By Aleksandra Oleksak, The Real Estate Chick
When buying a condo, whether it’s a unit in a building or a condo townhome, you will be making your offer conditional upon your lawyer reviewing the status certificate.
But what does that mean and why could it be a deal breaker? Well, a status certificate is a pretty big document that provides essential information regarding the financial status of a unit and condominium corporation. It costs $100 to obtain, and that can be paid either by the buyer or seller. The status certificate can take up to 10 days to receive or can be rushed at an additional expense and your lawyer usually has 48 hours to review it.
Although it’s a lengthy document, there are a few key things that may be the deciding factor for whether you will purchase the condo or not, so it’s important to review them with your lawyer and see if you’re comfortable with the information presented.
Maintenance fee increase
In the status certificate, it will state the current maintenance fee and will advise of any increase and how much. If the increase is nominal, then it’s no big deal as that comes with owning a condo, but if it’s significant, then it gives reason to dig deeper and found out why.
The reserve fund is an account where a portion of your maintenance fees go for the purpose of replacing or refurbishing big-ticket items such as a roof, windows, and so on. A well-managed condo will have a built-up reserve fund at all times. Keep in mind the age and state of the condo building. A newer condo building may not need a high reserve fund as everything is new and under warranty, whereas an older building may need it, depending when the big ticket items were replaced or repaired.
The condominium building may need to perform repairs or replace big-ticket items. Those expenses would normally come out of the reserve fund, but what if there is not enough money? A special assessment will be levied and either your maintenance fees will increase to cover the costs of the repairs/replacements needed, or each unit owner will be given an amount that needs to be paid on top of their mortgage payments and maintenance fees. This amount could be in the hundreds or thousands of dollars. Failure to pay for a special assessment may result in you losing ownership of your unit.
Pending law suits
It’s important to know if there are any open lawsuits against the condominium corporation. If the condominium corporation is ordered to pay out money as a result of a law suit, and the insurance either won’t cover the cost or there is not enough to cover the costs, then the individual units owners will have to fork out the cash.
Who is the property management company?
Although it’s not mandatory for a condominium to use a property management company, I’m yet to come across one that does not. Therefore it’s important to know which company it is, because like any business, there are good ones and bad ones. You want to ensure that the property management company has a good reputation so that your building is maintained and ran well.
If you currently have a pet or plan on getting one when you move in, it’s key to know if the building has any pet restrictions or does not allow them altogether. A lot of the time, a condo may limit the number of pets each owner can have as well as the weight of the pet.
As an owner thinking of selling their condo or townhome, it would be prudent to order the status certificate and have it reviewed. This way you are armed with the information and any potential problems a buyer’s lawyer may discover during the conditional period. This allows you to adjust your sale price if necessary and give yourself and the buyer a piece of mind.
As a buyer you need to take into consideration all the above items and decide whether this purchase is right for you and if you’re content dealing with any problems that you may inherit by purchasing this unit or townhome–and if not, back out of the deal.
Aleksandra Oleksak is Her City Lifestyle’s “Real Estate Chick,” and a Toronto real estate professional with Sage Real Estate. As @RealtyQueenTO, her real estate blog has been named one of the top 50 real estate blogs in Canada.