Status Certificates 101
Posted on: Tuesday January 02, 2018
When buying or selling a condo, it is extremely important to review the status certificate. Not only does a status certificate answer important questions about the details of your new property, it also keeps you informed of any potential repairs to the condominium that you could be on the hook for.
When purchasing a condo, you will become familiar with Form 13. Form 13 is a standard form required under the Condominium Act, 1998 and is included in the status certificate. If you are the seller, you will likely be the one to request this form from the property manager. This form contains information about any default of common expenses for the unit, increases in common expenses, knowledge of special assessments, lawsuits or actions against the condo corporation and other information a prospective buyer would want to know and be aware of.
The status certificate will also give the declaration, rules, and bylaws that the new buyer will be responsible to adhere to. These documents contain information about what owners can and cannot do in the condo (for example, they may limit the number of pets or species of animal allowed in the unit), and the corporation itself such as what qualifies as a quorum, how notice is given, and when it was registered under the Condominium Act. As a potential buyer, this is all important information.
One of the key details prospective buyers should review in this document is regarding the reserve fund. A reserve fund is essentially a savings account to meet the future costs of upkeep and any unexpected costs that may arise for the building. While there is no amount that is considered 100% safe, this dollar amount should be considered along with other factors about the condo. For example, if a building is newer and has a large amount of money in the reserve fund, it would be considered safer than an old building with a smaller balance. In the event that a building needs major repairs and the reserve fund does not have the funds to cover them, the condo corporation may levy a special assessment or increase common expenses, which both affect the buyer. There is no way to predict what may be required in the future with necessary repairs, but a status certificate review may reveal red flags to be aware of.
In Ontario, a condo corporation is required to carry out a Reserve Fund Study periodically. This means that an expert with special designations should review all systems (heating, for example) and physical aspects such as garbage, balconies, windows, and give a reasonable expectation as to when they will require non-routine repairs or complete replacement. This study typically happens every three years and is done to recommend contributions to the reserve fund in order to fund any foreseeable repairs.
Real estate lawyers do not usually advise on the state of financial information contained in the status certificate, as they are not qualified to do so. It is important that as purchasers, you review all documents thoroughly to protect yourself and your purchase. Nexera Law does not charge additional fees for certificate reviews when we are handling the purchase. **
*Please note that this article is not a substitute for legal advice and is provided for general information purposes only. Nexera does not warrant or guarantee the quality, accuracy or completeness of any information provided in this article. Click here to contact a Nexera representative to discuss your unique situation today.
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