Why You Need to Review Condo Documents BEFORE Finalizing An Offer
We’ve had a flurry of condo offers and closings this week. Each one was unique and in all cases, our buyers wisely agreed to make their offers conditional on reviewing the condo corporation status certificates and associated documents before making their offers firm.
Here is how the process works and what can happen.
A status certificate is a document that speaks to the status of the unit within the corporation as well as material facts about the condo corp. It would for example state if there are any lawsuits pending, any special assessments in effect or contemplated and if there are any liens or outstanding monies owing by the unit. In addition, the associated documents include lots of information about the rules and regulations, reserve fund studies, budgets, management and insurance contracts. In other words, really important stuff!
In the Blue Mountain area, we are often requesting several status certificates in connection to a purchase. For example, a condo unit may be a member of the Blue Mountain Village Association in which case the status certificate for that corporation should be reviewed. If there is a separate homeowner association, such as in Historic Snowbridge, that would be a third document we would request. In Collingwood, it may be possible that a condo unit includes deeded ownership of a boat slip which may again have another certificate.
When you make an offer to a seller, it would generally be advised that the offer is subject to a condition that you as a buyer, review the aforementioned documents with your lawyer and, upon you being satisfied with the contents therein. It is important to have a lawyer who has experience in this area and it is also helpful if they have an understanding of the local corporation issues and property managers. It is also important to use a local REALTOR® who knows how many status certificates will be needed and what issues may affect certain corporations.
A status certificate is ordered from the property manager and under the Act, they have up to ten days to provide it although many come sooner than that. The prescribed fee in the act is $100 although at least one property manager in our area charges $115.00. (Don’t get me started on that one!) Once it is received, your REALTOR® will generally recommend that a copy be given to your lawyer right away and commonly, there are up to five business days included in the offer to review the documents.
Buyers often wait until the last day or the day before to discuss the contents with their lawyer and this is where we often run into difficulties. If the status certificate reveals issues, there is often not enough time to research and/or resolve whatever the issue may be. For example, the status certificate may state that the unit owner is required to do something. An example would be to replace a dryer vent that has come loose in the attic or to replace a vent pipe that is not to code. It may reveal a previously undisclosed special assessment worth thousands of dollars or a plan to increase condo fees by a large amount that was previously unknown to the buyer. Any of these may necessitate renegotiation of an Agreement and having just hours to spare may not be enough time.
The bottom line is to make your offer conditional upon reviewing these documents, give adequate time for review, meet with your lawyer as soon as possible and ensure you know what you are buying. P.S. This is also a good time to speak to your insurance company to ensure you have coverage that fills the gap between corporation insurance, the deductibles, and your own needed coverage.