The Liability Faced By Property Managers Preparing Status Certificates

Metropolitan Toronto Condominium Corporation No. 673 and St. George Management Inc., 2016 ONSC 1148

This case explored the liability that a property manager may face for preparing status certificates.

In 2010 & 2011 the Condominium was challenged by a series of events.  The City of Toronto was proceeding with the expropriation of a portion of its lands, which was quickly followed by an engineering report finding the Condominium’s roof in need of immediate replacement. In addition, it was recognized by the Condominium that its reserve fund was not funded to pay for this repair. Although the engineering report was in hand, the Property Manager did not update the Condominium’s status certificate to reflect the defective roof or underfunded reserve fund.  A status certificate was issued one (1) month after the engineering report was received.  During this time a purchaser bought a unit, later finding a pending special assessment. In an earlier case, the Condominium was sued by the purchaser, ostensibly for a defective status certificate. After appeal, the Court held that the Condominium was prevented from claiming the special assessment from the purchaser, and was required to pay $15,000 of the Unit Owner’s legal fees.

With this earlier ruling, the Condominium commenced a claim against the Property Manager for the negligently prepared status certificate. The Condominium not only claimed the $15,000 it was forced to pay the purchaser, but also sought its legal costs in the earlier lawsuit, for a combined claim of $97,182.68.

The Condominium cited the property management agreement, which left the Property Manager both responsible and liable for the production of status certificates. The Condominium brought a motion for summary judgment, claiming the need for a trial was unnecessary claiming the case was essentially unchallengeable.

The Court ruled in favour of the Condominium and granted summary judgment. The Court found that the Property Manager failed to carry out its performance obligations with respect to the preparation of the status certificate.  The Condominium was permitted to rely on the indemnification clause in the property management agreement.  The Property Manager was held liable, without defence.

Bottom Line: This case is an unvarnished reminder that property managers carry risk and liability in the production of status certificates. Property managers should consider strict and measured internal controls to ensure that liabilities they are aware of are clearly transferred to the status certificate. Condominiums may face many challenges at once, leaving the status certificate as an after thought.  In addition, property managers should reconsider property management agreements to either remove or limit the scope and depth of liability assumed in the production of status certificates.