What are red flags to look for in an Ontario condo status certificate?
Several warning signs in a status certificate should prompt serious questions or cause you to reconsider the purchase.
An underfunded reserve fund is one of the most common and serious concerns. If the reserve fund balance is significantly lower than what the most recent reserve fund study recommended, owners are at higher risk of large special assessments to fund future repairs. Check the reserve fund study to understand how far behind the corporation is.
Pending or threatened litigation is another major flag. Lawsuits — whether from owners, contractors, or neighbours — can result in judgments against the corporation that all owners must fund. Significant pending litigation should be disclosed in the certificate.
Common expense arrears for the specific unit you're buying may mean the selling owner owes money that can affect your purchase. Large approved-but-unpaid fee increases or special assessments already levied also signal financial stress. Finally, rules or provisions in the declaration that restrict your planned use (pets, rentals, renovations) are not "red flags" in the same sense, but they are crucial to understand before you're bound.
Key takeaways
- An underfunded reserve fund signals risk of future special assessments.
- Pending litigation can result in costs borne by all unit owners.
- Unit-specific arrears and approved fee increases are important to identify before closing.
- Restrictive rules in the governing documents should be reviewed for lifestyle fit.