Who Can Rely On A Status Certificate?

Recently I received an interesting question respecting status certificates from a very astute condominium manager.

As many of our readers know, under the former (1978 version) of the Condominium Act, Section 32(8) of that Act said that a status certificate was binding upon the condominium corporation “as against the person requesting the certificate.”

However, the current Act – Section 76(6) – does not contain the same words. Instead, section 76(6) of the current Act says that the certificate binds the corporation “as against a purchaser or mortgagee of a unit who relies on the certificate”…and this could, in theory, be someone other than the person who requested the certificate!

So the question raised by the condominium manager is as follows: Continue reading “Who Can Rely On A Status Certificate?”

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Condominium Act Amendments and Common Expense Increases

At the ACMO / CCI EO Condominium Conference on June 2nd, I offered my view that the Protecting Condominium Owners Act, 2015 (including amendments to the Condominium Act and the introduction of mandatory licensing for condominium property managers) will likely mean an increase in common expenses for most condominium corporations in Ontario.

In my view, common expenses can be expected to increase for at least three reasons:

1. There will be added burden on condominium property managers – for various new procedures and requirements under the Condominium Act. Condominium management fees should therefore increase.

2. Condominium managers will also be faced with annual licensing fees and other expenses under the new licensing requirements – which of course will need to be passed on to condominium corporations.

3. Condominium corporations will be required to make payments to the new Condominium Authority of Ontario – which payments are currently estimated to be somewhere between $1 and $3 per unit per month.

It’s difficult to know what sort of common expense increase this will mean for a given condominium corporation, but there seemed to be general agreement at the conference that the amount will be somewhere between $5 and $10 per unit per month.

This raises the following question:  Should condominium corporations mention this (now) in the status certificates? 

In my view, this might not be necessary (because such increases will result from circumstances that are public knowledge); but I still feel that the safe thing is to add wording to the status certificates (paragraph 12) along the following lines:

The corporation has no knowledge of circumstances that may result in an increase in the common expenses for the unit except:

The Protecting Condominium Owners Act, 2015, will bring some important changes to condominium law and administration in Ontario, including changes to the Condominium Act, as well as mandatory licensing for condominium property managers.  As a result, condominium management fees are expected to increase.  Also, condominium corporations will be required to make payments towards the new Condominium Authority of Ontario.   These matters are expected to result in an increase in the common expenses, and the increase is currently estimated at between $5.00 and $10.00 per unit per month. 

These changes are expected to come into force in phases, from 2017 – 2019.

Condominium corporations might also want to let their owners know about these coming increases.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .

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A Reminder About Reserve Funds and Status Certificates

If a condominium corporation is aware of any circumstances that may result in an increase in the common expenses (that is, an increase beyond inflation), this must be disclosed in Paragraph 12 of the status certificates. Therefore, something may need to be mentioned in Paragraph 12 of the status certificates if it appears that contributions to the reserve fund may need to increase (beyond inflation).

For example, some features of the common elements may not be covered by the reserve fund study; such as, if those features won’t require replacement until after the reserve fund study period. If so, I recommend that the condominium corporation give careful consideration to the following: Is it possible that the annual contributions to the reserve fund will need to increase when those features “come into the study period” at some time in the future? If so, this may need to be mentioned now in Paragraph 12 of the status certificates.

As mentioned in my blog post last November, the reserve fund study period (currently required to be “at least 30 years”) is also expected to be increased, likely to “at least 45 years”, as part of the anticipated amendments to the Condominium Act and Regulations. Depending upon the particular condominium, this may mean that features not currently covered by the reserve fund study will be covered (if and when the study period increases to at least 45 years). Again, if this could result in an increase in the annual reserve fund contributions, this may need to be mentioned now in Paragraph 12 of the status certificates.

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Status Certificates – The Risks for Managers

The recent court decision in the case Metropolitan Toronto Condominium Corporation No. 673 v St. George Property Management Inc. shows the potential risks posed by an inaccurate status certificate. Very briefly, the facts of the case were as follows.

The property manager was responsible for preparing the status certificates for the condominium corporation. The property manager prepared and issued a status certificate that contained mistakes. In particular, it failed to disclose a potential special assessment (due to required roof replacement), and also failed to disclose details of an expropriation. Because of the mistakes, the condominium corporation incurred significant costs to deal with a dispute between the condominium corporation and the purchaser who received the status certificate. The corporation’s own costs as well as court costs payable by the corporation to the purchaser totaled almost $100,000.

In a separate court process (between the corporation and the purchaser), it was determined that the purchaser could not be forced to contribute to the special assessment for the roof replacement, because of the inaccurate status certificate. So, in that sense, the purchaser’s claim against the condominium corporation succeeded (again, because of the inaccurate status certificate). However, the condominium corporation had also received expropriation funds – from an expropriation of a portion of the condominium property by the City of Toronto. Those expropriation monies were deposited to the reserve fund, and served to essentially off-set the special assessment. So, in that sense, the purchaser hadn’t ultimately suffered any resulting loss. In the end, the purchaser wasn’t awarded any damages, but the court still awarded the purchaser costs of $15,000, I think perhaps because the whole dispute was the result of the inaccurate status certificate.

The condominium corporation then sued the Manager for recovery of the costs incurred by the corporation (the roughly $100,000 noted above) – and was successful. The Court said:

I find that the Property Manager failed to carry out its performance obligations with respect to the preparation of the status certificate for the Unit 13 Purchaser and that the Condominium Corporation was harmed to the extent of $97,182.68. The indemnification clause (in the Management Contract) applies to the circumstances of this case.

This is another cautionary tale about status certificates. The moral is as follows: when preparing status certificates, always make sure that they are complete and accurate.

To read more about status certificates, check out our previous blog post.

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Status Certificates – The Rainville Decision

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:

  1. 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”.
  2. 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.

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