Never buy a resale condo without reviewing status certificate.  An acceptable status certificate is as important to the buyers as the purchase agreement itself. Make sure your lawyer reviews the certificate closely.

Why does a lawyer have to review the condominium status certificate on a resale purchase? What are the risks if it’s not done?

Although there is no legal obligation to obtain and examine a status certificate before buying a condominium unit, it is extremely risky not to do so.  The wording of the status certificate is mandated by the Condominium Act.  A lawyer’s review of the certificate will confirm the unit and level number of the condominium, the amount of common expenses, the existence of a budget and audited financial statements and a reserve fund study.  Other matters disclosed in the certificate are the names of the board members and management company, the building’s insurance coverage, whether there are any anticipated special assessments or common expense increases, and whether the corporation is involved in any litigation.

The purpose of a reserve fund study is to ensure that enough money will be available for required major repairs and replacements in future years. In buildings where major work is required and the reserve fund is not adequate, the owners can face huge special assessments, or the condominium will have to carry the cost of borrowing large amounts of money over a lengthy period.

Audited financial statements are a requirement of the legislation, and their absence would be another reason for a purchaser to back out or a bank to decline to fund the mortgage.

An acceptable status certificate is as important to the buyers as the purchase agreement itself. Never buy a resale condominium without a lawyer’s careful review of the certificate while the offer is still conditional.