For condo owners watching the red-hot Toronto market’s continuing climb, the temptation to sell grows with each passing day.
Thinking of testing the waters? Then be sure to find out what your particular condo’s status certificate says long before you put your unit up for sale.
Not really one document, a status certificate is actually a group of legal and financial briefs provided by the condo corporation to buyers of resale condos. It provides a snapshot of the particular unit up for sale, as well as the financial health of the overall condo building as at the date that the certificate was issued. The cost for the package is $100 and is well worth paying as you gear up to sell.
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Avoiding Nasty Surprises
“These are must-knows for any prospective buyers and their lawyer,” explains Emma Pace, a real estate agent with Zoocasa Realty. “So it makes sense to review what the certificate has to say up front to avoid any unpleasant surprises.”
Although you’d likely already know some of this, the certificate would indicate if you, as the current unit owner, were behind in paying the monthly common expenses or taxes, for instance.
It also details the rules and regulations of the building, its insurance status, any outstanding liens or special assessments, whether an increase in the common expenses has been declared by the condo board, and the amount held in the reserve fund.
Reserve Fund is a Key Concern
The status certificate also breaks down the reserve fund further, outlining projected replacement costs, the trends in expenditures and receipts for previous years, and comparisons of the corporation’s actual and expected costs.
If you’re selling a unit and there’s only a modest reserve fund, or the potential for a special assessment, expect to adjust the sale price to reflect this. It pays to be up front here, Pace suggests: “If you do know that there are increased fees ahead, disclosure is always the preferred policy.”
Alternatively, you might consider a holdback on closing. This way, if there is a special assessment later on, it would come out of the holdback amount. If the assessment doesn’t happen, then the money goes to the seller at the end of the holdback period.
Buyers are going to want to know if there are any pending lawsuits floating around as well – again detailed in the certificate. The most common lawsuits are generally filed against condo developers and while there’s often debate about who is responsible for any given cost – the condo corporation, the developer, or perhaps TARION – potential buyers will want to ensure they’re not among them.
Owners Versus Renters
If they’ve lived in a condo before, buyers are also going to be looking though the certificate for insight into how the building is being managed. One controversial item: the number of investor-owned units that are being rented out, particularly through short-term stay services like Airbnb.
Prospective buyers may be leery about having a rotating cast of neighbours with access to the common elements of the building, particularly now that an Ontario court has ruled that condo corporations do have have the authority to ban unit owners from renting out their properties through platforms like Airbnb.
Have Your Lawyer Take a Look
Most deals are conditional on the buyer’s lawyer being satisfied after reviewing all of the condo’s legal affairs, including the status certificate. “Having it on hand to give to a motivated buyer could certainly help move things along though,” Pace explains. “Although it will still have to be updated to assure the buyer that there have been no recent changes.”