In the Rainville case, an illegal third floor (a converted portion of the common elements) had not been brought to the purchaser’s attention. The estoppel certificate issued by the condominium corporation did not mention the illegal third floor. The Court of Appeal said that the condominium corporation had not met its obligations to the purchaser.
One key message in the Rainville decision is as follows: A condominium corporation has a duty to take reasonable steps to verify statements made in the corporation’s status certificates (previously called estoppel certificates). In some cases this may mean that the corporation has a duty to inspect the unit (before issuing the certificate). And, depending upon the terms of the management contract, the manager may be obligated to fulfill these obligations on behalf of the corporation.
Having said the foregoing, it seems to me that the Rainville case involved a very special set of circumstances. For instance:
- In the Rainville case, the estoppel certificate stated that “there are no continuing violations of the declaration, by-laws and/or rules of the corporation”.
- The manager had also noticed a window on the third floor, which should have led him to further investigate the possibility of an illegal third floor.
So, to me, the message is as follows: If a condominium corporation cannot be reasonably sure about the accuracy or completeness of a given status certificate, the condominium corporation may have a duty to make further enquiries; and in some cases this may mean that the unit should be inspected. However, there is no clear “rule of thumb” on this. It will likely depend upon the specific circumstances of each case.
Some condominium corporations may decide to inspect the unit prior to issuance of each status certificate. This will certainly minimize the risk of claims for failure to inspect the unit. However, if the unit is to be inspected, the inspection would have to be carefully conducted to ensure that any apparent violations are noticed, are then mentioned in the status certificate, and are otherwise followed-up for resolution as appropriate.
It also seems to me that the prescribed fee for issuance of a status certificate should be higher (than the current $100) if the process will involve a unit inspection in every case. For more information, read Jim’s full article, Orr / Rainville v. MTCC 1056 and Gowlings – Court of Appeal Decision Arrives.