When buying a condo, a thorough review of the status certificate is the only way to know exactly what you’re getting into. Hire a good lawyer to help.
Almost every offer on a condo unit in Toronto is made conditionally upon review of the condominium corporation’s status certificate. This set of documents deals with everything from the building’s finances to how to proceed in the event of a fire. Every buyer should take a few days to review the status certificate with a lawyer in order to make an informed decision on whether or not to proceed with the sale. Here are the most important facets of the status certificate:
■ Litigation. Lawsuits are not uncommon in condominiums, as many boards sue the developer for broken promises or broken buildings. But sometimes the condominium corporations are on the receiving end of a lawsuit, such as slip-and-fall cases and human-rights suits. Your lawyer needs to assess the risk and advise you accordingly. If the building has to pony up big, the residents will have to pay for it.
■ Fees and assessments. One of the first items on the summary page deals with maintenance fees. The status certificate will say if fees are scheduled to increase in the next year, and if so, by how much. It will also tell you whether there is a special assessment pending, whereby each owner is responsible for a large sum of money in order make a major repair on the building or update a common area, such as replacing all the carpets and wallpaper in the hallways. A special assessment should be disclosed in the MLS listing, but sometimes it’s not.
■ Budget. You’re not expected to go through each item in the budget, which includes the cost of everything from hydro to Christmas decorations, but your lawyer probably should. You need to know what costs the condominium corporation is incurring, and whether it’s prepared to handle them. Otherwise, the maintenance fees will go up, and the possibility of a special assessment is more likely.
■ Reserve fund. This is the be-all and end-all of every condominium in the city. The reserve fund is effectively the rainy-day piggy bank that goes towards renovations, updating, and medium- to long-term improvements. If the roof caves in and it’s going to cost $500,000 to fix, the money comes from the reserve fund. If there’s not an ample reserve fund, residents will be on the hook for any increase in maintenance fees and/or special assessment.
■ Repairs and renovations. This ties into everything—the budget, the reserve fund, the maintenance fees, and ultimately whether or not a special assessment is lurking. You want to know if there are any big-ticket items that will require attention in the next couple years and if the condo corporation is planning any major expenditures.
■ Rules and regulations. Many condos have special rules pertaining to parking, outdoor space, amenities, and so on. Some of these rules apply directly to your unit. A colleague’s client owned a double-sized parking space that property management seized to give to a handicapped person who needed the large space. This was buried in the rules but the lawyer missed it. Your terrace might come with specific rules, as will the gym, visitor parking spots, and the rooftop barbecue area.
■ Property management. These are the people who oversee your home and everything that goes on around it. You want to feel comfortable with the company that runs the building. You should check to see if the condo board has hired and fired several companies in the past few years. Instability and turnover make life difficult.
As a first-time buyer, it’s a great idea to learn as much as you can about these issues, as they will directly affect your life in the condo you purchase. But it’s even more important that you hire a good lawyer, not just the lawyer offering the best deal. Buying a condominium means buying into a corporation with hundreds of partners, overseen by a board of directors. A thorough review of the status certificate is the only way to know exactly what you’re getting into.
David Fleming is a Realtor with Bosley Real Estate in Toronto, and author of the best known real estate website in the city: www.torontorealtyblog.com. A constant thorn in the side of condominium developers, David’s sarcastic, opinionated, outlandish thoughts can be read daily, although for some people, that’s far too often.