Congratulations on buying or
selling your Alberta home.
If you just firmed up your purchase or sale
(congrats!), you’ll likely need to choose a Real Estate lawyer to facilitate
your closing.
No matter which lawyer you choose, asking the
right questions before moving forward with having the lawyer (or law firm) who
is going to handle your transaction can make the entire experience smoother and
more predictable.
Here are some questions you should ask a
lawyer when buying or selling a house in Alberta:
What are the fees INCLUDING disbursements?
Legal fees are the professional fees
your lawyer charges for completing your real estate transaction. In addition to
legal fees, disbursements are third-party costs paid by your lawyer in
connection with completing your transaction. Disbursements usually include
costs such as land title fees, tax searches, title insurance, and courier
costs.
Can I sign my documents Virtually and
HOW do you conduct your virtual meetings?
Alberta real estate lawyers can now
witness real estate closing documents remotely. This means you can meet with
your lawyer through videoconferencing to have your closing documents signed and
witnessed. However, not all lawyers conduct virtual signing meetings in the
same manner.
At Deeded, virtual signings are easy,
efficient and client friendly. Our lawyers can remotely witness Alberta real
estate closing documents regardless of where you are located, either inside or
outside of Alberta. All you need is a computer
or tablet with a webcam, an internet connection, and a mobile phone.
What is your process?
Home buying/selling is exciting but
can also be one of the most stressful experiences of your life. Whoever you
choose needs to be able to explain the closing process so that you can anticipate
what is required and know what to expect.
At Deeded, our goal is to make the
process as smooth and seamless as possible. Our welcome package provides you
with everything you need to know about the home closing process. Further, at
every stage of the transaction, we will let you know what’s happening next. If
you have any questions during the process, please do not hesitate to call,
email or text us.
When you’re making an offer to purchase a property, you’ll be
asked when you would like to “close” on your property as part of the agreement
to purchase. The date you pick will also
have to align with your seller’s expectations as they may need to arrange to
move and vacate the property.
On closing day, the ownership of the property is transferred
to you, the buyer, and in most provinces, you will receive the keys to your
property towards the end of the day.
While typically any business day can be designated as your
closing day, it is important to consider a few factors that may make your
closing experience easier and avoid potential issues should closing get
delayed.
Here are a few of our suggestions when you’re picking your
closing date:
Avoid Fridays, if you can
While a Friday might sound like the ideal day of the week to
close on a purchase. Friday closings can
be the cause of major challenges and extra costs should something not go
according to plan.
That’s because mortgage lenders and the electronic land
registry are open until 5pm on Friday afternoon. After 5pm, registration and transfers of
funds, if needed, become impossible until the following Monday.
During the day of closing a lot goes on behind the scenes and
timelines can be very tight. Funds move
between the buyer, the buyer’s lender and the seller and their lender (and
their respective lawyers). After the
funds arrive, the transaction needs to get registered before keys can be
released to the buyer.
Needless to say, even the slightest delay or something not
going according to plan can mean the difference between meeting the 5pm
registration deadline or missing it. If
the 5pm deadline for registration is missed for whatever reason, your
transaction will likely not close till the next business day, which is Monday.
Depending on your circumstances, such delays can be costly
and put a wrench in your moving plans, so if you can potentially avoid a Friday
closing date, you may just eliminate a few potential headaches and hassles.
Before a long weekend or holiday
We love our long weekends and while it may seem like the
ideal time to close and settle into your new home, a long weekend can present
the same challenges of closing on a Friday.
With mortgage lenders and the land registry closed for the long
weekend or upcoming holiday, any delays in closing may result in having to wait
until the next business day to close.
Month-end, especially in the spring
The volume of Real Estate transactions peak during the
months of May through to September.
This means that law firms, movers, appraisers, and many
other parties involved in your transaction get particularly busy these months,
and particularly on the last few days of the month.
Closing at month-end isn’t an issue. In fact, it’s quite common.
However, with an increased volume of transactions and all
the players in the system working to hit month-end deadlines, the chances of
something slipping through the cracks will likely increase. It also means you may not always get your
first choice of lawyer, mover, etc., especially as covid continue to slow down
and change processes in the industry.
