The Condominium Act, 1998 (the “Act”) is provincial legislation which governs the creation, administration, and ownership of both residential and non-residential condominium units in Ontario. For a prospective purchaser of a condominium unit, perhaps the most beneficial part of the Act is Section 76 which requires a condominium corporation, when asked, to disclose a multitude of information about both the particular condominium unit(s) being purchased, as well as the condominium corporation as a whole – this disclosure is provided in the form of the Status Certificate, along with required accompanying documents. In order to benefit from this disclosure, it is important that any offer to purchase a condominium unit is made conditional upon the purchaser’s lawyer reviewing the Status Certificate and accompanying documents. What follows is a brief summary of certain aspects of the required disclosure and why these are important to you as a prospective purchaser:
Confirming the extent of what the seller owns and their exclusive use rights, and what you as purchaser are capable of purchasing:
The Status Certificate will confirm the legal description for the unit(s) that the seller owns, including locker and/or parking units. Sometimes parking units and/or locker units are not owned, but rather the seller has the exclusive use of certain units. A careful review of the Status Certificate and accompanying documents can clarify just what the seller owns and what exclusive use rights may transfer with his/her unit(s). Once confirmed, the offer to purchase can be amended, if necessary, to accurately reflect the intention of the parties.
Confirming the financial status of the condominium corporation:
The Status Certificate will confirm the monthly common expenses (commonly known as the ‘condominium fees’) attributable to the unit(s) being purchased, and confirm whether the seller has paid all common expenses owing to date. If there are arrears, the purchaser can require that such arrears be paid prior to taking ownership. Reviewing the current budget for the condominium corporation will shed light on the budgeted expenses for the condominium corporation as a whole, and provide valuable insight into its financial priorities. Likewise, reviewing audited financial statements for prior fiscal years will provide a brief history of the financial status of the condominium corporation and its operating and reserve funds.
Legal matters in which the condominium corporation is involved:
If the condominium corporation is involved in any sort of legal proceedings/hearings, whether as plaintiff, claimant or defendant, it is required to disclose the pertinent information about such proceedings/hearings in the Status Certificate. With this information, a prospective purchaser can assess risk and potential exposure in deciding whether or not to proceed with the purchase.
Rules, regulations and restrictions:
Often the condominium corporation will have adopted certain rules and regulations that owners and tenants are expected to abide by – such rules and regulations will typically be provided with the Status Certificate. The condominium declaration may also contain certain restrictions on a number of matters including, for example, an owner’s ability to lease their unit(s), or restrictions on having a pet (whether it be the number of pets, size, type). An informed purchaser will take the opportunity to carefully review these rules, regulations and restrictions and determine whether their intended use of the property will comply.
Understanding insurance requirements:
A brief review of the condominium declaration can provide clarification on the insurance coverages that an owner is required to obtain. While it is typical for the condominium corporation to maintain comprehensive insurance for the building and the common elements, owners of units are often required to obtain coverage for their personal property, and for liability relating to incidents within their unit. Providing the relevant insurance requirements to an insurance specialist during the conditional period will allow a prospective purchaser to ensure whether they will be able to obtain the required coverage and at what cost.
The foregoing is only a very brief summary of some of the key elements of disclosure required by the Act that may be important to you as a prospective purchaser. You should always retain a lawyer prior to obtaining the Status Certificate from the seller. A brief advance discussion with your lawyer about your intended use for the property and expectations as far as the review process will allow you to fully benefit from the required disclosure and make a fully informed decision on whether to proceed with the purchase.
If you require assistance in purchasing a condominium unit or with any other real estate matter, please do not hesitate to contact us.