Estoppel Certificates: Why They Are Important

Note: The rules and law may have changed since this article was first published. It is provided for archival purposes but you should consult with your lawyer for the current state of the law

By definition an estoppel certificate is a signed statement by a party certifying for another’s benefit that certain facts are correct. A party’s delivery of this statement estops that party from later claiming a different state of facts.

An estoppel certificate is an important document issued by the condominium corporation intended to give potential purchasers of a condominium unit information so that they can make an educated decision about their purchase. The certificate provides information about the specific condo unit and the condominium corporation.

The certificate is a true and accurate snapshot of the status of the unit and the corporation at the date of issue. The certificate is significant because the condominium corporation is estopped from denying the items it has represented in the certificate.

With respect to the unit itself the certificate outlines details about the condo fees. It is important for potential purchasers to be aware of the current contributions, the status of the contributions and ensure that they know what they will be required to pay. Specifically with respect to the condominium unit the estoppel certificate outlines:

– the amount of condo fees (common expense and reserve fund) that the unit owner is responsible for
– how condo fees are to be paid (i.e. annual or monthly payments, post dated cheques, monthly instalments sent to the corporation or direct debit from an account)
– the total amount of fees and arrears to date that have not been paid by the current owner
– the amount if any of an extraordinary contributions levied against the unit and the amount that has been paid
– if the current owner is in default or has not fulfilled any of their membership obligations

The certificate also outlines important information about the corporation itself. Before purchasing it is important for potential purchasers to have information about the status of the corporation, potential issues including law suits involving the corporation, the financial status of the corporation, the status of the reserve fund, the insurance policy that is in place etc. Specifically the estoppel certificate outlines:

– that the corporation holds insurance in accordance with the requirements in the Condominium Property Act and that its bylaws and policies are in good standing.
– if the corporation has any outstanding judgements or legal actions against it
– if there have been any material adverse change in the assets or liabilities of the corporation since the last date of audit
– if the condominium corporation has done anything to substantially change or authorized a material change to the common property owned by the corporation or amend the condo plan
– if the condominium corporation has taken steps to change its bylaws
– if there is any action taken to terminate the condominium status
– if there have been any steps to amend the scheme of apportionment of taxes
– if a scheme of apportionment of common expenses other than the one provided by the Act has been implemented
– whether a reserve fund study has been completed, the amount of money in the reserve fund and whether the corporation adopted a funding plan in conformity with the recommendations in the reserve fund study (if not why not)
– if there are any contracts extending beyond one year

The Condominium Property Act states that the estoppel certificate must be in the prescribed form outlined in the Regulations. Therefore, all estoppel certificates will provide the same information in the same form.

Your lawyer and your bank will require information provided in the estoppel certificate and request a copy of same when you are purchasing. To get a clear and accurate picture of the condominium association a potential purchaser should also review the corporation’s financial statements, bylaws, budget, proof of insurance and minutes of the last year’s general meeting minutes with their realtor or their lawyer before removing conditions to purchase.