When negotiating your closing date, picking a day other than
Friday, prior to a long weekend or on a month-end may be a good idea, despite
the inconvenience.
While your transaction may close without a hitch, even if on
a Friday or the end of the month, picking the right closing date can decrease
the chances of having closing issues.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
When it comes to closing a home in Alberta, on occasion, the seller may offer a credit for the costs to the buyer to purchase a title insurance policy in lieu of the seller providing an up-to-date real property report (RPR).
Title insurance is available for a low premium that is paid only once at the time of the purchase. Title insurance provides coverage for losses arising from survey/RPR related matters including:
>Forced removal by a governmental authority or an affected neighbour/easement holder of all or part of the existing structures due to encroachments onto adjoining land or onto an easement; and
>The land being unmarketable, which allows another person to refuse to perform a contract to purchase, lease or make a mortgage loan due to adverse matters that would have been disclosed by an up-to-date survey/RPR.
Title insurance does not cover known defects at the time of the purchase. This would include deficiencies disclosed in an RPR or home inspection report obtained prior to closing. However, some title insurers may provide coverage for known issues subject to underwriting approval. If you wish to use title insurance to deal with known issues, the availability and extent of coverage must be confirmed with the insurer prior to offering a title insurance credit to the buyer to compensate for the known issue. Do be cautious in drafting title insurance clauses in the purchase agreement. Avoid vague clauses such as:
>Buyer accepts the RPR as-is with title insurance
>Title insurance in lieu of RPR
Clauses such as these do not address a) who pays for the title insurance; or b) what happens if the RPR shows a known defect which a title insurer will not cover.
At Deeded, we would be happy to help you draft these clauses and would welcome the opportunity to collaborate with you on the purchase agreement to ensure the best interests of your client.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
We love working with
first time buyers and are always striving to educate clients to ensure their
first closing experience is a smooth one.
Let’s face it. Being
first time buyers isn’t easy. There’s a
lot to know about buying and closing a home and while there’s a flood of information
out there, it is important to get the right professionals working with you to
make your home buying experience as smooth and stress-free as possible.
The most common mistake we see with first time buyers is forgetting to budget for closings costs. With all the excitement, first time buyers often forget that these closing costs must be paid upfront in cash, unlike the mortgage which is amortized and paid in instalments over time.
Before the keys can be
handed over, however, there are still a few expenses buyers need to shell out
for. These closing costs must be paid upfront in cash, unlike the mortgage
which is amortized and paid in installments over time.
Here are the closing
costs you can expect as a first-time buyer:
Down
Payment
While your lender will
provide your mortgage funds to your real estate lawyer on closing day, as a
buyer, you must have the cash down payment ready to go, minus any amount that
has already been paid as part of your deposit.
If you aren’t liquid
(meaning you don’t have the down payment money sitting in cash), make plans to have
the down payment cash ready at least 3-4 days prior to closing. Keep in mind that if you have your money with
an online bank, it may take a few days to transfer funds, so plan accordingly.
Your lawyer will be in
touch a few days prior to closing to let you know the exact amount to bring towards
the closing. This amount will include
any adjustments, legal fees, land transfer tax and other costs we’ll discuss
shortly.
Adjustments
What’s an “adjustment”?
If you are buying a resale or new construction property, you will likely have to pay for several adjustments on closing. Adjustments can include payments for utilities, property taxes or in cases of new construction, account setup fees, development charges, and others.
Adjustments
can range from a few hundred to several thousand dollars. For example, if the seller of your property
has paid property taxes for the year and you are buying the property halfway
through the year, you will owe the seller your portion of the property
taxes.
Your
lawyer will inform you of adjustments a few days prior to closing.
Land
Transfer Tax or Property Transfer Tax (LTT / PTT)
Home purchases in Ontario and British Columbia are subject to a provincial land transfer tax. Outside of the down payment, this is likely the largest outlay to be paid at the time of closing so it is very important to budget for.
Home buyers in the City of Toronto pay municipal land transfer tax (MLTT) in addition to the Ontario LTT, which effectively doubles the land transfer amounts owed.
