New Condominium Act Creates Fresh Challenges for Condo Boards

The new Condominium Act has been with us for a few years now and some of the glitches in the turnover from the old Act to the new Act are now surfacing.  One of the most noticeable changes relates to the new “Status Certificates” (formerly known as “Estoppel Certificates” under the old Act) and how they have changed the lives of condominium buyers and owners. Let’s do a quick comparison of status certificates and their predecessors, the old estoppel certificates.  The Old Act actually never referred to “estoppel certificates”, but with the certificate provided under the old Act, the corporation was estopped, or prevented, from denying the accuracy of the information in the certificate, as against the person requesting it; hence the name “estoppel certificate” was established.  Under the Old Act, the condominium corporation was required to give a certificate, confirming the status of the common expenses of a particular unit owner, any default in their payment, together with some other statements and information prescribed by regulation. Only a person that wished to buy a unit could request an estoppel certificate from the corporation, unlike in the new Act, where this restriction has been lifted to allow any person to request it from the condominium corporation.

The new Act gives much more information about what must be included in the new status certificate.  They are designed to provide new unit owners with a more complete picture of what they are getting, to eliminate those nasty surprises after closing that some people experienced in the past.  And under the old Act, while the Act said the estoppel certificate was supposed to be produced within seven days of it being requested, unit owners would not be considered in default if the condominium corporation failed to do so.  So under the old Act, it was not uncommon for purchasers to be left in the dark, sometimes until the closing date, about the status of the condominium they had agreed to purchase. 

With the new Act, the time has been extended to ten days, but if a status certificate is not supplied on time, or is deficient, there are consequences.  If the certificate isn’t supplied within 10 days, the condominium corporation will be deemed to have given a certificate on the day immediately after the requisite time has expired.  It will be deemed to have confirmed that as of that date, no default in the payment of common expenses exists, that the board has not declared an increase in the common expenses since the date of the budget for that fiscal year, and that no assessment has been levied against that unit for the purposes of increasing the contributions to the reserve fund since the date of the budget for that fiscal year.  All that could cost the corporation money, so you know they are paying attention now.  Also, if the information is supplied, but turns out to be deficient, the corporation will be deemed to include a statement that there is no such information.  That too could be problematic and costly. 

So the new status certificates have to be taken more seriously than the old estoppel certificates.  That would explain the increase in cost, from $50 to $100.  Unpaid volunteer boards of directors of condominiums can soon find themselves swamped by the technical details of the new Act and they are increasingly turning to professional help to wade them through the morass.  That would also explain why professional property managers are becoming more in demand.  The new Act creates more obligations for the boards of condominium corporations, so much so, that many boards are now feeling the pinch of the increased legal exposure if they fall below the threshold level of professionalism now expected of them.  Condominiums are now, more than ever, looking to professionals to assist them, and deflect liability for decisions they make. 

One of those areas relates to reserve fund studies, which every condominium corporation must now do periodically.  Reserve fund studies must now be conducted to ensure that sufficient monies exist to cover the major repair and replacement of the common elements and the corporation’s assets.  They are meant to eliminate problems that plagued many condominiums in the past which had under-funded reserves that resulted in unexpected special assessments or special borrowing programs for unsuspecting unit owners.   These reserve fund studies must be done by independent persons, of a prescribed class - translation: once again, a professional.  This will, without a doubt, have an effect on condominium fees over time. 

Don’t get me wrong - I’m not saying that the amendments in the new Act aren’t working.  I’ve spoken to some of my realtor friends and talked to them about their experiences with the new status certificates.  I heard many stories, but one, in particular stands out.  He told me about a status certificate that he obtained for a buyer of a condominium unit that stated that the unit owner was responsible for the storm door of the unit and an oil spill on the driveway.  It is doubtful that this amount of detail would have been revealed in an estoppel certificate.  Because of this disclosure, the buyer was able to obtain from the seller a holdback on the purchase price for the screen door and the seller agreed to repair the driveway, before the sale was completed.

The new Condominium Act is providing new challenges to condominium corporations.  In our aging society and our desire for convenience in our lifestyles, condominiums remain an  increasingly popular housing type.  The new Act is meant to provide more regulation in these privately managed environments.