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Podcast - Status Certificates for Condominiums

Podcast - Status Certificates for Condominiums

REALTOR® IN YOUR POCKET Podcast

EPISODE SUMMARY

Have you ever wondered what a status certificate is for a condominium?

In this episode, I interview Cecilia Perdigao of LaPierre Law. Cecilia is a fantastic lawyer and someone I’d consider part of our “extended team” that I trust to refer our clients who are buying or selling. We talk about Status Certificates for Condominiums: what they are and what they can tell you about a property you’re considering purchasing.

TRANSCRIPT

NICK FUNDYTUS: This is REALTOR® in Your Pocket podcast. My name is Nick Fundytus, and I'm joined on the program today with Cecilia Perdigao, who is part of my team's, extended team. She doesn't actually work for us, but we're very lucky that she will work with us. I trust her to refer our clients to who are buying or selling.

And today, Cecilia and I are going to talk about status certificates for condominiums. So what are they and what can they tell you about a property you're considering purchasing?

So, first of all, Cecilia, thank you for coming on.

CECILIA PERDIGAO: It's a pleasure. Thanks for inviting me.

In brief, what's a status certificate?

A status certificate is a document that provides a lot of information about a condominium unit. So when people are thinking about buying a property, they should get to know the rules that that property comes with. So the certificate has a specific structure, and it will give a lot of very relevant information, not only to someone buying a property, but to somebody who plans on living in the property because there are rules and declarations, but there's also financial pieces of a status certificate that's really important before you buy, because everything else kind of flows from that.

Right. And as a lawyer, part of your role here is to help protect the client's interests and make sure that they are not running into the minefields, the things that might be hiding in a status certificate.

So do all properties have one? For example, if I go buy a freehold house in Beacon Hill, does it have a status certificate?

No, not every property has a status certificate. A status certificate does apply to condominium properties. Sometimes people think condos are like apartment styles, but there are townhouse condominiums. 

There are also status certificates, similar documents for Freehold Properties, where there is an owners association. Basically, any time you have a property where there is annual or monthly or any kind of ongoing financial obligations for a shared space, then there should be a status certificate requested.

Okay, that makes perfect sense. So if I'm a Buyer, if I'm looking to purchase a home, how do I get one and when should I arrange to get one in the purchase process? 

So when should you get it? The day before you wanted it.

Generally speaking, when a real estate lawyer on a purchaser side gets an agreement of purchase and sale, oftentimes it was conditional upon review of a status certificate, and as soon as we would receive the agreement, we would order the certificate right away. Because everybody wants short conditional periods, which we understand. Except a status certificate the obligation of the property manager to provide it is within ten days of the request.

So they have up to ten days to provide the status certificate, even after the request. And it's not a short set of documents, so it's not something you can read in an hour. It's not even something that I would expect most people to read in a couple of hours. The parts that I will read I can do quickly if I'm available at that time, as would any other lawyer give that answer.

But there's a lot of it that we don't read that's still relevant to a purchaser, so they always want to buffer. Having said that, we are living through crazy days, and I understand that not every agreement has conditional periods that a lawyer would like to see. So at that point, I've had some clients actually order status certificates before they even put the offer in, because for the cost of $100 or sometimes $200 for a rush certificate, they can get that information in advance.

I know that a lot of Sellers, when they're selling condos, are ordering a status certificate, so they have it available upon request. The issue with that is that the status certificate is only valid for so many days, and if there's any follow ups on it, apparently only the person that ordered the status certificate can rely on its accuracy.

Yeah, little tidbit.

One of the things is that when we see it's all clear, we're generally not in a big panic. If we see any issues, then you kind of know what you're walking into. So it at least gives some people some guidance.

Now, specifically in a status certificate, what documents are in that bundle? I know that a status certificate is one document in the bundle, but when we're referring to that whole package, it might be 70, 80, 100 pages or more. What do we see in there?

So the status certificate portion is about six pages long, sometimes a couple of pages longer or shorter. That's the one that I'm going to focus most of my attention to, another document that I will focus attention to is something called the form 15. It's a notice that talks about increases to the monthly condo fees. And then there's also a certificate of insurance document. I'm going to pay attention to that too, because I'm going to want to see that there is sufficient insurance and that insurance is in place well after the closing date.