Legal
Fees, Disbursements, Title Insurance
Legal costs include a number of services, such as registering the transfer of the property and registering the mortgage. Your lawyer will also facilitate the purchase of title insurance, which protects the buyer from any other claims made toward the property. It can also include the ordering of the property survey, should the buyer wish to obtain one.
Legal fees and title insurance premiums can vary depending on the property type, location, and several other factors.
When you can anticipate and budget properly, the stress associated with closing your first property can be drastically reduced. Remember to consult with professionals such as your Realtor, Mortgage Broker and Real Estate Lawyer, and ask lots of questions… there’s no bad or silly questions you can ask.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
Since the Covid shutdown, lawyers have been able to witness real estate closing documents remotely and that includes virtual Real Estate closings in Alberta.
A virtual closing means you can meet with your lawyer through videoconferencing to have your closing documents signed and witnessed instead of having a face-to-face meeting with your lawyer and signing documents with ‘wet ink’. At Deeded Law, we leverage the latest technologies to make virtual signings easy, efficient and client friendly.
The Alberta government recently decided to allow remote witnessing to continue indefinitely.
How Does a Video Conference Signing Work?
At Deeded Law, our lawyers can remotely witness Alberta real estate closing documents regardless of where you are located, either inside or outside of Alberta. All you need is a computer or tablet with a webcam, an internet connection and a mobile phone.
Prior to the meeting, we will obtain your written consent to proceed with a video conference signing and to take screen shots of you and your identification. We will also get a copy of your government issued identification and provide any original documents required to be signed.
To ensure confidentiality, we encourage you not to have anyone else present in the room during the video conference. During the meeting, you will be required to show the same identification previous sent to us. The lawyer will take “screen shots” and compare the photos on the identification with the individual on the video.
After witnessing you sign your documents, you will send us a PDF version or photograph of any originally signed documents. Only originals documents are required to be returned via courier using the provided return address label.
You will receive an electronic version of all executed and sworn documents as part of the final reporting package, to keep for your records.
It is too often that we get clients who are closing the purchase
or sale of their home in Alberta and are surprised to find out that they did
not budget for all their closing costs.
Nothing is more stressful than finding out you have to scramble to come up with more money for your closing. Nobody likes surprises. That’s why we are always aiming to educate our clients and partners early in the home buying or selling process.
If you are buying or selling a home in Alberta, here are some of the closing costs you may encounter:
Legal Fees
In Alberta, you will need a lawyer to close your Real Estate
transaction. Legal fees can range from
$800 – $1500 and can sometimes include or exclude disbursements (expenses
incurred by the lawyer, which are typically passed on to you such as couriers, search
costs or other fees).
When comparing legal fees, ask for an estimate of total fees
you can expect to pay for your closing, including disbursements.
Say you are buying a home, closing in July and the seller has prepaid their full property taxes for the full calendar year. In this situation, your lawyer “adjusts” the taxes so that you (as the buyer in this example), would owe a pro-rated portion of the expense to the seller.
Typical adjustments happen for
property taxes, condo/strata fees, or any other fees that may have been pre-paid
or unpaid by the buyer or seller.
It is important to always budget for adjustments as they can increase your closings costs.
Land Titles Fees
The cost of transferring land title in Alberta is set by the Land Titles Act and charged by the Alberta Land Titles Office. It is paid for by the purchaser of the property on closing.
This fee is calculated based on the value of the property
and the mortgage funds borrowed and can be several hundreds of dollars.
We offer a Land Titles calculator, along with calculating
any other closings costs on our website.
Real Property Report (RPR)
A Real Property Report (RPR) is a
legal document that clearly illustrates the location of significant visible
improvements relative to property boundaries.
A seller will typically have to obtain an RPR as a condition of their
sale.
The amount of work (and cost) to prepare a Real Property Report varies between properties. Lot size and shape, number of buildings, natural features, age and availability of the property boundary information all affect the cost.
Estoppel Certificate Fees
You need this certificate to
purchase a strata unit or a condominium in Alberta. The estoppel certificate typically costs
around $200 and shows you if outstanding interest is due from the previous
owner, or if there are any unpaid condo contributions or interest that is due.
