Buying or selling a condo apartment or townhouse comes with some significant differences from buying or selling freehold properties. When it comes to condo units, one of the most important set of documents that is involved in the sale is the status certificate package.
As the name implies, this set of documents provides the buyer with current summary of the status of the unit, the building or complex and the condo corporation. It also provides a historical background of the property in the form of the condo corporation declaration from when it was formed, as well as the rules and regulations by which owners agree to abide.
A status certificate package will typically include the following documents:
- The status certificate itself, which sums up the detail on the condo corporation, the property management firm, the board of directors, common expenses (maintenance fees), budget situation, reserve fund status, legal proceedings or claims and more.
- Rules and regulations for the condo corporation.
- Standard unit schedule, describing what is the base level of finishes in the event of repairing damage and for insurance purposes.
- Reserve fund study, along with cash flow tables for recommended/planned increases in contribution and closing balance of the reserve fund.
- Audited financial statements, including schedule of expenses and statement of cash flows.
- Operating budget
- By-laws of the condo corporation.
- Condo management agreement with the property management company.
- Insurance trust agreement
- Condominium corporation declaration, the legal document that formed the condo corporation to which all units belong.
- Proof of insurance.
- Relevant agreements such as with utility providers or cable or internet providers.
As you can see, there are a lot of documents that comprise this status certificate package and it is not unusual for the package to have hundreds of pages.
We’ve written articles about the reserve fund, the part of the status certificate package that is focused on monies set aside to pay for the ongoing operation of the condo corporation as well as monies kept in reserve for upcoming expenses.
Today, let’s review what you should be looking for when you review a status certificate package. We’ll look at it from the perspective of the buyer as they are the primary readers of these packages. Obviously, this is not a substitute for involving a lawyer in the review of the status certificate package as they are looking for specific legal concerns. Instead, we’ll look at it from a practical perspective and what our clients want to know when they are looking at buying a condo unit.
Confirming that what we were told, is in fact true.
One of the most important things that a status certificate package provides is certainty about what we were told about the unit and the building by the seller and their agent.
- Are the maintenance fees as described in the MLS listing and our Agreement of Purchase and Sale accurate? While we may have some recourse if the seller misrepresented the monthly costs and what they include, it is far better to know exactly what our obligations are as the new owners BEFORE we actually buy the unit.
- Is the parking space as listed on the MLS listing accurate? Is it owned or exclusive use? Is it the number and location as described? These things can matter to buyers and it is always better to have clarity beforehand.
Getting answers to our specific questions.
The status certificate package contains all of the rules and regulations for the building, complex and units and it is here that buyers can find answers to specific questions that they have.
- Are pets permitted? If so, are there restrictions on how big a pet or how many? This is where we find out what the specific rules are that the property management company enforces.
- Can you have a BBQ on your balcony? Can it be gas or propane or only electric, or not at all?
- Are AirBnbs permitted in the building?
Understanding if anything is changing.
The status certificate package also provides us with information about upcoming changes, particularly as it relates to financial elements of the condo corporation.
- Is the contribution to the reserve fund increasing after an update has taken place? How much is it going up by and how will that impact your actual maintenance fees? Are we approaching a danger zone of close to or more than $1 per sf?
- Are there special assessments coming for the unit owners that will have to be paid by the new owner? If so, what is it for and will the seller pay for it?
- Do the financial statements tell us that certain costs are expected to increase? Are there notes of concern that reveal issues with the building, property management or the condo corporation?
The status certificate package is a complex set of documents but generally contains the same type of information. While your lawyer will review it in detail and look for certain red flags or elements of concern, you and your agent should review it to make sure you have a good handle on the unit you’re buying and what you can and can’t do an owner.
If you want to work with agents who take the time to read and review the status certificate package with you, don’t hesitate to get in touch.