So those are the three that I focus my attention on. But that doesn't take away from the importance of all of the other documents, which is the condo declaration, all of the bylaws, all of those documents.

It's worth it for a purchaser to skim it. I understand they're not going to read it, but they should skim it because they will be filled with a lot of legalese but the things that are relevant to their lifestyle, they will red flag themselves when they read through it. Like, I have a pet. Oh, you're going to see the word pet. It's just one of those natural things.

They also have their financial information in there, so their audits, their budgets. They'll have their new homeowner set up documents like welcome to the community, here's our rules about guest parking, things like that.

So again, very relevant to a person that's going to be there, not so relevant for us, in the professional element of it, we're like it is what it is. So there's kind of two things that we're weighing on. A purchaser should be skimming those other documents for sure, just so that way they have a clear idea of what it is that they're walking into. While, I'm going to be more focused on very specific items that are red flags from an actual real estate transaction point of view.

Okay. Great, and then what are the, from the purchasers side, what are the most important things that this bundle tells us?

Now, you've touched on these, but what are really the main things that if you were to sum it up, the status certificate tells us?

So one of the things that I've noticed that's been coming up a lot is sometimes people are like, okay, well, this unit comes with two parking spaces. My question is, who says? Show me, because the status certificate will actually tell you. So some condominiums, the parking space is assigned and you actually own it. Sorry, some of them are assigned and it's through the status certificate that you see which one is yours.

Other ones are through the land register system where you actually own a separate piece of the condominium, which is the parking space or the locker, things like that. Those are very relevant pieces of information a lot of Buyers are looking for, especially if they expect two parking spaces or they expect a specific parking space in the building. For whatever reason, they've had somebody have that issue, they wanted it to be close to the door, what have you. And turns out that wasn't it was just neighbors had swapped parking spots.

Yes, I bet they were thrilled about that too when they learned that.

Fun times! It's also really important because it will tell you exactly how much the condo fees are per month. Whether or not the condo fees are in arrears, that's important to know because it's also a red flag. If somebody's in arrears, then it's going to trigger the: I need to be more careful as to what's going on with this unit itself. Because if someone isn't paying their condo fees, what else are they letting slide.

Right. Now, in layperson's term, what does it mean if condo fees are in arrears?

In arrears means they haven't been paying their bills on time. Okay. Most condo fees are due on the first day of the month, just like rent would be due. And if someone is three months late, then the condo can actually be starting proceedings, just like a bank would for not paying your mortgage to repossess or register a lien. And once a lien is registered, it's very costly to get it removed.

So those are the kinds of things you definitely want to know before committing to buying a place because you don't want to invest in somebody else's financial problems.

Another thing that they talk about is special assessments. 

And that's a word that Buyers hear about all the time. 

Especially in the high rises there's elevators. Elevators don't come cheap. They need to be maintained they are expensive often and sometimes they're not. But it's going to be something happened and we didn't budget for this. And when we think about a condominium is owned by all the owners in it. So we all pool our money together to fix things. It doesn't have to be in your unit. It's part of the building. The exterior windows all had to be replaced or the foundation needed to be repaired, or the roof needed to be replaced, or we redid the carpeting and all of the hallways.

Those different things can cause a special assessment to be issued. And so a special assessment is a bill. Here comes the bill. Hey everybody. This is how much you all owe. This is how much you pitch in. And oftentimes it can be broken up into different amounts.

Well, if you're buying a house or buying a unit and you don't know that there's a special assessment, you are taking responsibility for payment of that special assessment. And sometimes that impacts whether or not you qualify for the mortgage that you thought you qualified for.

And that could be a pretty scary scenario. If you get disqualified from a mortgage by a fee like that.

It is very scary. So that's another big kicker.

The other red flag I'm always looking for is this condominium involved in a lawsuit. And that used to be rare and it doesn't seem to be so rare these days. I almost feel like a clear status certificate is more rare. But if they're involved in a lawsuit, they're supposed to give as much details as they have about that lawsuit in the status certificate. So you can kind of determine your risk assessment.

