One of the common issues that crops up in a residential real estate purchase and sale (mostly for sellers) relates to the requirement to provide a Real Property Report and Compliance Certificate. The purpose of this post is to provide some helpful comments about these documents.
If you are selling your property through a Realtor, the contract that you will likely sign will be a standard AREA (Alberta Real Estate Association) contract. In most cases, this standard contract will require a seller to provide a Real Property Report reflecting the current state of improvements on the land and evidence of municipal compliance (or legal non-conformance).
So, the question is: what are Real Property Reports and/or evidence of municipal compliance?
In the simplest sense, the Real Property Report (RPR) is a schematic diagram prepared by an Alberta Land Surveyor that shows the property boundaries, where the improvements on the land are located relative to these boundaries, and that highlights any encroachments of the improvements onto neighbouring lands or improvements on neighbouring lands that encroach onto your land.
Evidence of municipal compliance generally means either a letter, or stamp on the RPR, from the municipality (City, Town, County, Village, Summer Village, or Municipal District) that confirms, on the basis of the RPR submitted, that the property complies with the requirements of the municipal land use bylaw. In general terms, this means that the use of the property is consistent with the zoning, that all required development permits have been obtained, and that the improvements on the land meet all required set back distances from the property line. Alternatively, where the property meets the municipal requirements that existed at the time of development (even though these requirements may have since changed), the property would be “legally non-conforming”, and this also meets the contract obligations.
So, if you are a seller, you may have questions about the RPR/Municipal Compliance requirements in the standard contract. Our 5 most common FAQs regarding “things to know about real property reports” and the answers for each of these FAQs are as outlined below:
- Does the Seller have to provide a Real Property Report and Compliance Certificate? This requirement is governed by the terms of the contact between seller and purchaser. Read the contract.
- I have a Real Property Report and Compliance from when I purchased the property. It is still valid? It does not matter how old the RPR ad compliance certificate are, if they still accurately reflect the current improvements on the land. If they do, your lawyer will simply have you sign an Affidavit or Statutory Declaration confirming this, which will be provided to the Buyers. If, however, there have been changes (such as the addition of a deck, gazebo, or fence), a new RPR will likely be required.
- What if the contract requires that I provide a current Real Property Report and Compliance Certificate and I do not have these documents? Your lawyer or Realtor will likely arrange for these documents to be obtained. If the RPR or Compliance Certificate cannot be obtained prior to the closing date, you can expect that the lawyers for buyer and seller will negotiate a “holdback” of some of the proceeds of sale until such time as the documents have been obtained and it has been confirmed that no issues have been identified, or issues have been resolved.
- What if I do not have a current Real Property Report and Compliance Certificate and I do not want to provide these? If this is the case, you should identify this issue to your Realtor at the time of listing, and before you sign the contract. You can always “contract out” of this requirement by changing the terms of the contract to confirm that you do not have to provide these documents.
- Are there any alternatives to providing a Real Property Report and Compliance Certificate? Yes, a common alternative is for the seller to provide for a credit for title insurance in favour of the Buyer. Title insurance, generally, insures a purchaser for many (but not all) of the title defects that would be identified by a current Real Property Report and Certificate of Compliance. If you wish to pursue this alternative, you should ensure that your listing realtor (if applicable) is aware of this.
If you are a seller or a buyer and you have questions about Real Property Reports and Compliance Certificates, or any other matter respecting a potential contract, please contact us. We are happy to help!