When buying or selling a resale condominium, the most important document in the deal is the status certificate.
Carlos Osorio
/ Toronto Star
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A view of some of the Condo buildings in Toronto's Liberty Village neighbourhood.
When buying or selling a resale condominium, the most important document in the deal is the status certificate.
It answers such important questions as:
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.
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.
Mark Weisleder is a lawyer, author and speaker to the real estate industry. You can contact Mark at mark@markweisleder.com
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