Buying Tips : Why a condo status certificate is important
When buying or selling a resale condominium, the most important document in the deal is the status certificate.
Most deals are conditional on the buyer’s lawyer being satisfied after reviewing all of the condominium documents, including the status certificate.
In my experience, there are no easy rules to provide guidance. A reserve fund might have over $1 million dollars in it, but the building could need over $2 million in repairs.
Another building might only have $200,000 in the reserve fund, but could have completed all repairs that would be needed for years to come. You get the picture.
A Condo Status Certificate answers important questions such as:
- Do I own the parking or locker?
- Are pets allowed?
- What are the pool hours?
- How much is in the reserve fund to look after future repairs?
- Are there any special assessments because there isn’t enough money to pay for needed repairs?
- Is anyone suing the condominium and is there enough insurance to pay for it?
- Who is the property manager?
In some cases, the Canada Mortgage & Housing Corp. (CMHC) can decline to provide mortgage insurance for buyers if they’re not satisfied with a condo’s financials.
In other cases, a board might have to borrow money for repairs if there isn’t enough money in a reserve fund. The money can be paid back over time through increases in maintenance fees.
If you are selling a unit and there is a low reserve fund, or potential for a special assessment to pay for needed repairs, either adjust the sale price to reflect this, or negotiate a holdback on closing for one to three years, so that if a special assessment is levied later, it would come out of the holdback amount. If it is not levied, then the holdback would go to the seller at the end of the holdback period.
It is not mandatory for a board of directors to use a management company, but I am suspicious if there isn’t one. Board members aren’t generally qualified to make these types of decisions or handle large budgets.
But be careful who you hire. The story of Channel Property Management and Manzoor Khan, the property manager who allegedly defrauded several condominium corporations out of millions of dollars is one cautionary tale; unit owners ended up having to fork out thousands of dollars in special assessments.
In general, townhouse condominiums do not require as large a reserve fund as highrise condominiums, because they will not have as many future repair requirements. The unit owners are responsible for everything inside their units.
It is thus important for everyone buying a townhouse to also include a condition for a home inspection, to check everything inside the home before you commit to buying.
Sellers, find out what your status certificate will say before you put your unit up for sale. Buyers, ask what is in the status certificate because this will form the basis of your continued enjoyment of your home after closing.
By: M. Weislander