What is the condo status certificate?
This is a package of information which contains extensive detail on the legal description, governance, policies and finances of a specific condominium corporation. It is prepared by the Condominium Property Manager and is a snapshot at a certain point in time, meant to provide pertinent details to a potential buyer and their lawyer, concerning that condo and the unit being purchased.
What is the critical information contained in the package?
All of the information is important but the key things include the Declaration which details the legal description and governance rules under which the condo was created. The budgets and status of the reserve fund are very important, as is whether there are any pending lawsuits or special assessments. Condo rules and policies are critical, too. Ie if an investor wants to rent out a unit, they will need to know what rules are in place. Ie short term rentals may be ruled out thus Airbnb or other short term rentals may be excluded.
What is the typical review process?
These are normally ordered from the Property Manager by the buyer’s lawyer, once a conditional sale has been agreed between buyer and seller. The Property Manager has 10 business days to update/research and produce the package and make it available for buyer and lawyer review. Normally, this gets done in 5-7 days and some Property Managers also offer an expedited service for a higher fee. Normal fee for the package is $100 and we have been quoted up to $200 for expedited service. The lawyer pays this and the delivery charge and gets reimbursed by the buyer.
The lawyer then reviews the package and highlights any unusual circumstances for the buyer and answers any specific buyer questions.
What’s wrong with this process?
Lost buyers and time lag:
Often there can be information contained in the Status package that may cause a buyer to rethink their interest in the unit or the price they might be prepared to pay for it. If this is so, the buyer may walk from the deal and the unit remains unsold. Other interested buyers may have moved on by this point and be lost to the seller as prospective buyers, especially given the lag time between the agreement and buyer and lawyer review of the status package which is typically 7 or 8 days after agreement.
Buyer feels committed to purchase at time of agreement:
There is also a psychological tendency for buyers to want to complete a deal once it has been made and they often do not pay enough attention post agreement to details which may deter them from completing the deal. For this same reason, there is a “cooling off” for new construction condo purchases (often sold in high pressure, if not timeshare manner) while buyers and hopefully, their lawyers review all the detailed information in the new construction or pre-construction condo.
Disclosure package. Unfortunately, in the case of resale condos, the seller pays a big price should the buyer get cold feet while awaiting the condo package.
Sale falling through delays seller plans and may leave a stigma:
When a conditional sale falls through, it listing gets put back on the active market but this takes some time and there may be a question mark or stigma attached to the listing. Other buyers and their Realtor will be asking: why did that sale fall through? Is there something wrong with the property? Something come up on inspection? Something in the condo docs?
Best practices recommendation:
The seller or listing agent should order and pay for the condo docs (currently, this done by the buyer’s lawyer or agent) , so they are available at time of listing for interested parties to peruse prior to making an offer to purchase. If this is done the buyer, their agent and lawyer can clarify any details in the condo documents and make a better informed purchase decision. This is guaranteed to help minimize the number of sales that are currently falling through (which are at an all-time high, 10-15% in our opinion) and potentially set up a multiple offer situation for a condo seller.
$100 seems like a pretty inexpensive way to do all the above, don’t you think?
Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage
If you have any comments on this post or any other real estate matter, feel free to indicate below!