Most buyers could not imagine involvement in a large financial transaction without knowing exactly what they are buying. Real Property Reports (RPRs) are an important part of many real estate transactions in that they clearly illustrate the boundaries of the property and the location of any improvements relative to the property boundaries.
RPR Benefits
RPRs benefit all parties and participants in a real estate/mortgage transaction.
Benefits to property sellers:
- Location of the property boundaries and improvements are known
- Measurements and distances associated with the property and improvements are known
- Issues with the property or adjacent properties are revealed
Benefits to property buyers:
- Location of the property boundaries and improvements are known
- Issues with the property or adjacent properties are known
- Known issues with the RPR tend to fall to the seller to resolve before the transaction closes
- Helps the buyer to determine if the property can accommodate additional improvements in the future
- If the lender requires an RPR, the buyer/borrower typically gets one from the seller
- If the current buyer resells the property to a new owner, that person may want an RPR
Benefits to real estate professionals:
- Provides a visual representation of the property for sale
- Meets the possible requirements of real estate listing/purchase contracts
- Provides information about any property compliance issues early in the selling process
- Answers buyer questions about property boundaries and potential future improvements
Benefits to mortgage lenders:
- Provides an understanding of improvements and municipal bylaw compliance
- Identifies any problems that may have to be resolved prior to registration of the mortgage
Determining if an RPR applies
RPRs are available for most types of real estate.
- Most standard real estate contracts require a current RPR with municipal compliance, to be supplied by a seller to a buyer.
- Most mortgage lenders will not provide mortgage funds to a buyer until they have received a RPR and the municipality has confirmed all structures comply with municipal bylaw requirements.
RPRs, however, are not available for traditional condominiums because owners of traditional condominiums have no exclusive right to land. In the case of a bare land condominium or a home owner association situation where specific land is owned exclusively, an RPR would be available.
Real estate industry professionals should indicate in the listing contract with the selling client the requirement for the seller to obtain an RPR for the property being listed.
Residential Real Estate Purchase Contract
The standard residential purchase contract in Alberta requires the seller or the seller’s lawyer to deliver normal closing documents, including an RPR, to the buyer or the buyer’s lawyer. The buyer or buyer’s lawyer must have an opportunity to review the RPR prior to submitting the transfer documents to the Land Titles Office. The buyer or buyer’s lawyer must also have a reasonable period of time to review the documents before completion day to confirm registration of documents at the Land Titles Office and to obtain the advance of proceeds for any new financing and other consideration. The RPR provided must reflect the current state of improvement of the property, with evidence of municipal compliance or non-compliance.
If a seller’s building(s) or other improvement encroaches on neighbouring lands, and an encroachment agreement is not already registered on title, efforts should be undertaken to obtain such an agreement and register it on title. If an encroachment relates to municipal lands or a municipal right-of-way, the municipality should have supplied an endorsed encroachment approval directly on the RPR.
Seller Brokerage Agreement
RECA’s seller brokerage agreements (listing agreements) contain clauses related to land use. Through such agreements, sellers warrant to the best of their knowledge that:
- the land and buildings comply with existing municipal land use bylaws;
- the buildings and other improvements are not placed partly or wholly on any easement or utility right-of-way and are entirely on the land and do not encroach on neighbouring lands except where an encroachment agreement is in place; and,
- the location of buildings and improvements complies with all municipal bylaws, regulations and relaxations prior to completion of the sale or they are “non-conforming buildings.”
All of this information can be warranted through the seller’s provision of an RPR.
Current vs. Existing
RPRs are current on the date indicated and they reflect the status of the property on the date they were prepared. Improvements to properties, however, occur over time and as soon as a property improvement is made, the RPR is no longer current. Only a current RPR can accurately illustrate up-to-date improvements on the land and their relationship to the property boundaries.
If a seller has an existing RPR for their property, some lenders may accept this with an accompanying Statutory Declaration or Affidavit from the seller to the effect that improvements are as indicated on the RPR and no additions or changes have been made to the property since the date of the RPR. However, if any property changes have been made, the only way to be certain that a property is compliant with municipal regulations is to obtain an updated RPR with evidence of municipal compliance.
Certificates of Compliance
An RPR contains extensive information about the property it applies to, including:
- Legal description and municipal address
- Dimensions and directions of all property boundaries
- Date of the title search and the survey
- Certificate of Title number
- Registered owner(s)
- Location and dimensions of building relative to property boundaries
- Location and description of all relevant improvements situate on the property together with dimensions and distances from the property boundaries
- Location of rights-of-ways or easements registered on the title
- Designation of adjacent properties, roads, lanes, etc.
- Location and dimensions of any visible encroachments onto, or off of, the property
- A duly signed certification and opinion by a certified land surveyor
- Copyright of the RPR to the land survey company
- Permit stamp (where applicable)
- Parcel designations of adjoining lands
- Illustrations of any easements affecting the property
- Any areas of concern from the land surveyor’s perspective
As appropriate, an RPR will be stamped by the municipality where the property is located to confirm that the property improvements comply with municipal regulations. As proof of this compliance, the municipality stamps the RPR with a Certificate of Compliance. A compliance stamp confirms that the building location abide by the setback requirements of the Municipal Land Use Bylaw. Such a Certificate of Compliance, however, does not mean the use of the building complies with the bylaw, nor does it relate to any other legislative requirements or provisions of any easement, covenant or other document affecting the land or buildings.