Title Insurance
Title insurance protects you from unknown title defects (title issues that prevent you from having clear ownership of the property). For example, existing liens against the property’s title , encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property), and Title fraud.
Title insurance is often recommended, but is optional. The cost of a title insurance policy in Alberta can range from $200 and up, depending on the value of your property and could be a worthwhile investment for peace of mind.
Property Insurance
If you are borrowing money for
your home, your lender will typically require that you have a certain level of
insurance coverage on your home and ask for proof of insurance (also known as
an insurance binder), prior to closing.
Without insurance, a lender will typically not advance the mortgage
funds to the lawyer.
It is a good idea to call your
insurance broker and shop around a few weeks prior to closing.
Finally, it is important to mention that your fees can vary depending on the property, location and situation. We’d be happy to give you a more accurate estimate.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
When an agreement of purchase and sale is negotiated, both parties will agree to a closing date that seems reasonable. Just as there is said to be a preferable day to book a flight or find an economical hotel room, when negotiating your closing date, the day or week of the month to close may have advantages and disadvantages. Closing on a Friday may have it’s disadvantages.
In Canada, the time span between the
offer being signed and the closing date is typically 30-90 days, although some
closings may be shorter or longer, depending on circumstances for the buyers
and sellers. This period is meant to
allow the buyer time to obtain a mortgage, search
the title, and plan their move.
Avoid closing on a Friday, if you can
Friday might sound like the ideal day
of the week to close on a purchase. Most
people are of the mindset that they can take the day off work, and have the
weekend to move in. However, Friday
closings can be the cause of major challenges and extra costs should something
not go according to plan.
That’s because mortgage lenders and
the electronic land registry are open until 5pm. During the day of closing a lot goes on
behind the scenes. Funds move between the
buyer, the buyer’s lender and the seller and their lender (and their respective
lawyers). After the funds arrive, the
transaction needs to get registered before keys can be released to the buyer.
Needless to say, even the slightest
delay or something not going according to plan can mean the difference between
meeting the 5pm registration deadline or missing it. If the 5pm deadline for registration is
missed for whatever reason, your transaction will likely not close till the
next business day. If your closing was
originally on a Friday, that means you won’t be able to close until Monday. If it is a long weekend, you’ll be closing on
Tuesday.
While there are implications to not closing on time, some of the most common ones are additional per-diem costs for interest incurred on a mortgage or bridge financing, delays in moving (remember, your seller also has plans to move out before closing), or other penalties. Above all, it is a stressful situation for everyone involved, despite best efforts.
Month-end closings
Due to the nature of Real Estate transactions,
law firms get particularly busy on the last few days of the month, especially during
peak Real Estate months such as May through to September.
Closing at month-end isn’t an issue,
but keep in mind that closing involves multiple parties that need to come together
to complete your transaction. With an
increased volume of transactions and all the players in the system working to
hit month-end deadlines, the chances of something slipping through the cracks will
simply increase.
When negotiating your closing date, picking a day other than Friday or on a month-end may be a good idea, despite the inconvenience. While your transaction may close without a hitch, even if on a Friday or the end of the month, picking the right closing date can decrease the chances of having closing issues.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
You’ve signed on the dotted line and your offer was accepted. Congratulations on your new home! As you start readying your finances for closing, one of the top items that first-time home buyers forget to budget for is the land transfer tax (LTT for short).
Buyers of houses and condos in Ontario pay LTT when they purchase a property. Buyers who are purchasing a property in the City of Toronto also get to pay the Toronto LTT, on top of the Ontario LTT amount.
With rising property pricing the LTT can be significant. To give you an idea, on a $1M property in the City of Toronto, you’d be paying $32,950 in LTT. This amount is due on closing and is collected by your lawyer and remitted to the government. The LTT applies to all properties: resale or new construction.
The land transfer tax amounts
are calculated on a sliding scale formula, but to make things easier, use our simple Land Transfer Tax calculator where you
can plug in your purchase price and save yourself the number crunching.
