Status certificate inadequately disclosing financial information exempts the buyer from paying $34K special assessment.

A buyer of a condominium was hit with a $34,000 special assessment shortly after purchasing a condominium and the judge ruled the buyer is exempt from paying his share because the possibly of the special assessment wasn’t properly disclosed in the status certificate.

The case of Adam Bruce v Waterloo North Condominium Corporation No. 26, they buyer Adam Bruce purchased a condominium in 2021. The buyer received the status certificate package including the status certificate summary form 13 and the audited financial statements.

Below are the important facts:

1. The summary of the status certificate states the following: “The corporation has no knowledge of any circumstances that may result in an increase in the common expenses for the unit except: the corporation’s fiscal year end is August 31, 2021. Therefore, monthly common element fees may be increased in the accordance with the new budget which has yet to be determined.”
2. The buyer didn’t retain a lawyer to review the status certificate, nor the buyer read all the information included in the status certificate package.
3. The agent representing the buyer summarized the content of the status certificate and assessed it as “looked to be in order”, “reserve fund seemed to be properly funded” and “there is nothing to suggest there may be any special assessment anytime soon”.
4. The financial statements notes mention the possibility of the special assessment or the loan with respect to the water main repairs.
5. The agent representing the buyer didn’t advise the buyer about the notes in the financial statements discussing the possibility of the special assessment or the loan.
6. Within a year of the purchase the buyer learned about the $2.5M needed to finance the repairs or replacement of the water main.
7. The buyer’s share to finance the project was $34,000.
8. The condominium corporation was aware of the issues related to the water main way before the purchase in 2021, in fact the issue was discussed many times going back all the way to 2017.
9. In 2019 the corporation obtained a quote for $415K for partial replacement of the water main.
10. In 2020 the auditor stated the following: "The corporation has tendered the water main repairs. It was unknown at the time of the audit the cost of this project, but it is estimated to be significant. The work is expected to commence and be completed in the following fiscal year. To fund this project, there is a possibility of a special assessment to the unit owners and/or an application for the loan.”
11. Around the time of the purchase the property manager had communicated with the vendors about the quotes for the project, received the actual quote in the amount of $2M just days after the offer on the unit was accepted.
12. The property manager didn’t issue an updated status certificate for this unit after learning of the costs of the repairs.

Judge’s decision.

After reviewing the facts, the judge determined that the buyer is exempt from the special assessment or the loan for as long as he owns the unit, but the exemption can’t be transferred to the future buyers of this unit.

Summary. 

This is a very interesting case, and I would encourage you to read the case summary along with the precedent cases cited in the link above. This is an example of multiple errors; the property manager of the corporation not knowing the rules and issuing the documents incorrectly, the buyer agent not reviewing the status certificate properly, the buyer not hiring the lawyer to review the status certificate. This all could have been avoided if the property manager had known how to do, and did her job properly, and the buyer and his team did proper due diligence. Neither was the case.

For any condo buyer it is important to go over all the documents included in the status certificate, ensure the current and updated info is included, and if the condo corporation didn’t disclose any material facts in a proper way the buyer has rights to dispute it.