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Buyer A agreed to buy a condominium resale unit from Seller B for the purchase price of $339,000.00. In the original agreement, it was represented that the condominium maintenance fees were $285.96 per month and that there were no special assessments contemplated against the unit.
When the buyer received the status certificate, it stated that the maintenance fees for the unit were $314.56 per month which was a 10% increase. There was also a one-time special assessment of $457.87.
Based on this information, the buyer refused to waive the condition and tried to cancel the agreement. The seller refused to return the buyer’s deposit of $16,000. The case went to trial. At trial, the buyer won the return of their deposit and the seller appealed.
The seller claimed that when he signed the contract, the maintenance fees were $285.96 and that he was not aware that they were going to be increased in the coming year. The special assessment was just a one-time problem that was being paid by the seller and there was nothing substantially wrong with the building. He thus argued that the buyer was not acting in good faith when they reviewed the status certificate with their lawyer.
In a decision dated February 2, 2015, a judge determined that the buyer did exercise their condition in good faith, based on the increased maintenance fees and the special assessment, even if it was one-time only.
In my experience, buyers and lenders are both typically concerned when there are special assessments levied against condominium unit owners. It could indicate mismanagement or poor planning by the board of directors.
In addition, a 10% increase in maintenance fees on a year over year basis is also a concern.
In order to protect yourself, whether buying or selling a re-sale condominium, here are five key things to remember:
1. When selling, check your own condominium status certificate in advance, so that no errors are made on any listing or any agreement of purchase and sale. The cost is $100 and is well worth it.
2. If you know that there will be an increased maintenance fee coming shortly, find out what it is and disclose this to the buyer before they sign any offer.
3. If you know there are any special assessments coming, disclose them right away.
4. When buying a re-sale condominium, make sure that your lender is also satisfied with the contents of your status certificate. Even if you are satisfied, if the lender or CMHC has concerns, your loan may not get approved.
5. Buyers still must try and satisfy any condition in good faith. A condition is not an option to cancel your deal.
If you have any stories to share about the condominium market or just need some advice, please contact me at firstname.lastname@example.org.