Legal

July 24, 2024 Published by London and Area Chapter - By Kristi Sargeant-Kerr

Status Certificates—A Case Law Review

From the CCI Review 2023/2024-4 June 2024 issue of the CCI London Chapter

As the spring real estate market heats up, many corporations are seeing an increase in status certificate requests as unit owner prepare to list and sell their units. In addition to condominium law, our team also practices real estate law, and we certainly see an increase in client requests to review status certificates this time of the year.

A status certificate must contain prescribed information under section 76 of the Condo Act, and potential purchasers should always include a status certificate condition in their purchase agreement. The case law has repeatedly demonstrated that unit owners are entitled to rely on the information provided in status certificates, so it is crucial that corporations ensure that status certificates are complete and accurate.

Special Assessments

In Bruce v. Waterloo North Condominium Corporation No. 26, a unit owner commenced a claim against the Corporation to seek an order that he was not obligated to pay for a special assessment that was not disclosed in the status certificate.

The status certificate stated that “[t]he Corporation has no knowledge of any circumstance that may result in an increase in the common expenses for the unit”; however, the auditor’s report included with the status certificate stated that there was a possibility of a special assessment and/or a loan application related to watermain repairs at the Corporation. The Corporation’s property manager did not disclose the possibility of a special assessment because they understood that “disclosure was only required if the potential cost was a certainty, not a possibility”; however, the court noted that this was not correct.

The Court found that the unit owner was entitled to an exemption from the special assessment or loan as long as he continues to own the unit, and the Corporation’s conduct was found to be oppressive because it breached the unit owner’s reasonable expectation that that the status certificate would be properly completed and the Corporation unfairly imposed the cost of the special assessment on the unit owner.

The Liability of the Condominium Manager

In Metropolitan Toronto Condominium Corporation No. 673 v. St. George Property Management Inc., a condominium corporation filed a claim against its property manager for breach of contract. The property manager had knowledge of the Corporation’s financial situation related to anticipated roof repairs, including the possibility of a special assessment, yet issued a status certificate which stated that the Corporation had no knowledge of any circumstances that may result in an increase in common expenses.

A unit owner later served the Corporation with an Application to seek an order that they were not liable to pay the special assessment because of the statements listed in the status certificate, and the Court decided that the unit owner was not obligated to pay the special assessment. As a result, the Corporation incurred costs responding to the Application and commenced an action against the property manager.

The Court found that the property manager “failed to carry out its performance obligations with respect to the preparation of the status certificate” and that the indemnification clause listed in the management agreement applied to the circumstances of this case. The condominium corporation was awarded $97,182.68 for breach of contract.

Unknown Changes to the Common Elements

Orr v. Metropolitan Toronto Condominium Corporation No. 1056 was a complicated case involving multiple parties which took almost two decades to litigate. In 1998, a unit owner bought a townhouse which she believed was three stories, when in fact the previous unit owner had illegally built the third floor into the common elements attic space. This unapproved alteration was not cited in the status certificate provided to the unit owner.

The unit owner brought a series of claims against previous unit owners and former Board members of the corporation, the City of Toronto, the real estate agents involved in the purchase, the condominium corporation, the real estate lawyer who acted for her in the purchase, and the corporation’s property management services provider and its employees. There were also several cross-claims amongst the defendants, resulting in multiple overlapping legal actions being consolidated.

After several appeals, the corporation was not ordered to amend the declaration to include the third storey in the unit. However, the Court of Appeal determined that the purchaser was not required to close up the third floor and had no obligation to pay any occupation rent for the use of the common elements space. In the final 2017 decision, orders for costs exceeded $850,000, which was more than the original amount of the claim.

Return of Purchase Deposit

In Atkinson v. TWS Developments Inc., the plaintiff brought an action against a condominium developer for the return of deposits paid towards the purchase of a newly built condominium unit after a status certificate provided by the condominium developer was revealed to contain several errors.

The plaintiff first learned that there was a discrepancy when his real estate lawyer advised that the common expenses were actually higher than stated on the status certificate. The unit owner requested a new status certificate and learned that there was a budget deficit for current and previous fiscal years and that the corporation was subject to ongoing litigation. These issues were not disclosed in the original status certificate, despite the developer having knowledge of them.

In a pre-closing inspection, the plaintiff also discovered that there was mould in the building that would constitute a health risk to occupants, which was also not disclosed in the status certificate. As such, the plaintiff decided not to close on the purchase of the unit and requested that his deposit be returned. The developed declined and the potential unit owner had to commence a legal action to recover the deposit.

The developer did not appear at trial, and the plaintiff was awarded the return of the deposit plus interest and costs, totaling over $43,000.

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Kristi Sargeant-Kerr, LL.B., LCCI is a partner with Scott Petrie LLP specializes in all aspects of condominium and real estate law, including development, management and litigation and purchase, sale and mortgaging of condominiums. She has extensive experience working with managers and corporations in and around the region and prides herself on finding reasonable solutions to their complex issues.

Kristi is on the local CCI Board of Directors and is co-chair of their Education Committee. She has also been appointed to the Advisory Committee of the Condominium Management Regulatory Authority of Ontario (CMRAO).