Getting a home in the Toronto market can be tough, even in this slight softening we’ve been feeling lately. It’s still so tough, though, that most buyers are making their offers unconditional. That is, they are going in firm on financing and home inspection. Assuming you have a good mortgage broker and that you’ve been able to do a home inspection in advance, waiving your rights to financing and home inspection is a calculated risk. It is risky, but also usually necessary to getting the home of your dreams. However, in a worrying trend, some buyers of condos have started to waive their right to review the status certificate of the condo board. This is, in our opinion, a huge problem.
Waiving your right to a status certificate is not a manageable risk. It is a huge risk, one that is not worth taking.
First, what is a status certificate? A status certificate is a long legal document that details, among other things, the financial health of the condo board. It will tell you how much money is in the reserve fund, where exactly your maintenance fees go and if there are any outstanding lawsuits against the board. The status certificate also details all the rules and regulations (for example, size restrictions on pets, rental restrictions, the colour drapes you’re allowed to have, etc). While there is much more to the status certificate than this brief list, we’re just going to focus on a few four reasons why it is always a good idea to review the status certificate:
- CMHC may not insure your mortgage: If you need CMHC insurance (if your downpayment is less than 20%) you may not get your mortgage if the reserve fund is underfunded or if there are pending lawsuits against the corporation. If you haven’t gone in conditionally on review of status certificate, you will lose your deposit when you get out of the deal.
- Maintenance fees may not be paid up: You want to make sure that the current owner has paid their fair share of maintenance fees. If they haven’t, you will get that bill on closing.
- Rules and Regulations: Do you have a 60 lbs dog? Might not be allowed in this building. Similarly, if you are planning on renting out this unit, that might not be allowed.
- Increase in Maintenance fees?: Well run buildings will raise the maintenance fees slowly, every year. Usually they are increased at the rate of inflation. Sometimes, however, your maintenance fees will spike from one year to the next. You want to make sure you know about this prior to closing.
In addition to obtaining the status certificate, you need to get a good lawyer to review the documents. Don’t try to do it yourself. Lawyers will be able to tease out the nuances and legalese that is rife in these documents.
Have questions? Get in touch.