There is some good news for first-time buyers. You may qualify for a rebate equal to the full amount of your LTT, up to a maximum of $4,000.
You must be a Canadian citizen or permanent resident of Canada,
You must be 18 years of age or older,
You must live in the home within 9 months of purchasing it,
You cannot have owned a home before, and
If you have a spouse, they cannot have owned a home during the time they have been your spouse.
If you’re planning on buying a house or condo, make sure you’ve budgeted for land transfer tax.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
There are few things that are more exciting than getting the
keys to your new home. What you typically
picture as a happy and exciting moment, can quickly turn into a stressful and
frustrating mess thanks to a variety of situations that can transpire after
closing. In “industry-speak” we call these
post-closing issues.
As much as we are
optimists, we’d like to set the stage with both buyers and sellers. Something willgo wrong upon
closing. Something willundoubtedly bother you when you
close. Whether it’s garbage that the seller failed to dispose of and left
behind, or the dirty toilet in the main floor powder room. Our best advice is just be prepared, put it
all in perspective, and realize that not everyone see things that same that you
do.
While there may be thousands of different ‘post closing’ situations,
here are the top six we’ve encountered with our buyers or sellers. The good news is that some of these can be
avoided through proactive communications and some due diligence.
Damage to Property
You get your keys and arrive at your new home. While the place looked spectacular during
showings, now that the seller’s furniture and possessions are gone, you notice
damage to the drywall. Maybe you go to
the basement and see a big puddle beside the hot water tank.
These things are unfortunately common. As a typical closing takes 60-90 days from signing
the purchase agreement, a lot can change in the condition of a property. Damages that may not have been visible during
showings all of a sudden appear now that the property is vacant. Sometimes even minor things like removing
artwork from the walls can leave nail holes and damages that may require repairs
after closing.
How to handle:
First, you need to know that these types of things are expected,
and damages can occur intentionally or unintentionally. It is important to put things in perspective
as to how significant these damages are before you put your time and stress
into rectifying them.
When you take possession of a property, make detailed note
of any unexpected damages and if possible, take clear photos of the damaged
area(s). Submit the notes and photos to
your lawyer and real estate agent.
Please note that submitting these photos doesn’t guarantee that the damages
will be rectified, but at the very least, you’d be starting a process where the
seller’s lawyer will be notified, and the seller be given the opportunity to
respond to your claims.
Surprise! You’ve
got Rented Items
You move in and a month later, you receive a bill to pay for
your hot water tank rental. Problem is,
you had no idea it was rented. You didn’t
sign a rental contract or even consider the possibility when you bought the
place. Now you’re stuck with monthly
bills you did not plan on having.
It is the job of the seller, and the listing agent, to disclose
if there are any items in being sold with the home that are rented such as a hot water tank (or in some cases, air
conditioners, furnaces and other appliances).
There is a section within the standard Agreement
of Purchase & Sale that specifies which items, if any, are
rentals. Barring the inclusion of a
rental item in this section, then all items and equipment are deemed to be free
and clear of any encumbrances.
So, what happens when you take possession of your new home, and
find out that the hot water tank is rented? Or the furnace? Or the
air conditioner?
Well, the seller is on the hook for the contract, but will the
seller now buy out the contract after the fact? What if they refuse or blame
their real estate agent for not including it in the listing and/or the
agreement of purchase and sale?
How to handle:
Before you sign an agreement of purchase and sale, ask your real
estate agent to verify any rental items with the seller’s agent (who should
double-check with their seller). While
there isn’t a sure-fire way to avoid misrepresentation, it never hurts to
double check. If there are rental
items, you can request to see those agreements and/or contracts and can require
the seller to pay off any contracts prior to the closing date.
During the closing process, your lawyer typically also double-checks with the sellers’ lawyer to see if there are any rental items or contracts, however, the reliance is still on the seller to represent the facts as sometimes rental items may not be registered on title.
If you find out about a rental item that was not disclosed
after your closing, reach out to your lawyer immediately. Your lawyer will likely reach out to the
seller’s lawyer and advise of possible next steps.
Appliances not working
You can’t wait to cook your first meal on your new home’s gorgeous
stainless-steel stove. You flip the
switch and nothing happens. The stove won’t
even turn on.
