This is the third in a series of three articles written by guest author Stan Galbraith of Galbraith Law. The series includes Real Property Reports, Title Insurance, and Real Property Reports vs Title Insurance.
The first article in this series contained a discussion of the full ambit of Real Property Reports (RPR). In summary, they provide certainty as to all exterior matters such as the location of buildings and all improvements and their relation to matters such as utility right-of-ways and setbacks. An RPR does not cover interior or hidden issues or off-Title issues such as fraud.
In the second article in this series, we discussed title insurance. It provides coverage for a wide range of issues including matters that would have been disclosed in a RPR, gap coverage, interior or hidden issues, or off-Title issues. As an insurance product, it only becomes active if an issue becomes an actual problem and then the only obligation is to pay damages not fix the issue.
So, which is better?
Both RPRs and title insurance have a role to play in residential real estate in Alberta. Real Property Reports provide certainty. They allow a buyer to see exactly what they are getting. This information can be used to ensure the seller complies with all the warranties in the Real Estate Purchase Contract (REPC).
As the saying goes, sometimes it is best to let sleeping dogs lie. That is certainly the case with some real estate. An RPR that is submitted to the local municipality may trigger a process that can become very expensive. For example, where a fence encroaches onto the land between the back of the sidewalk and the property line, the cost of an Encroachment Agreement can be very expensive. Also, some accessory improvements such as a deck or carport may have been in place for many years and may not meet current building code requirements. If the buyer insists on an RPR, they may be left with an expensive repair bill as the seller does not warrant building code issues. In these cases, avoiding an RPR and utilizing title insurance is the best means to ensure a trouble-free closing.
In one recent purchase, there was a carport existing without permits. The carport ran right up to the property line. It would likely fail to meet building code requirements and would certainly not meet setback requirements. In this case, the buyer had plans to remove the carport within a short while after purchasing the property. This is an ideal case where title insurance allowed the deal to close while keeping the mortgage lender secure. In a separate matter, another purchaser is facing the loss of a covered patio. In this case, the seller submitted the RPR to the city who said there were no permits in place. They sent an inspector who ruled the roof did not meet building code requirements even though it had been there for 15 years. Here is another case where title insurance would have been the preferred alternative.
In conclusion, in my view, a Real Property Report is a preferred tool in most real estate transactions. It provides certainty – as a buyer you know exactly what you are getting – and you can insist the seller remedy any issues. However, caution should be exercised where the RPR might open more issues than it resolves. In those cases, a seller is best to offer to close with title insurance only and no RPR. A purchaser may find this alternative entirely suitable where they would otherwise face the loss of an amenity. Title insurance provides comprehensive coverage for a wide range of issues during the entire tenure of ownership and should be considered in every real estate purchase.
About the author: Stan Galbraith is a lawyer with over 25 years of experience. He was admitted to the Alberta Bar in 1983 and has operated his own law office since 1988. Stan has a wealth of experience ranging from litigation and appeal work, to teaching and writing. He has now left the world of litigation behind and works with commercial and residential Realtors and their clients on closing their transactions. He also practices extensively in the areas of small business and wills and estate planning and administration. You can find his website at www.galbraith.ab.ca.
