Rich Cousin Mildred and the Status Certificate

Uncle-Pennybags-surprised

Rich Cousin Mildred (Milly) Pennybags was the daughter of Rich Uncle Pennybags, aka Mr. Monopoly, the Real Estate Mogul who built an empire across the country.  Upon the morning of her 21st birthday, she gained access to her trust fund. Of course, she wanted to be just like her father, and she decided to invest in Real Estate as well.

As she was only 21 years old, she was naturally spontaneous and impulsive. She went on to Realtor.ca and booked an appointment with the Seller’s Realtor on the first million-dollar penthouse she saw, on the most posh street in town. That same evening, she gazed out from the Juliet balcony off the master bedroom. She saw herself following in the footsteps of her father. She must have it. And she must have it now. “I’ll take it!!!” she exclaimed.

She waived her $1,000,000 trust fund cheque at the Seller’s Realtor and demanded the Realtor draft up an offer immediately! No conditions!  Of course the Seller’s Agent was happy to oblige, his client the Seller had just received an unconditional offer for the full asking price.

That same night, the cash offer was accepted and Milly had a firm deal.

As closing day arrived, Milly received a set of keys. She grabbed her set of Louis Vuitton suitcases and a custom made Louis Vuitton hamster cage. She used her new fob to let herself into the lobby. As she walked across the marble floors, the concierge quickly stopped her. “Excuse me Mademoiselle, but you cannot bring that rat into the building”. “This is my darling pet hamster Penny, and of course I can, I am the new owner of penthouse 10!” “I’m afraid you are mistaken, it is against the condo bylaws to have any pets of any kind inside the building, have you not read the status certificate???”

Milly had no idea what a status certificate was.

“Oh, and this is an envelope for you from the Board of Directors”, finished the concierge. Milly opened envelope and read the letter.

  

April 25th, 2014

 

Ms. Mildred Pennybags

118 Plaza Ave, Penthouse 10

M5R 1H5

   

RE: OUTSTANDING MAINTENANCE FEES AND SPECIAL ASSESSMENT FEES

Dear Ms. Pennybags,

 

Welcome to The Plaza.

This is a notice that your outstanding balance of $37,800 is due immediately. Enclosed is a statement of account for your reference.

Please arrange payment of this account within the next 5 business days.

Your prompt attention to this matter would be greatly appreciated. If you have any queries regarding this account, please contact our office as soon as possible.

If payment has recently been made, please accept our thanks and ignore this notice.

 

Regards,

Donald Trump
Trump Residential Services Incorporated

 

It turns out that the Sellers had reneged on paying their maintenance fees for the last 9 months, at $1.60/square foot (yikes! That’s high) and a 750 square foot condo, the maintenance fees in the amount of $10,800 are in arrears. As the new owner, the responsibility of paying the outstanding fees is passed onto Milly. Further, the building is in debt. As the condo turned 20, the elevator began to malfunction, the balconies needed renovations and the underground garage was scheduled for an overhaul in the coming months. The reserve fund is insufficient to cover the cost of the repairs. The Board of Directors has a history of running a budget deficit and overleveraging. Now they have charged a special assessment fee to all the owners to replenish the condo reserve fund so they can begin the repairs, before they become a liability. The special assessment fee is $27,000.

There was Milly, keys in one hand, a shock-inducing letter in the other, while the squeeking hamster in his Louis Vuitton cage was being carried out by the concierge.

Poor Rich Cousin Mildred, if only someone could have warned her of her erroneous investing.

Real Estate should never be an impulsive decision. One must be diligent before making any Real Estate purchase, never mind such a luxurious one.

 

The moral of the story is this: do your due diligence.

 

One: Hire your own Realtor who will represent your best interests, not the Seller’s. When you have your own Buyer Realtor, you can count on a full review and comparison of similar condos sold. This way you have the information you need to properly negotiate the best deal.

Two: Include every necessary condition to ensure you protect yourself from surprises on closing day. The two standard conditions in a condo sale and financing and status certificate review.

The status certificate is easy to brush off, especially if it’s a brand new condo. While on the outside, the physical condo may be perfect, but problems may be lurking beneath the surface.

A status certificate describes who is on the condo board, the property management company, the amount of money in the reserve fund (which goes towards paying condo expenses), the history of the condo maintenance fees, the annual budget, special assessments, lawsuits, condo deficiencies or repairs, and condo rules and regulations. The status certificate must be reviewed by a Real Estate Lawyer, who will warn you of financial difficulties the condo and Sellers are having, and any strict and limiting rules, such as the no pets condo bylaw.

Only after the status certificate is approved by a Lawyer, and the Mortgage Broker delivers a financing commitment letter from a Mortgage Lender, is it safe to firm up your deal.

Rich Cousin Mildred thought she was making a wise decision by investing in Real Estate like her father. Unfortunately for her, there are consequences to making an uneducated decision. Not only will she have to cough up a very large, additional sum of money, she will have to give up her pet hamster if she wants to live at The Plaza.

Although this is a story and Rich Cousin Mildred is a fictional character, sometime Buyers end up in tough positions when they don’t have all the information. When it comes to Real Estate, take your time. Do your research, and not only will you be happy, you will be confident you made a knowledgeable decision.

 

 THE PRECEDING COMMENTARY IS THE OPINION OF HANNA MACDONALD AND DOES NOT REPRESENT THE INTERESTS OR OPINIONS OF RIGHT AT HOME REALTY INC., BROKERAGE OR THE TORONTO REAL ESTATE BOARD. THEREFORE, RIGHT AT HOME REALTY AND THE TORONTO REAL ESTATE BOARD WILL NOT BE HELD RESPONSIBLE AND/OR LIABLE FOR ANY OF THE OPINIONS HEREIN.

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