Status Certificates – The Risks for Managers
The recent court decision in the case Metropolitan Toronto Condominium Corporation No. 673 v St. George Property Management Inc. shows the potential risks posed by an inaccurate status certificate. Very briefly, the facts of the case were as follows.
The property manager was responsible for preparing the status certificates for the condominium corporation. The property manager prepared and issued a status certificate that contained mistakes. In particular, it failed to disclose a potential special assessment (due to required roof replacement), and also failed to disclose details of an expropriation. Because of the mistakes, the condominium corporation incurred significant costs to deal with a dispute between the condominium corporation and the purchaser who received the status certificate. The corporation’s own costs as well as court costs payable by the corporation to the purchaser totaled almost $100,000.
In a separate court process (between the corporation and the purchaser), it was determined that the purchaser could not be forced to contribute to the special assessment for the roof replacement, because of the inaccurate status certificate. So, in that sense, the purchaser’s claim against the condominium corporation succeeded (again, because of the inaccurate status certificate). However, the condominium corporation had also received expropriation funds – from an expropriation of a portion of the condominium property by the City of Toronto. Those expropriation monies were deposited to the reserve fund, and served to essentially off-set the special assessment. So, in that sense, the purchaser hadn’t ultimately suffered any resulting loss. In the end, the purchaser wasn’t awarded any damages, but the court still awarded the purchaser costs of $15,000, I think perhaps because the whole dispute was the result of the inaccurate status certificate.
The condominium corporation then sued the Manager for recovery of the costs incurred by the corporation (the roughly $100,000 noted above) – and was successful. The Court said:
“I find that the Property Manager failed to carry out its performance obligations with respect to the preparation of the status certificate for the Unit 13 Purchaser and that the Condominium Corporation was harmed to the extent of $97,182.68. The indemnification clause (in the Management Contract) applies to the circumstances of this case.”
This is another cautionary tale about status certificates. The moral is as follows: when preparing status certificates, always make sure that they are complete and accurate.
To read more about status certificates, check out our previous blog post.