Mon-Fri 9:00 - 17:00

[email protected]


Buying Condo Facing Lawsuit

Buying a Condo Facing a Lawsuit: Legal Considerations & Risks

Real Estate Law

Updated on 

Purchasing a condominium can be an exciting investment opportunity for most prospective buyers. A condo might offer property ownership and the enjoyment of community amenities at the same time. However, it is essential to exercise thorough due diligence, especially when considering buying a condo entangled in legal proceedings.

While it is not uncommon for condos to be involved in legal proceedings, it might carry inherent risks that potential buyers must be aware of before making any commitments. This article aims to shed light on the potential challenges and legal aspects involved when considering the purchase of a condo embroiled in litigation.

Importance of Obtaining a Status Certificate

A status certificate is a vital document that provides crucial information about the condo corporation, its financial health, legal matters, and the property’s overall condition. Obtaining a status certificate becomes even more crucial for potential buyers interested in a condo facing a lawsuit. The status certificate typically reveals whether condo owners may be subject to financial liabilities or special assessments at the outcome of the lawsuit.

Understanding The Nature of The Lawsuit

First, it is crucial to understand the nature and scope of the lawsuit that the condo is facing. Litigation matters and claims regarding condos can vary significantly and may include construction deficiencies, personal injury (i.e. slip and fall), breach of contract and HoA disputes.

Potential Risks for Buyers

Uncertain Financial Liability: Buyers may become financially liable for the condo’s legal fees or settlements if the lawsuit is ruled against the condo association. Usually, regardless of the case’s outcome, there might be additional legal expenses related to the legal representation and costs of the condo association in the lawsuit. This burden may be imposed on all condo owners, potentially leading to increased monthly maintenance fees or special assessments.

Marketability and Property Value: Selling condos with pending litigation against them might be challenging, as potential buyers may be deterred by the uncertainty and risks involved. This could lead to prolonged market exposure and potentially impact the property’s value.

Limited Access to Amenities: Depending on the nature of the lawsuit, specific amenities or common areas may be off-limits during the legal proceedings, affecting the overall living experience for condo residents.

Difficulty Obtaining Financing: Due to the increased risk involved, lenders may hesitate to provide financing for condos facing litigation. This can limit the pool of potential buyers and make it more challenging to secure a mortgage.

What is the Next Step?

First, if the status certificate indicates a pending lawsuit, you might want to contact the condo corporation to confirm the information is accurate and current. Sometimes, status certificates might reflect cases already concluded or settled between the parties because their records have not been updated. If there is a legal proceeding against the condo corporation, it is essential to seek approval from your lender immediately to avoid funding delays (or no funding at all) before the expiration of condition timelines in your offer.

At our law firm, we understand that purchasing property can be daunting. That’s why, as a Toronto real estate lawyer, we are here to help. Contact us if you are refinancing, purchasing, or selling real estate.

The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.

About the Author

Photo of author