So a recent one I had, it actually was very specific. A condominium was being sued by a former property maintenance worker for $300,000. The insurance company was managing the lawsuit, and of course they think they're going to win. But that doesn't determine whether or not there's going to be financial consequences to the condo owners, because what if they lose? Who's going to cover the costs? What if there's cost association? Even what if they win? What are the costs for this lawsuit? Because anything that the insurance company doesn't cover the money has to come from somewhere.

So those kinds of things happen. More common lawsuits are slip and fall. So somebody slipped in the parking lot, sued the condo. 

How much is it? I don't know. That's normally the next question. Well, how much is it? I don't know. It's a status certificate. It says nothing. Call the property manager and start digging for as much information as you got. But they don't necessarily know either.

Right? So that's where anyone that is approved for their mortgage, but the approval is pretty tight. Chances are the lender is not going to accept any sort of additional risk.

Okay.

Now if someone has enough resources that the lender no worries, you're far below the threshold, you can afford a special assessment or two. Well, then that person has a luxury deciding for themselves of what kind of risk they're willing to take. You don't want to find yourself in the former category where the bank says, no, you're not approved anymore, but you're locked into buying this property.

Right. Yeah. That's a heck of a spot to find yourself.

Now that segues nicely into the next question. So what are some things that you typically find that a Buyer thinks the status certificate might tell them, but the status certificate actually doesn't tell them?

I would say that most often they think that the status certificate may show them a picture or a map of the condominium. So they actually know where their unit is, where their parking spaces, where their locker is. And that's very rarely provided with a status certificate itself. It is something that I can order when I'm doing the title search, but normally I'm doing the title search just for closing. So if I know that doing the status certificate, it's conditional, I'll do that part of the search early so that way people can actually look at the dimensions and then they can see, oh yes, that unit is here and these are the actual dimensions of the unit. And then they can locate where their parking space is on a map.

And I'll be honest, the maps are not the easiest things in the world to read, but they're better than nothing.

Sure.

And it has actually been a source of litigation in Toronto where people think, well, my unit is this when it wasn't. And it's often important to verify, which property are you actually buying? Like when you're buying a house on a street, you know what house the street. It's got the municipal address. You show up. There's the driveway, there's the house. 

But in a condominium, you may know it as a unit number. I'm describing it as its legal unit number. And they don't always.

They don't have to match.

Exactly. So then sometimes people get really confused like but I'm Unit 11, I'm like you're Suite 11, but you're actually Unit 101, something like that.

So sometimes there's confusion about that. But the status certificate, when you actually go through all of it, it does tell you a lot more information than most people are even looking for. So there isn't a lot I think that isn't included in there.

Great.

I'm not going to tell you if your neighbors are bad people though. 

No, no.

We still got to knock on the doors for that and just listen.

So if I'm hearing this correctly and I was summing this up to a new client then I would say that, would I be correct to say, that a status certificate is a bundle of different documents that's provided by the condominium corporation and ideally it's great to have these in advance of a firm offer. So that your lawyer, so you, can review these and it will give you an idea of things like the the Buyer and the lawyer ideas of things like the rules and the bylaws, red flags such as special assessments, lawsuits and other sort of impediments to either purchasing it or impediments to the Buyer's enjoyment of it or verifying that they're buying what they think they're buying. Basically.

That's actually a really good summary.

Cool, that's good. Ten years, I finally got it. Well that's wonderful. Now I would of course want people to come talk to you if they're going to buy a condominium. So where can people find you?

Well, they can find me here at the office but I'm on social media. Our office has its own page, although we don't respond to the messages through there. On that end I would ask people just to use good old fashioned google lapierrelaw.ca. There is a place to send us emails and like most people these days I don't seem to be too far from my phone.

But we are available via telephone. Some people prefer that method. It's just more scheduled that way.

Perfect.

Because we're working remotely and these conversations definitely need to be in a private setting. So I generally don't have telephone calls from home when a twelve year old can walk in the background.

But the email response rate is pretty good. I generally respond to any email enquiry the way I would expect somebody to respond to me, which is please don't leave me hanging.

Perfect. Great. Well I'm always proud to refer you because I know that you do a fantastic job for our clients. So thank you very much for coming on today.

Team Effort!

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