As a lawyer, when representing buyers of resale condominium properties, the main question my clients initially have is whether the condominium corporation is “financially healthy”.
A condominium’s status certificate contains auditor’s reports and other relevant financial information.
Is that all it contains? Moreover, should a prospective buyer’s concerns be limited to:
- whether the reserve fund for major repairs and replacements is adequate;
- whether the condominium corporation is involved in a lawsuit that may result in legal costs and damages; and
- whether there are special assessments or other indications of increases to monthly common expenses (such as maintenance fees)?
The short answer is no. A proper status certificate review should be much more than that.
First and foremost, giving legal advice involves ascertaining a client’s interests. To do so, and to determine my client’s desired use of the condominium property, I ask my clients several questions at the outset of the process. For example:
- Are you planning to live at the condominium, or is this an investment property?
- Do you or your tenant have pets?
- Do you require vehicle parking or a storage locker?
- Do you have special plans for the condominium unit?
- Are there particular kinds of restrictions that would interfere with those plans?
Depending on the answers given, the focus of the status certificate review will change. For instance, with the rise of Airbnb in recent years, many corporations have been wary of their condominium properties being treated as hotels. Short-term renters may be noisier and more of a nuisance than other kinds of tenants, as they would naturally be less concerned with upsetting neighbouring condominium residents they will never see again.
Accordingly, nowadays it is common to see condominium rental terms being restricted to a minimum of three or six months. Provisions establishing these timelines may be present in the condominium’s declaration or bylaws that are included with the status certificate. Unless the lawyer reviewing the condominium’s disclosure is aware of their client’s desire to implement short-term rentals, they may not be on the look-out for such clauses and restrictions, especially since status certificates can sometimes be over 200 pages in length.
Similarly, pet restrictions will be important to both condominium residents with pets, as well as to owners seeking to lease their units to tenants with household animals. There may be restrictions on the size of pets (for example, dogs must be under 35 lbs.), the number of pets (only two dogs allowed per condominium unit), or the types of pets permitted (defining “household animals” as including only dogs, cats, aquarium fish and caged birds).
Additionally, the provisions establishing such restrictions may grant discretion to the board of directors and allow them to require permanent removal of pets upon notice, particularly if those pets cause unreasonable interference with other residents’ use and enjoyment of their units.
Another thing to keep in mind is repair and maintenance obligations. In Ontario, pursuant to s.89 of the Condominium Act, the corporation is generally responsible for the repairs of both the units and the common elements (all of the condominium property outside of individual units like hallways and shared facilities) after damage. S.90 of the act states that the corporation is usually obligated to maintain the shared common elements, while owners are required to maintain their own personal units.
However, s.91 of the act states that the condominium’s declaration can alter these obligations. It is entirely possible that the declaration can specify unit owners are obligated to repair their own units after damage, such as that caused by water leaks. Or unit owners may be responsible for maintaining the common elements or portions thereof, such as particular pipes or HVAC systems that only benefit a handful of units. Another more positive possibility for owners is that the corporation could be required to maintain individual units in addition to repairing them after damage. As such, any alterations should be reviewed on a case-by-case basis and brought to the client’s attention.
Ultimately, the act is commonly construed as consumer protection legislation, as was discussed in the case of Metropolitan Toronto Condominium Corporation No. 723 v. Reino, 2018 ONCA 223. In that case, structural changes had been made to a unit, by adding a second bedroom as well as relocating the kitchen. When the owner bought the unit in 2013, the status certificate did not make any mention of these unit configuration alterations, but such changes were mentioned on the status certificate when he sought to sell the unit in 2016. This negatively affected his ability to market the unit for sale, as Realtors almost always include a status certificate review condition in their Agreements of Purchase and Sale.
For this reason, I always explain to my clients that they should do a full physical inspection of their dwelling, parking and locker units, and they should ensure no structural changes have been made without the board of directors’ consent. In such scenarios, it is much more difficult to ask for forgiveness afterwards, than it is to ask for the board’s permission or confirmation that there were no changes beforehand.
Of course, the financial health of the corporation is highly relevant as well, not only to the prospective unit owner but also to their mortgage lenders. Mortgage instructions commonly require lawyers to review status certificates and advise the lender of any possible issues. If such issues only come to light after the status certificate condition is waived, mortgage lenders may back out of the transaction. This would be truly unfortunate, as the funding needed by the buyer client to close the deal would then disappear.
Finally, I always try to tell my clients the date the condominium declaration was registered on title near the end of the review process, as this is the date the corporation was created. Common expenses generally increase over time because normal wear-and-tear requires additional maintenance and repairs, so the age of the condominium property is almost always of interest to my clients.