Status Certificates and Fulsome Disclosure: Why One Condo Unit Owner is Exempt from Paying Special Assessment Fees

By Slonee Malhotra and Gary Keller

A recent judgement from the Ontario Superior Court of Justice reinforces the importance of status certificates and their role in protecting buyers, sellers, and condominium corporations. A status certificate is a document that discloses mandatory information about a condominium corporation and the details about a particular unit being offered for sale within it. The case of Bruce v Waterloo North Condominium Corporation No. 26 demonstrates the fallout that can occur when a corporation fails to disclose a material expense such as a pending special assessment in the status certificate.^[1]

The Purchase

The summer of 2021 was a time when the real estate market was heated, with properties selling fast and buyers waiving conditions amid bidding wars. This was also a time when the Applicant, Adam Bruce (“Bruce”), was looking to purchase a condominium unit in Waterloo, Ontario. Bruce identified a unit to his liking and had his real estate agent request a status certificate from the condo corporation (“WNCC 26”). On June 8, 2021, before making an offer on the unit, Bruce obtained the status certificate.

Bruce did not read the status certificate himself, nor did he retain a lawyer to do so on his behalf. However, his real estate agent did review it, summarizing its contents to Bruce and concluding that there was “nothing to suggest there might be any special assessments anytime soon.”^[2] Bruce’s agent did not mention the auditor’s report attached to the status certificate that noted the possibility of a special assessment related to watermain repairs.

On June 22, 2021, Bruce entered into an irrevocable purchase agreement for the unit with the seller, waiving conditions.

In May 2022, Bruce learned that WNCC 26 was seeking authorization from unit owners to borrow $2.5 million to repair or replace its watermain supply and lift stations. This would cost Bruce approximately $34,000. Moreover, the facts of the case revealed that WNCC 26 was aware of these issues since 2017; retaining MTE Consulting (“MTE”) to advise on the project in 2020 and tendering offers for repairs in 2021.

The Status Certificate

On June 7, 2021, Christina Brown (“Brown”), the manager of WNCC 26 and author of the status certificate, reached out to MTE requesting an update on the tendering process. On June 8, MTE informed Brown that they were closing the tender that week. Upon receiving this information, Brown prepared the status certificate which was delivered to Bruce’s real estate agent that same day. The status certificate stated:

“The Corporation has no knowledge of any circumstance 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 accordance with the new budget which has yet to be determined.”^[3]

The Positions of the Parties

Even though Bruce did not retain a lawyer to review the status certificate—which would have been a prudent thing to do—he contended that WNCC 26 “failed to disclose material facts about an extremely expensive project that it knew about for years and was in the process of tendering for.”^[4]

Under section 76(6) of the Condominium Act, Bruce sought a declaration stating that his unit was exempt from any special assessment towards WNCC 26’s cost to maintain, repair or replace any asset or property not disclosed in the status certificate. In addition, pursuant to section 135 of the Condominium Act, Bruce also sought a declaration that the conduct of WNCC 26 was oppressive and unfairly prejudicial.

In response, WNCC 26 argued that it provided all material information in the status certificate. Moreover, WNCC 26 contended that any of Bruce’s injuries resulted from his failure to take notice of the information in the auditor’s report that accompanied the status certificate.

The Judgement

In the end, the court ruled that the disclosure provided by WNCC 26 in the status certificate was insufficient. The judge noted that corporations must disclose any potential increase in expenses that it knows, or ought to know, of. WNCC 26’s failure to make the watermain issues known in the status certificate entitled Bruce to an exemption from the special assessment for the period that he continues to own the unit. Additionally, the court held that WNCC 26’s inaccurate disclosure of the status certificate amounted to oppressive conduct under section 135 of the Condominium Act.

This case highlights the need for fulsome disclosure within status certificates. Any financial concerns should be presented in clear language directly in the status certificate, not just as an attachment merely referred to within it. As noted by the court, “Only with full disclosure can the prospective purchaser assess their own risk and make informed decisions about the purchase.”^[5]

If you have any questions about status certificates or any condo-related issues, please contact one of our qualified real estate lawyers: Slonee Malhotra (slonee@sorbaralaw.com) or Gary Keller (gkeller@sorbaralaw.com).