Status certificates don’t make the news often, and really, that’s because they aren’t all that newsworthy. A status certificate is a collection of documents that provide a prospective purchaser with financial information about the unit or home they are purchasing. It also contains financial information about the condo corporation if the home being sold is a condo unit.
Status certificates should flag, in clear language, any financial concerns that would prompt a prospective purchaser to pay close attention to the “fine print.”
But a recent court ruling put a temporary spotlight on condominium status certificates and highlighted the necessity for corporations to be as transparent and thorough as possible. As a result of one condominium’s failure to be more forthcoming about an expensive project, a new buyer was granted an exemption from having to pay a hefty special assessment. Read on to learn more about this unique case.
Table of contents
About special assessments
When a condo owner hears the words, “special assessment,” they may be struck with an instant feeling of dread, anger or concern. That’s because these unplanned fees can cost each unit owner thousands of dollars.
Special assessments can be charged by a corporation on top of regular monthly fees, and the board may be able to charge these fees without getting permission from condo owners. Though no one is ever happy about a special assessment (remember that board members are not excluded from these costs), a corporation may levy a special assessment for the following reasons:
- An unexpected major expense must be covered and the reserve fund was just depleted
- An expense or major repair ended up costing more than expected
- The corporation lost a lawsuit and can’t pay the judgment from the operating fund
The board will tell owners how much they are required to pay. Amounts will vary from owner to owner as they are determined using the same calculation applied to generate common element fees.
Special assessments must be paid…with very few exceptions
Bylaws of the corporation often address special assessments and may include provisions for owner input. In addition, the decision to levy a special assessment can be challenged in court if proper procedures are not followed.
However, in most cases, owners must pay their share of a special assessment.
About status certificates
A status certificate is a collection of documents disclosing the financial status of a home. If the home is a condominium unit, financial information about the corporation is also included in the package. The Ontario Condominium Act mandates the document; prospective buyers are legally entitled to a status certificate when they request it.
A status certificate helps the potential buyer identify any required expenses that could cost them additional money. It informs them if the unit is in default of its payment of common expenses.
It also shows them if the condominium is in debt or at risk of going into debt.
According to Ontario’s Condominium Act, a status certificate must include the following information (but it can also have more items included):
- The common expenses for the condominium unit and the default, if any, in payment of the common expenses
- The increase, if any, in the common expenses for the unit that the board has declared since the date of the budget of the corporation for the current fiscal year
- The reason for the increase
- A copy of the corporation’s budget for the current fiscal year
- The last annual audited financial statements and the auditor’s report on the statements
- Information about the reserve fund – including the most recent reserve fund study and updates to it, the amount in the reserve fund no earlier than at the end of a month within 90 days of the date of the status certificate, and current plans, if any, to increase the reserve fund under subsection 94 (8)
- Assessments, if any, that the board has levied against the unit since the date of the budget of the corporation for the current fiscal year to increase the contribution to the reserve fund, and the reason for the assessments
- The current declaration, bylaws and rules
What do special assessments have to do with status certificates?
Any information about special assessments will be included in a status certificate. This information is critical in helping the prospective buyer make an informed decision about the unit up for sale. The buyer has a right to know what they’re buying into, and if there is a $30,000 special assessment attached to the unit, they need to know so that they can negotiate a lower sale price or find a unit that doesn’t come with extra costs.
Obtaining status certificates
A seller can obtain a status certificate when they put their unit on the market, or a buyer can request it if it isn’t readily available. The best way to get this collection of documents is to request it from the management company that cares for the building. If you are unsure of the company name, you can check this registry.
Condo corporations must produce a status certificate within 10 days of receiving a formal, written request, and payment. It is now possible to complete this process online though, which drastically speeds up timelines and ensures certificates are always delivered before the deadline.
There are no laws in Ontario dictating who must pay for the status certificate. However, a corporation cannot legally charge more than $100 to prepare the certificate, including taxes and materials.
What happens if status certificates are wrong or incomplete
Now that we’ve covered special assessments, status certificates, and the link between the two, let’s return to the court ruling that excused a buyer from having to pay a pricy special assessment.
A man was looking for a condo in 2021. He found something he liked in Waterloo, Ontario. The man asked his real estate agent to get a status certificate.
The certificate was provided to the buyer by the seller’s agent in June of 2021. In paragraph 12, the status certificate stated that “The Corporation has no knowledge of any circumstance that may result in an increase in the common expenses for the unit. Except: The Corporation’s fiscal year end is August 31, 2021. Therefore, monthly common element fees may be increased in accordance with the new budget, which has yet to be determined.”
The man did not hire a lawyer to review the status certificate. The real estate agent did summarize the contents of the status certificate to the prospective buyer, and concluded that the finances looked to be in order, and that there was nothing in the document to suggest there might be a special assessment anytime soon.
Based on the information he received, the buyer went through with the purchase. But, in May of 2022, the new buyer learned that the corporation was seeking authorization from owners to borrow up to $2.5 million to repair or replace its lift station and water main. The buyer’s share was around $34,000, payable as part of a special assessment or a loan. The man didn’t have the money for such a big special assessment and would have had to opt into the loan.
The man brought this issue to court. He argued that the corporation failed to disclose material facts about an expensive project that it knew about for years and was in the process of tendering for.
The corporation argued that the status certificate did contain the material information about the project, and noted the auditor’s report remarked that the corporation had tendered for repairs to the water main. It also pointed out that the buyer failed to retain a lawyer, who could have explained the document to him more clearly.
While the judge agreed that a lawyer should have been retained, he also found the status certificate to be misleading. He concluded that the author of the status certificate misunderstood in thinking that special assessment disclosure was only required if the cost was a certainty, not a possibility.
The judge issued the owner an exemption from the special assessment, but only for the period he owns the unit. The exemption will not be extended to subsequent owners of the unit.
While cases like this one don’t occur often, other condominiums should learn from this corporation’s mistake. Always be as transparent as possible, and don’t squeeze important financial details into the fine print.
Status certificates are only valid for the day that they are issued. The author of the certificate can make no representations or warranties beyond that date.
However, most lawyers will consider a certificate to be acceptable if reviewed within 7 days of its issuance, but this timeframe may vary depending on the situation. In short, if you are a buyer who has just received a status certificate, make sure you also have a lawyer available to review the document.