The absence of a current RPR with evidence of municipal compliance may have a negative effect on a real estate or mortgage transaction. It could delay registration of the title and/or delay the provision of funds from the mortgage lender. Real estate industry professionals are advised to ensure their seller clients obtain an RPR as early in the selling process as possible. It is an important document in ensuring the transaction proceeds smoothly. If problems are identified in the RPR, they may hopefully be resolved before closing.
Title insurance is another option which provides a measure of protection in the purchasing process for mortgage lenders and property buyers, but it cannot take the place of an RPR. For more information about title insurance, please see RECA Information Bulletin: Title Insurance.
A Non-Compliant RPR
Sometimes the production of an RPR or the submission of one to the municipality for a Certificate of Compliance may unearth a problem regarding the location of the buildings. The most common issues include a garage not being set back far enough from the back of a lot or being built over an easement or utility right-of-way. In these cases, it usually falls to the seller to resolve the problem as most real estate purchase contracts contain a provision for the seller to represent and warrant that the location of the buildings comply with all municipal government regulations.
When it is discovered that a building does not comply with municipal land use provisions for setbacks from the property lines, a seller may have to apply for a development permit and a relaxation.
Some possible results from a non-compliant RPR:
- The municipality may grant a relaxation to allow for the improvement. However, should this not occur, the non-compliant structure (e.g. garage, deck) may have to be moved or taken down completely. If this is discovered during the sale of the property, the buyer or lender may require a holdback of a portion of the purchase price or mortgage proceeds until the seller has obtained the relaxation permit or the structure has been removed/moved.
- If a structure on the seller’s property encroaches on an adjoining property, the seller must rely on the neighbour to enter into an encroachment agreement. This agreement allows the encroachment to remain. The seller in whose favour the easement has been granted agrees to absolve the neighbour from any costs arising from the encroachment. The encroachment agreement is then registered as an easement against the title of both properties. If the neighbor refuses to enter into an encroachment agreement, the structure may have to be moved or torn down at the owner’s expense.
- An easement may need to be obtained. The easement grants a third party the right to enter onto another person’s property for a specified purpose. A utility right-of-way is a particular type of easement granted to a public utility, usually at the time of subdivision, which allows the utility to enter onto the property for the purpose of repairing or replacing the utility services. In both cases, the easement is registered against title to the property and shows on the RPR. This also applies to encroachments upon easements and utility rights-of-way. For example, where a structure encroaches onto a utility right-of-way, the municipality may agree to enter into an encroachment agreement with the seller, who is then to apply for a relaxation permit. However, the encroachment agreement may contain a provision requiring the seller to remove the construction (structure) after notice from the municipality.
Where relaxation permits, encroachment agreements, easements or rights-of-way are either unavailable or cannot be completed in time for closing of the real estate transaction, or if any other impediment to closing is discovered, title insurance may be available to the seller, buyer or mortgage company, thereby enabling the transaction to close on time and assuming liability and cost of correction as set out in the policy of insurance. However, title insurance is not a substitute for an RPR.
CBA-Alberta Branch Recommended RPR Rules of Practice for Lawyers
The Canadian Bar Association - Alberta Branch - Real Property Section members agreed to abide by Recommended Rules of Practice for Alberta lawyers with respect to the provision and handling of RPRs in real estate transactions.
These Rules of Practice include that:
- A buyer’s lawyer cannot be compelled to proceed to registration without having the opportunity to review the RPR.
- An original or a photocopy of a Certificate of Compliance from the municipality, along with a clear and legible RPR satisfies the requirements of the standard real estate purchase contract in Alberta.
- The age of the RPR and date of the Certificate of Compliance is not relevant as long as the RPR reflects the current improvements to the property.
- When an RPR was prepared prior to the date of final acceptance of the purchase contract, the seller’s lawyer will have the seller sign a Statutory Declaration as the seller is in the best position to advise whether any improvements have been constructed since the date of the RPR.
- The exclusion of sidewalks, driveways, landings on RPRs cannot be used as a reason to refuse the document as long as the RPR was completed in accordance with the Alberta Land Surveyor's Manual of Standard Practice at the time the RPR was surveyed.
- The provision of an RPR that was completed during the construction stage will not in and of itself be deemed not to comply with the requirements of the purchase contract as long as the RPR shows all current improvements.
- The removal of an improvement will not necessitate an RPR update.
- All fences in urban areas must be shown on an RPR if they appear to define a boundary, regardless of who constructed the fence or if the fence is actually on the property line.
- A Certificate of Compliance on an RPR does not guarantee there are no other building location issues that may need to be addressed.
- If an unpermitted encroachment exists from the seller's property into neighboring lands or municipal lands, the seller's lawyer will use their best efforts to resolve the matter.
- If an RPR discloses that a third party adjacent property owner has an encroachment onto the seller's land, it does not constitute a breach of seller's warranties and the seller is not required to obtain an encroachment agreement.
- Both the seller's lawyer and the buyer's lawyer should address the availability and adequacy of the RPR immediately on receiving instructions to act on a file.
- It is unethical for the seller's lawyer to provide a survey, plot plan or RPR, which they know to be inadequate without bringing the deficiencies to the attention of the buyer's lawyer.
|
