Buying a Condo Apartment – What is a Status Certificate and why is it important?
A Status Certificate is a short report on the current status of a condominium corporation. If you are buying a resale condominium, it is important that your agreement of purchase and sale is conditional, upon review of the Status Certificate by your lawyer.
The Status Certificate provides valuable information directly from the condominium corporation, examples of such information include, but are not limited to: Arrears or increases in common expenses; Whether any major work needs to be done to the building; The amount of the reserve fund and whether the reserve fund is sufficient for any major work. The Status Certificate also provides information about any claims against the corporation and whether the corporation is involved in any proceedings. This is important because if there are high value claims against the corporation and the corporation’s insurance does not provide coverage; the corporation can either increase the common expenses or levy a special assessment against the unit owners. If you are buying a condominium, you need to know of any potential significant increase in your monthly common expenses. .
The Status Certificate package includes the corporation’s financial statements, declaration and by-laws. The financial statements are a good indication of a corporation’s financial stability. The statements will show the trends in expenditures and receipts for previous years and provide comparisons of a corporation’s actual and expected costs. The budget for the current year will also be included, identifying both the income to the corporation, and the amount of the reserve fund. The declaration of the corporation outlines the structure, rules and regulations of the corporation for example whether you can keep pets. The corporation’s by-laws govern the corporation’s functioning, i.e., electing the Board of Directors, meetings, notices etc.