Before you get frustrated and opt out for take-out food
instead, remember that this happens all the time and could just be a matter of poor
timing. It can also be an appliance that
wasn’t in good repair to begin with.
The agreement of purchase and sale will typically include a
condition where the seller warrant’s that appliances and home systems will be
in good working order upon closing. This
clause can vary in cases where you are buying a property as-is or the seller is
aware of an appliance not working or excludes it from the agreement at the time
of negotiation.
How to handle:
Your purchase and sale agreement should include a condition that allows you to revisit the property a certain number of times prior to closing (usually 2-3 times is the norm we see). We suggest booking the last revisit within a couple of days of closing and using that revisit as an opportunity to briefly inspect the property, including the operations of major appliances. Also, if you had your home inspected, check the inspector’s report for that appliances.
If you notice anything out of the ordinary such as an
appliance not working, inform your lawyer as soon as possible.
Another option to protect yourself at closing and after closing
is purchasing a home warranty policy.
There are several affordable options on the market that will protect
your appliances and home systems in case of breakdown or replacement, giving
you peace of mind.
Sellers still on the property after closing
Yes, it happens. You
open the door to your new home only to discover the seller is still in the
midst of packing their belongings. In
the meantime, you might have your moving truck outside, charging you by the
hour.
Whether an honest mistake or just poor planning by the
seller, in these situations, both lawyers must be made aware so that the property
gets vacated as soon as possible.
How to handle:
Closings typically happen between 3-5pm in the afternoon. Once funds
have been exchanged and the property’s title is in your name, your lawyer will
release the keys. Sellers are notified
to plan to vacate their properties by the afternoon, but things like forgetting
to book the elevator or your seller’s moving truck not showing up sometimes do
happen.
If you do find yourself in a situation where the seller has
not left the property, keep your cool and try sorting out the situation with
them. They can also be in the same
stressful situation that you are in. While
the situation wasn’t what you expected, having a calm and rational discussion
may be the best way to deescalate a situation.
The case of the missing chattels
You move in and notice the seller removed all the curtains and
curtain rods. You are in total shock as
you were under the impression that the curtains and rods come with your home.
When negotiating your agreement to purchase, it is important to
understand the difference between a chattel and a fixture. A
chattel is an item of tangible movable or immovable property except real estate
and things (such as buildings) connected with real property. An example of a chattel is a stove, fridge or
a laundry machine.
A fixture in real estate is an item that is fastened or attached
to the property like a curtain rod, a light fixture, or even a bathtub (to be
extreme). Fixtures are part of the property and should come with it when the
buyer takes possession.
There is a section on the agreement of purchase and sale that
says “chattels included.” That’s because all chattels are
deemed to be “excluded” unless specifically included.
There is a section on the Agreement that says “fixtures
excluded.” That’s because all fixtures are
deemed to be “included” unless specifically excluded. It is excluded unless it
is specifically included in the Agreement.
A curtain rod is a fixture. It is screwed to the
wall. It is affixed. It meets the rudimentary test of “nailed,
screwed, or glued. This curtain rod is included unless it
is specifically excluded in the Agreement.
How to handle:
Keep in mind that your agreement needs to be as specific as
it can and you need to pay special attention to the chattels and fixtures
sections before you sign. If you
negotiate for certain chattels to be included, list them out and be specific
down to the location (for example: upright freezer in basement, shelving unit on
the first floor family room, etc.).
If you take possession and notice a chattel or fixture
missing, consider its importance (it may not be worth the effort or stress to
chase down a $20 lighting sconce that was removed) and inform your lawyer as
soon as you can.
Garbage and/or junk left on property
This is the number one complaint we get from buyers by
far. The sellers may have left some of
their possessions, garbage or junk inside or outside the property.
As a general rule, the buyer expects the seller to leave the
property free and clear of any possessions or garbage. However, it happens all the time. Whether it is garbage left on the lawn days
ahead of scheduled garbage pickup or the seller leaves some possessions behind.
