Most people know that a home inspection is necessary when buying a house, but what do you do when you buy a condo? We've seen people spend $450-$600 on a home inspection on a condo, but the challenge is that a home inspector cannot inspect some of the important components of a condo building. We're not saying that a home inspection on a condo cannot be done, but in our opinion, a "typical" condo doesn't require a home inspection for the following reasons;
1. A home inspector likely cannot inspect the roof, foundation, electrical and mechanical components of a condo.
2. A home inspector likely cannot comment on the condition of the common elements (ie. pool systems, gym equipment, elevators and lobby)
3. A home inspector likely cannot comment on the financial health of a corporation (ie. their reserve fund) and how it relates to increases or decreases in maintenance fees in the coming years.
4. A home inspector likely cannot comment on the legal action pending against (or on behalf of) the condo corporation, rules and regulations and how these can impact your maintenance fees.
This is where a "status certificate review clause" in an offer to purchase a condo will come in handy.
A status certificate is a document that provides insight into all of these things (highlighted above). The condo corporation, made up of residents living/owning in a building, works alongside a property management company to oversee the daily operation of a building and their findings are typically summarized in the status certificate. Some of the items you can expect to find in a typical Status Certificate;
1. Members of the Condo Corporation
2. Any financial surplus or deficit for the current fiscal year
3. Anticipated expenditures to fix common elements and maintain those elements over time
4. Anticipated increases in reserve fund contributions and special assessments that "may" need to be considered
5. Rules and regulations of the building (ie. pet restrictions, etc.)
6. Any legal action pending against or on behalf of the condo corporation
7. Specific details about the unit you are looking to buy (ie. maintenance fees, any fees owing by that particular unit, legal description of the unit, parking space and/or locker).
These are just a few of the items that will be summarized in the Status Certificate. Every three years, an independent engineering firm is hired to inspect the building and it's common elements (sort of like a home inspection for the building). These findings are then used by the engineering firm, property management company and condo corporation to determine if the maintenance fees need to be increased (and in some cases, decreased) to pay for these future repairs.
Normally, a status certificate is sent to the lawyer representing your interests in a purchase to review. Your lawyer can make the phone calls to the property management office to obtain clarification on any items that may impact your decision to buy. The final decision on whether to proceed or rescind from the transaction is up to the Buyer, but a good lawyer will succinctly summarize the findings and with the guidance of your Realtor, assist you in making a decision with your best interests in mind.
As you can see, reviewing a status certificate is incredibly important. Ensuring that you are comfortable proceeding after being made aware of all of the positive and negative attributes of a condo building is of paramount importance when we advise our clients. Reviewing a status certificate should be a standard clause when buying a condo.
Happy home hunting...
The WareInToronto Group.