What is a Status Certificate and how does it relate to a condo?
Well by definition, a status certificate is “a document provided by the condominium corporation to buyers of resale condos that provides a snapshot of the unit as at the date that the certificate is issued. In most cases, if the building is serviced by a property management company, it is prepared by the property manager. The certificate must be given to the prospective buyer within 10 days of the date of the request, and the Condominium Act allows for a $100 fee to be charged for the status certificate.”
Status Certificates can sometimes be hundreds of pages as they contain numerous different documents. Most of which are written in legal terminology, not fully understandable by most people. That is why as the buyer you will not be responsible for reviewing this document, that task will be your lawyers.
So what do they look at? Well amongst those hundreds of pages there are 5 Kkeyareas that we are going to cover that can directly affect you and how you plan to use your condo.
Information Regarding Common Expenses of Your Unit
This is where your monthly condo fee payment will be laid out. It will give you the total dollar amount, wwhichis included in the fees and how it can be paid. The amount is generally calculated by calculating the proportion of sq footage that your condo takes up in regards to the entire building.
For example, if your condo is 1,000 sq ft and the total square footage for the building is 1,000,000 sq ft. . You own 0.001% of the square footage and are responsible for 0.001% of the total condominium fees. If the total condo fees for the year, for the building are $3,000,000. Then your annual condo fees are $3000/annually or $250 per month.
In this section, you will also be notified if the current owner is in arrears for any of their monthly condo fee payments. These payments transfer with the unit, so if there are payments in arrears, the new owner will inherit them unless it is written into the Agreement of Purchase & Sale that the seller will pay the arrear before closing.
Any Special Assessments Levied By the Board
A Special Assesment can happen when there iarenot enough funds in the reserve fund to complete any needed or necessary repairs. While these can be minor repairs and from a ddollarsstandpointfairly insignificant, they can also be extremely costly iarethings like windows and doors in the whole building need to be replaced, or if elevators are dated and need to be replaced.
The special assesment is passed on to each owner and payment will either be one payment,or for larger special assessments they are spread out over monthly installments. Either way, this is a key area to focus on as it can become extremely costly and these costs are in addition to your regular condo fee payments.
This section here will outline the role of the property manager, their fees, wwhichis included in there fees and anything else in regards to the management of the property.
Property Manager roles have a wide, varying degree of involvement. On one end of the scale you have a property manager who just takes care of the common elements, grounds (lawn-care & snow removal) and maintenance. On the other end of the spectrum, there are management companies who will do all of that, plus find you, tenants, if you plan on renting it out, collect the monthly rent payments, handle in-unit maintenance requests, ETC.
Knowing what the property manager does, what they charge and and exclusions there maybe is of vital importance, especially for investors!
Declaration and By-Laws
While they are somewhat intertwined, they are not interchangeable and are two completely different documents. Here is a description of both:
Declaration: A declaration is like the constitution of a condo. It is a thick document that is based on the Act and that each owner receives upon buying a unit in a condo.
By-Laws: By-laws are legally binding documents approved by a condo’s board of directors and voted by owners at an owners’ meeting. By-laws’ purpose is to complement what is missing or is not specific enough in the declaration.
In short, the Declaration is what the law of the land is and contains things like, common use restrictions, pet restrictions, are you allow BBQs on your deck? The By-Laws are voted on and enacted by the Board of Directors and are meant to complement the Declaration, by including anything that is missing or not specific enough in the Declaration.
Reserve Fund & Reserve Fund Study
A reserve fund is a special account with a financial institution such as a bank, loan and trust corporation or credit union. This account is separate from the condominium’s operating fund, and it is used to pay for major repairs and replacements to the condominium’s common elements. A portion of the owner’s monthly common expenses fee is deposited into the reserve fund every month. The reserve fund is intended to ensure that the corporation has enough money to pay for future repairs.
A reserve fund study determines how much money needs to be in the fund to ensure the repairs can be paid for in the future. The reserve fund study must be prepared by a specialist, like an engineer. The board of directors approves the study, then informs owners of the results of the study.
Both of these are important because if the reserve fund is not large enough to cover expenses outlines in the Reserve Fund Study, that is when a Special Assessment is placed on the owners of the units.
While buying a condo can be a fun process, no matter if you are an investor or plan on living in it, these are 5 things that you need to have a clear understanding of and have a candid conversation with your lawyer before moving forward with the purchase of your unit.
By: Victor Addis