial institution/lender will require that a Status Certificate and accompanying condominium documents be obtained and reviewed, regardless of whether or not the Purchaser wants to obtain same. Any negative information revealed in the Status Certificate/condominium documents such as legal proceedings involving the Condominium Corporation, special assessments and a low reserve fund balance can result in a Purchaser’s financing with a financial institution/lender being declined and falling through.
The review of a condominium’s Status Certificate and accompanying condominium documents by a legal professional is an important step that a Purchaser should not ignore.