What is a Status Certificate?
When buying a condo, one of the most important documents you should pay attention to is the status certificate. This document is a financial snapshot in time (good for 30 days only) of the current state of a condo corporation. It provides essential information, including insights about the:
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- Unit
- Building
- Management contract
- Condo’s declaration, bylaws and rules
- Fees you can expect to pay
- Any special assessments
- …and more.
You can get a copy of the status certificate from the building’s property management. Typically, this costs $100.00. Under the Condominium Act, the certificate must be given to you within 10 days from the order date. Most lenders will want to see a copy before releasing funds on close.
Why Should You Care About a Status Certificate?
As a prospective buyer, it’s part of your due diligence to obtain and review the status certificate. The importance of this document cannot be overstressed enough, especially given that ill-informed buyers will often overlook this step in the condo purchasing process.
Essentially, when purchasing a condo you are not just buying a property. Rather, you are becoming a part owner of the condo corporation. As such, you want to ensure that the corporation is in good financial health. Furthermore, you should ensure this potential acquisition is the right fit for your lifestyle, budget, and long-term investment goals. For these reasons, it’s beneficial to have a lawyer review the status certificate – and then explain it to you in plain English! You want a lawyer who comes from experience with downtown Toronto condominiums. This is one of the most important steps in doing your due diligence prior to purchasing a condo.
9 Questions the Status Certificate Will Answer
So, you’re about to make one of the biggest purchases of your life. Before moving forward with a condo purchase, wouldn’t you want to know…
Common Elements Fees and Reserve Funds
- Is the current owner in default of any common elements fees? What exactly are the monthly maintenance fees? Sometimes, there are mistakes on the MLS listing and you want to ensure this information is accurate.
- Is the condo’s reserve fund properly funded or is it underfunded? This means, in an emergency, will there be ample funds to pay for necessary repairs and improvements? If not, you could be left on the hook.
- Is there a pending increase in monthly common elements expenses, special assessments, or one-time charges coming down the pipeline? Maintenance fees will rise over time. However, you want to ensure there are no known current increases on the immediate horizon. If there are, that could affect the value of your property and monthly budget. In the event that any foreseeable increases in maintenance fees are in the status certificate, you should either negotiate a price reduction or holdback before going through with the sale.
Lawsuits
- Is the condo corporation party to a litigation? If so, is there enough money in the reserve fund to pay for the legal fees? Should there be litigation, is there proper insurance to pay for any negative outcomes?
- Are there any judgments against the condo corporation? This is good to know.
Condo Restrictions
- Are there any pet restrictions and if so, what are they? Think about it this way, does your 60-pound golden retriever (and BFF) meet the condo weight restrictions?
- Are you able to have a BBQ on your balcony or terrace? Just because the current owner has one doesn’t mean its allowable as per the rules of the condo corporation.
Building Rentals
- Are there rules and guidelines surrounding short-term rentals, such as Airbnb’s? This information is very relevant to both a condo investor and end user.
- How many of the units in the building are rentals? What is the percentage of end users to renters? Generally, if there is a higher number of end users (meaning owner-occupied units), it is more likely that the building is better maintained. Aside from this, buildings that are owner-occupied are often more desirable and appreciate at a more accelerated rate.
All important questions, right?
The more information, the better.
The status certificate will also provide key financial information, such as:
- The most recent budget for the condo corporation
- Financial audit from the previous year
- A copy of the most recent reserve fund study (redone every three years, outlining all parts of the building a corporation needs to replace or repair on a timeline)
- Insurance certificate
- Copies of the condominium’s by-laws and rules
Reviewing the Status Certificate: This is so Important!
Generally, a status certificate is quite lengthy and far too complex for the average reader to digest without proper training and context. As real estate brokers with experience in the condo buying process, we always strongly recommend having a lawyer review the document prior to considering purchasing any condo. There are a lot of unknowns and unforeseeable outcomes when purchasing a condo. However, you can mitigate many of these risks with the simple act of having a competent and experienced real estate lawyer review the status certificate.
In working with sellers, we oftentimes secure a status certificate in advance before going to market. This way, we have all the information about the property and can confirm that the MLS is factual ahead of time. Remember, the status certificate can take up to 10 days to receive, in order to be current and up-to-date from the property management. As listing agents, we don’t want to have any delays or possible unforeseen surprises come up in the sale of your property. That’s why it’s important to keep these timelines and processes top of mind.
When considering whether to buy or sell a property in a fast moving market, like the Toronto real estate market, your margins for error are slim. There are a lot of considerations to take and it’s important that you have a solid team by your side – one that has your best fiduciary interests every step of the way.
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This article is written by Ralph Fox, Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts that help to establish Ralph as a top agent in the real estate market in downtown Toronto.
