A status certificate is a crucial document for prospective purchasers. This document serves as a comprehensive guide, offering a point-in-time snapshot of the condominium corporation’s fiscal health, potential circumstances which may result in an increase in common expenses, ongoing legal matters, and other potential red flags that would be of interest to purchasers. Status certificates are typically requested during the process of buying or selling a condominium unit.
In Bruce v. Waterloo North Condominium Corporation No. 26 (“Bruce v. WNCC 26”), the Court highlights the importance of adequately disclosing to a prospective purchaser the existence of a potential project that will likely result in a special assessment.
In Bruce v WNCC 26, the applicant owner brought an application against the condominium with respect to a status certificate he received in the process of purchasing a unit which stated “the Corporation has no knowledge of any circumstance that may result in an increase in the common expenses for the unit…” Despite the wording used in the status certificate, WNCC 26 knew that its water main and lift station would require costly replacement.
Following the closing of the sale, the applicant learned that the condominium was seeking authorization from the owners to borrow up to $2.5 million to repair and replace its lift station and water main’s supply.
A copy of the auditor’s report (included in the status certificate) stated that the Corporation had tendered the water main repairs and that there was a possibility of significant costs, the funding of which may require a special assessment. The Corporation argued that because the applicant received the auditor’s report and financial statements with the status certificate, all the relevant information was presented.
The court did not agree. The Court held that WNCC 26 did not adequately disclose the existence of the project and likelihood of a special assessment in the status certificate, that the applicant’s unit was entitled to an exemption from the special assessment or loan for the entirety of the applicant’s ownership, and that the applicant is entitled to damages for oppression. The applicant had a reasonable expectation that the status certificate would be completed truthfully, accurately, and completely. The Court found that the status certificate did not meet this reasonable expectation which resulted in a finding of oppression under section 135 of the Condominium Act, 1998.
A status certificate binds the condominium with those who rely on it. Condominium corporations have an obligation to take reasonable steps to ensure that the content of the status certificate is accurate, as a prospective purchaser can only assess their own risk and make informed decisions about a purchase if they are given full disclosure.
The Court clarifies (as the language of the status certificate clearly requires) that disclosure in the status certificate is required if there is a known possibility of increases to the common expenses, whether in the current fiscal year or future ones.
For condominium corporations and managers who prepare status certificates, Bruce v WNCC 26 emphasizes that there is a responsibility to ensure that the status certificates accurately reflect the status of the condominium, regardless of which supporting documents are included with the disclosure; it is not enough that accompanying documents may refer to potential cost increases. Condominium corporations may incur significant financial ramifications if a status certificate incorrectly depicts the known state of a condominium and its finances.