Review your status certificate when purchasing resale unit
February 12, 2010
Mark Weisleder
SPECIAL TO THE STAR
Once a buyer finds a condominium resale unit that satisfies his or her needs, there are many "hidden" questions about the building that need to be answered:
Are there any restrictions, such as "no pet" clauses, in the declaration?
Are there any special assessments being considered, whether for major repairs, replacements or improvements to the building?
Is the condominium corporation involved in any lawsuit?
What is the amount in the reserve fund?
Has a reserve fund study been completed?
What percentage of the common elements do you own with your unit?
Does the building have an insurance deductible in its policy that you will have to pay if something occurs inside your unit?
Do the owners get along?
Is the building professionally managed?
You can obtain most of the answers to these questions by looking at the status certificate, which is issued by the condominium corporation for a fee (usually $100) to any interested buyer. Almost every condominium resale agreement is conditional on the buyer reviewing this certificate with his or her lawyer. This is an extremely important process and must be done carefully.
A copy of the declaration is included with the status certificate so that you can read any restrictions that will impact you, such as a "no pet" clause. Also look at all rules that have been passed by the directors, for they will apply to how the common areas are enjoyed by the residents, such as when you can use the swimming pool or party room.
The directors of every condominium in Ontario are required to commission a reserve fund study every three years. This study, completed by a combination of engineering and accounting firms, does an inspection of the building to determine not only what major repairs and replacements will be needed in the coming years, but if there will be enough money in the reserve fund to pay for them. In many cases, this information is more important than the actual amount of money in the reserve fund. Underfunded reserve funds will lead to costly special assessments in the future when a major repair becomes unavoidable. If there has been no reserve fund study done at the building, be very wary before committing to buy.
Also ask to obtain a copy of the minutes of the last annual meeting, where presumably the annual budget was passed. If you multiply the budget number by the percentage ownership that your unit has in the common elements, you can figure out your common expense payment for the year. In addition, check to see if the meeting proceeded in an orderly fashion or whether many items were disputed. You can tell whether owners in the building get along as a group by what takes place at the annual meeting.
Does a professional property management firm manage the building or is it being run by a few directors in their spare time to save money? When the building is not being run professionally, too often more emphasis is placed on keeping monthly common expense payments low instead of taking care of necessary repairs.
If your building insurance policy contains a $5,000 or $10,000 deductible, then be sure to speak to an insurance specialist about obtaining your own unit coverage to protect your contents and any improvements that you make to your unit. Unit coverage will also protect against this deductible being claimed against you if something happens inside your unit.
I often tell buyers that when researching condominium buildings, they should ask in advance what the status certificate will say. Ask your real estate salesperson for this information. That way, when condominium units become available, buyers can limit their search only to those buildings that are well run and well maintained.
Mark Weisleder is a lawyer, author and public speaker and a regular contributor to Real Estate News. Email: mark@markweisleder.com.
Toronto Star