Status Certificate Review: Importance with Examples

Ontario has witnessed a significant rise in condominium developments over the past decade due to the growing population. When purchasing a condominium, obtaining the status certificate is a crucial step in the entire process. As a unit owner, you have a stake in the property’s common elements, which implies that you share the assets and liabilities of the corporation. Therefore, it’s important to review the status certificate with the help of your lawyer to gain an understanding of the financial and structural health of the condominium corporation before making a purchase. Ignoring this document could have severe consequences.

What is a Status Certificate?

A status certificate is a document provided by a condominium corporation that offers a snapshot of the financial and legal state of a specific condominium unit and the corporation as a whole. Typically reviewed during the purchase process, the certificate includes information such as the current monthly common expenses, any special assessments or outstanding dues, the status of the reserve fund, ongoing legal proceedings involving the corporation, and details of the corporation’s by-laws, rules, and insurance. Essentially, it informs prospective buyers about the health and obligations of the condominium, thereby aiding them in making an informed decision.

Ontario’s Condominium Act, 1998 is the guiding statute governing condominium corporations. Section 76 explicitly necessitates the corporation shall give the status certificate within 10 days after receiving a request for it and payment of the fee charged by the corporation for it. This ensures that a Status Certificate is available to potential purchasers within 10 days, providing an informed and transparent transaction.

What should you expect to see in a Status Certificate?

The following information is typically found in a Status Certificate:

General Information: This section includes basic information about the condominium corporation, including its legal name, address, and contact details.

Financial Statements: The status certificate should include financial statements that provide insights into the condominium corporation’s financial health. This includes the operating budget, a summary of expenses, reserve fund information, and any outstanding fees.

Reserve Fund: Information about the reserve fund, including its balance, funding plan, and any special assessments planned or ongoing. The reserve fund is essential for covering major repairs and replacements of common elements.

Legal Proceedings: Any ongoing or pending legal proceedings involving the condominium corporation are disclosed in this section.

Insurance Coverage: Details about the insurance coverage held by the condominium corporation, including coverage for the common elements and liability insurance.

Declaration and By-laws: The status certificate includes copies of the condominium corporation’s declaration and by-laws. These documents outline the rules and regulations governing the property and the rights and responsibilities of unit owners.

Board of Directors: Information about the current board of directors, including their names, contact information, and terms of office.

Condo Fees: Details about the monthly condo fees and what they cover, including common expenses and potential future fee increases.

Special Assessments: Any upcoming or ongoing special assessments that unit owners may be required to pay for specific projects or repairs.

Rules and Regulations: Information about any rules and regulations that govern the property, such as pet policies, noise restrictions, and use of common areas.

Management Company: Information about the property management company responsible for managing the condominium corporation.

Examples of Issues a Status Certificate may Identify

Some examples that a Status Certificate may identify:

1. Reserve Fund Adequacy: Consider a situation where a Status Certificate reveals a depleted reserve fund. A potential buyer, through this insight, may anticipate future financial strains in the form of increased maintenance fees or special assessments for imminent repairs.
2. Litigations and Legal Disputes: A Status Certificate may disclose ongoing litigation concerning structural defects or disputes with contractors. Such information is vital for a buyer to assess potential risks and financial implications.
3. Restrictive By-laws and Rules: A prospective buyer with a pet may discover through the Status Certificate that the condominium has stringent pet policies or restrictions on modifications to the unit, influencing the purchasing decision.
4. Insurance Coverage: A review of the Status Certificate can also reveal the extent of the condominium corporation’s insurance coverage. For instance, if the coverage is lacking in areas such as flood or fire damage, a buyer may need to consider additional personal insurance.
5. Compliance and Liens: The Status Certificate may also inform a potential buyer about non-compliance with the Condominium Act, such as liens on specific units for unpaid common expenses, which could indicate broader financial issues within the corporation.

Case Study: Atkinson v. TWS Developments Inc., 2005 CanLII 20792 (ON SC)

The case pertains to the plaintiff, Douglas Atkinson, seeking to recover the deposit paid to the defendant, TWS Developments Inc., for purchasing a condominium unit at Suite 1108, 797 Don Mills Road, Toronto, along with damages. The plaintiff entered into an agreement of purchase and sale on April 15, 2002, and made deposits totalling $30,000. The plaintiff was provided with a disclosure statement that indicated common expenses for the unit to be $182.26 per month and that there were no ongoing lawsuits or judgments against the property. However, on the closing date, August 28, 2002, the status certificate and an inspection revealed several discrepancies, including a higher common expense charge ($331.00 per month), potential deficits in the condominium corporation’s budget, disputes regarding repair of deficiencies amounting to millions, and ongoing litigation against TWS for failing to provide necessary documents. Furthermore, mold was found in the building, posing a health risk.

Given these discoveries, the plaintiff chose not to proceed with the closing and demanded a return of the deposit, citing failure to disclose material amendments to the disclosure statement. The defendant admitted to being aware of the substantial deficiencies and the ongoing litigation.

The issue was whether the plaintiff had the right to rescind the agreement and demand the return of his deposit due to the defendant’s failure to disclose material amendments. The court, referring to the Condominium Act and previous cases, determined that the defendant had an ongoing disclosure obligation. The undisclosed information was deemed material, as it could influence a purchaser’s decision and potentially adversely affect the unit’s value. Thus, the court concluded that the plaintiff was entitled to rescind the agreement and demand a return of his deposit.

Case Study: Nipissing Condominium Corporation No. 4 v. Kilfoyl, 2009 CanLII 46654 (ON SC)

The case pertains to the Nipissing Condominium Corporation No. 4 (the “Applicant”) and the respondents Paul Kilfoyl, Stephanie Kilfoyl, and unknown occupants of Unit 667-7 Gormanville Road, North Bay, Ontario.

The Applicant alleges that the respondents violated occupancy restrictions by leasing the unit to multiple unrelated tenants. This contradicts the declaration that each unit should be occupied only as a “one-family residence”. The respondent, Kilfoyl, obtained a Status Certificate before purchasing unit 667-7.  The Status Certificate clearly stated that the occupancy restrictions were strictly adhered to and that the unit could not be leased to multiple tenants but only to single families.  The respondents, McGuire, Mous, Bruce and Campbell, were the occupiers of the unit at the time the application was commenced.  They are not related to each other in any manner.  They were students who were renting rooms in unit 667-7.

The respondents, Kilfoyl, were found to be in breach of the Condominium Act 1998. The court ordered that the unit must only be occupied per the Declaration and By-law No. 1.

Status Certificate Review

A comprehensive review of the Status Certificate is essential to ensure that potential buyers are fully aware of the various aspects and potential liabilities of purchasing a condominium. Legal professionals play a crucial role in this process, as they interpret complex nuances and protect the buyer’s interests. By examining the Status Certificate, prospective buyers can make well-informed decisions and safeguard their investment from unforeseen complications.

Our lawyer can conduct a status certificate review in Toronto at reasonable rates for condominium units to mitigate unwanted issues or delays. During the review of a status certificate, the lawyer will identify potential red flags that might lead to substantial future hikes in common expenses or other unwelcome surprises. Our Status Certificate Review Lawyer has guided numerous real estate clients through possible pitfalls linked to impending property acquisitions. We conduct reviews of all pertinent documents and searches impacting your purchase, ensuring complete awareness before closing.

Insight Law Professional Corporation is a real estate law firm located in Toronto. If you need assistance from a Toronto Real Estate Lawyer, contact us today and see how we can help you.

The information provided above is general 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.