Are you one of the many Torontonian’s looking at or thinking about buying a condo? You may have heard about a Status Certificate, but do you know what it is or why it’s important? If you don’t, you are in the majority & that’s why I’m here to shed some light!
A Status Certificate is a report on the current state of a given condominium corporation. It details everything related to the condominium’s everyday operations & finances. When you purchase a condo you become part-owner of a corporation, so it is important to make sure the corporation is in good health before investing your money!
It is highly recommended you have a building’s Status Certificate reviewed by your lawyer before committing to purchase. I would ask them to go into detail with you about their findings & recommendations. The following are the major categories of a Status Certificate you should inquire about & understand before taking the leap to condo ownership.
A condominium’s reserve fund is composed of a portion of all unit owners’ monthly maintenance fees & is used to pay for major renovations & repairs. Reading through the reserve fund can help spot red flags early on in the buying process or help a seller determine when it is a good time to sell by foreseeing possible problems. A well managed condo should consistently have a healthy amount of money in their reserve fund.
Reserve Fund Study
Every 3 years a mandatory study is conducted that will help indicate the financial contributions required by unit owners to keep the reserve fund in a healthy state. Basically, it will estimate how much your maintenance fees will be increasing (ideally only 2-3% to cover inflation) to make sure the building can cope with its financial responsibilities. Reserve fund contributions are only a fraction of your totally monthly fees, so while your fund contribution could increase by 10% that does not mean your monthly fees are increasing by that amount.
Make sure the current unit owner isn’t in arrears for non-payment of common expenses. If they are, that amount will need to be paid by the seller before closing or be held back upon closing. If neither are done, it is possible you will have to front the costs! Doing your research is worth it, I promise.
These are commissioned when an unexpected repair is required that the condo board wasn’t necessarily budgeting. It can be an indication that there may be a short term increase in condo fees to help cover unanticipated or large expenses.
It is important to make sure your building has adequate coverage so you won’t have to cough up $$ should your building be sued!
Legal Proceedings & Claims
Ensure there are no outstanding legal actions against the Condominium Corporation. Judgements may be divided among the unit owners, resulting in a special assessment. Occasionally the corporation’s insurance policy may cover these claims, but it is worth it to check!
Know what you are getting yourself into when you sign an offer! Do your research! Understand the legal jargon!
Some condos are blacklisted by mortgage lenders. What this means is that you may not be able to obtain financing for a unit in one of those buildings, regardless of a mortgage pre-approval. Believe it or not, I have seen lenders pull out just days before closing! (Not my clients of course!) Scary thought isn’t it? Less drastically, they may just require a larger down-payment.
Buildings can be blacklisted for a number of reasons, primarily dealing with a building’s financials. Each lender has their own list & their own reasons to blacklist, so the best way to be safe with your investment is to have the Status Certificate reviewed by a lawyer & educate yourself on what you’re buying! If you choose to move forward with a building that may have a special assessment or another red flag causing it to be blacklisted, you can then bring it up with your lender to discuss your options for financing, rather than submitting an offer & being stuck without financing options.
Real Estate is a sound investment, when invested properly. It’s important to do your research & hire different professionals for the different facets of home ownership. When it comes to your Status Certificate, your lawyer is the expert! But I am always here to help, guide you & make sense of all the confusion!
Lara Stasiw • Real Estate Agent & Home Design Connoisseur
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