When buying or selling a resale condominium, I believe one of the most important documents in the deal is the status certificate.
It answers such important questions as:
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Do I own the parking or locker?
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Are pets allowed?
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What are the pool hours?
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How much is in the reserve fund to look after future repairs?
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Are there any special assessments because there isn’t enough money to pay for needed repairs?
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Is anyone suing the condominium and is there enough insurance to pay for it?
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Are there a number of tenants in the building?
When you make an offer to buy a condo, your offer will likely be ‘conditional on the review of the status certificate’ by your lawyer.
How Do I Get One?
The buyer, seller, or realtor can request a copy of the status certificate from the condo corporation. The property manager will have 10 business days to provide it to you at a cost of approximately $100.00. Most deals are conditional on the buyer’s lawyer being satisfied after reviewing all of the condominium documents, including the status certificate. You will need 2-5 days for your lawyer to review all the documents. Status certificates are usually several 100 hundred pages. Pay close attention to the financial health of the building and how much money is in the reserve fund to cover any major repairs.
In my experience, there are no easy rules to provide guidance. A reserve fund might have over $1 million dollars in it, but the building would need over $2 million in repairs. Another building might only have $200,000 in the reserve fund, but could have completed all repairs that would be needed for years to come.
If you are selling a unit and there is a low reserve fund, or potential for a special assessment to pay for needed repairs, either adjust the sale price to reflect this, or negotiate a holdback on closing for one to three years, so that if a special assessment is levied later, it would come out of the holdback amount. If it is not levied, then the holdback would go to the seller at the end of the holdback period.
Most townhomes condominiums do not require as large a reserve fund as highrise condominiums, because they will not have as many future repair requirements. You do not want to move in to find out you have been hit with a huge increase in maintenance fees because there was not enough money to cover major repairs.
Sellers, find out what your status certificate will say before you put your unit up for sale. Buyers, ask what is in the status certificate because this will help form your decision on whether to buy.
Buyers Tip: In some cases, the mortgage lender can decline a mortgage application if they are not satisfied with a condo’s financial health.
Don’t get caught off guard. Do your homework before buying your next condo.
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