How to handle:
Consider the severity of the situation and inform your lawyer if necessary. Your lawyer will work with the seller’s lawyer to potentially rectify.
Important note: This article is not Legal Advice. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice.
If you are buying a
condo, you will probably encounter the term “status certificate”. What exactly is a status certificate and why
is a status certificate important?
Think of a status
certificate as a comprehensive document that provides information about the
current state of a condominium property.
The purpose of it is to give potential buyers as much information as
possible about their unit and the overall health of the operations of the condo
complex.
A condo unit is typically
subject to additional rules and regulations compared to a (freehold) house
because it’s managed by a Board of Directors and often a property manager.
The condo board is responsible
for managing the budget for the overall condo, which includes upkeep, repairs
and improvements to the common elements on the property. Common elements are typically anything outside
of your unit such as elevators, lobby, amenity facilities, etc. For this
reason, you’ll want to make sure that the condo board is fiscally responsible
and can handle necessary repairs that come up now and in the future.
That’s where the status
certificate comes in. The status certificate
is a recent collection of relevant information such as the condos by-laws (rules
about things like pets, fitness facilities, swimming pools, barbecues, smoking,
etc.), a current budget for the condominium, a recent reserve study (we’ll talk
about that in a moment), and whether any lawsuits may be pending against the
condo.
With this information
at-hand, a status certificate can help you make your purchase decision and
anticipate any issues such as:
Anticipated increases in maintenance fees
Any major future repairs you may be liable for
a share of
The overall financial health of the condo
Any special assessments that may be costly
down the road
Where do I get a
status certificate?
You or your Real
Estate agent can order a condo corporation’s status certificate. All you have
to do is submit a written request and pay the $100 fee (plus HST) to management
or the condo corporation.
It takes about 10
days, although it can be rushed for an additional fee.
Is it mandatory to get
a status certificate?
Typically, when buying
a resale condo, your real estate agent will recommend that you obtain a copy of
the status certificate and thoroughly review it with your real
estate lawyer before you commit to a purchase.
Most offers on resale
condos are conditional upon review of the condo status certificate, so that
buyers can ensure everything is in order.
If you are getting a
mortgage or refinancing your mortgage on a condo property, your lender will
require a status certificate be obtained and reviewed by a lawyer as a
condition of the mortgage.
How do I review the status
certificate?
As the status certificate
can often be complex and contain key information within dozens of pages, we recommend
having an experienced Real Estate lawyer review the status certificate for you. A lawyer will know the key information to
look for, how to interpret the information and will typically summarize the key
points and what you should be aware of.
What is a typical ‘deal
breaker’ that can be found in a status certificate?
Condos carry a monthly maintenance
fee to pay for common expenses are shared between all owners. If the condo corporation
is running short of funds to pay operation expenses, you will notice an
increase to your maintenance fees. While
some increases may be reasonable, in some circumstances, when reviewing the
status certificate is a condition of your offer to purchase, a sharp increase
to maintenance fees may not be within your budget and you may decide to not
proceed with buying the unit.
Another major item that can be
found by reviewing the status certificate is called a special assessment. A special assessment is an additional charge
that condominium owners are required to pay on top of their regular monthly
maintenance fees. While all owners are responsible for paying a special
assessment, it’s important to realize that the condo board of directors does
not need to get the approval of individual owners to add a special assessment. For example, if the condo has an urgent
requirement to repair the roof at a cost of $500K and does not have sufficient
funds in the reserve to cover the cost, each unit may have a special assessment
put against it, which means you and other unit owners are liable for your share
of the cost of repairs.
Under Ontario law, there’s very little owners
can do if they can’t pay or disagree with a special assessment. If an owner can’t
pay, the condominium corporation can put a lean on the property.
Keep in mind that reviewing the status
certificate will only highlight any issues at the current time but does not guarantee
against having condo fee increases or special assessments in the future.
Can Deeded help with
my status certificate?
Of course! As you are shopping for a condo unit, we’d be happy to review the status certificate for your property and provide you with a comprehensive, yet understandable summary. If you are in a bidding war situation, we’d be happy to turn around a status certificate review within 48-72 hours. Please feel free to contact us anytime.
