Which Status Certificate Red Flags Should Concern Condo Buyers: Ask a Wahi REALTOR®

Status certificates are indispensable resources for condo buyers. Here’s what to look for when reviewing this paperwork before purchasing a unit.

By Josh Sherman | 3 minute read

If you’re eyeing a condo for purchase, obtaining legal documentation regarding the suite is a crucial part of conducting your due diligence.

In Ontario, that documentation is known as a status certificate, although different provinces have varying versions. The status certificate includes vital information about the unit, providing an overview of the financial health of the condo corporation of which the unit is a part.

The owner must provide the certificate upon request. Typically the buyer pays for the document, which costs about $100. “It’s well worth asking for a status certificate,” says Wahi Broker of Record Anne Alkok. “When it comes to what will be one of the biggest purchases of your life, it’s not time to cut corners,” she continues.

The certificate, which generally only runs a few pages, comes with heaps of attached paperwork. Once you and your Realtor have the status certificate in hand, you’ll ideally have a detailed accounting of everything from monthly maintenance fees, any arrears, the corporation’s current budget — as well as audited financial statements and reserve fund studies — by-laws and regulations, engineering reports, and more.

Most condos are well-managed operations, but through the course of your homebuying journey you may discover elements that just don’t add up — or signs of something amiss. “With a status certificate, If you know what you’re looking for, you can learn a lot,” says Eric Plant, owner/director at Brilliant Property Management Inc. As a condo manager, Plant has prepared countless status certificates for condo buyers. However, too often, he says, homebuyers don’t take full advantage of the information contained within. “There are a lot of people that aren’t giving it a good look,” he says. He and Alkok suggest buyers have their real estate lawyer look over the certificate and its attachments.

So which status certificate red flags should concern condo buyers the most? In addition to Alkok, we turned to Plant, also the former president at the Association of Condominium Managers of Ontario (ACMO), to learn more. Here are five status certificate red flags that should concern condo buyers the most:

1. Missing or Incomplete Information

A status certificate with missing or incomplete information is worth looking into. “The level of detail of the certificate is important,” says Plant. “If it looks lacking in detail, that might be an issue. If it has lots of detail in it — good or bad — that’s better, because it just means the management company is disclosing what they should.”

Sometimes, missing info is simply the result of human error. It may be an oversight by the condo manager, who issues the certificate, or the corporation’s representatives, who provide the documentation and may have forgotten one attachment or another.

Other times, it could indicate a more serious issue. Compare the status certificate you receive with the Condominium Authority of Ontario (CAO)’s list of mandatory inclusions to see if anything is missing. If so, reach out to the management company to get more information. 

2. Budget Shortfalls  

If the condo corporation’s expenses are outpacing its intake, serious challenges may lie ahead. However, in the life span of a building, there may be certain years where the corporation operates at a loss. One fiscal year does not necessarily mean catastrophe is looming. “You can have small deficits. You shouldn’t have massive deficits,” says Plant. Repeated annual deficits with no sign of correcting course should raise alarm bells, as should a massive swing from one year to the next.

“Definitely take a look at the audited financials,” Plant advises. “The audited financials have your annual deficit or surplus, but they also have your cumulative [totals],” he notes. “If you have a massive cumulative deficit… that’s a big problem.”

3. Special Assessments

Trouble stemming from repeated budget deficits could eventually take the form of a special assessment for residents. “A special assessment is an extra one-time charge added to the owners’ common expenses fees that condo corporations may use to cover shortfalls in their yearly budgets,” according to the CAO.

In the most severe scenarios, condo owners could risk losing their homes if they can’t fork over the amount, which can range from just a few hundred dollars up to — in the most extreme instances — tens of thousands (or more). That’s what happened, in 2022, when a north Toronto condo building found itself $9 million in the hole when it needed major structural repairs. That left owners on the hook for anywhere between $30,000 and $42,500 (larger units pay more). They had just two weeks to pay. 

Context matters, Plant suggests. For instance, it could just be a matter of a certain component needing to be replaced ahead of schedule. “That’s a one time thing. That’s not something that’s going to happen over and over again,” he says. “It depends why they are special assessing,” he notes. “It may not be that big a red flag in and of itself — if it can be explained.”

4. Legal Trouble

“A big one to look for is the legal section,” says Plant. The legal section includes any lawsuits as well as cases at the Condominium Authority Tribunal, which settles disputes between condo owners and condo corporations. “If you see a lot of them in there that’s a big red flag, because it means things aren’t going well if you have lots of people suing and that kind of thing,” he says. “If you have lots of tribunal cases, it means you probably have lots of angry owners,” he continues. “So that would be a huge one from the perspective of a buyer.”

5. Low Reserve Fund

A portion of the monthly maintenance fees condo owners pay goes towards the reserve fund, which is like a savings account for the condo corporation. It is a rainy-day fund in the event that major repairs are needed.

“A large amount in the reserve fund at any point in time doesn’t always mean the condominium is in good financial health,” notes the Condominium Authority of Ontario’s Guide on Condo Reserve Funds. “Its health should be judged on its consistent ability to cover expected and unexpected repairs and replacements.” Therefore, any amount needs to be looked at within the context of the building. Fortunately, the status certificate should give you access to any relevant reserve fund studies undertaken by the condo corporation. Condo corporations are mandated in Ontario to conduct a reserve fund study every three years.

To gauge whether the condo building you’re looking at purchasing within has a sufficient reserve fund, turn to the Notice of Future Funding of the Reserve Fund (NOFF), which should be provided with the Status Certificate. It must be conducted every three years, by law. It is based on the comprehensive Reserve Fund Study, and shows where the reserve fund stands compared to where it is supposed to be. “If your reserve fund balance is well below where it says it should be, that’s another red flag,” says Plant.