We are often asked by both Buyers and Sellers “What is a Real Property Report and why are they important?” To help answer those questions, we have approached Dan Hawkwood, an Associate Lawyer at Beaumont Church LLP in Calgary, to explain Real Property Reports. Dan comes from a long line of farmers and ranchers in the Calgary area and brings the experience of his rural upbringing to his practice. Dan is customer service driven and client focused adding to a great real estate experience.
One of the key components of a home purchase or sale is the provision of an accurate Real Property Report. The Agreement of Purchase and Sale contracts used by most realtors in Alberta provides that the seller must include a Real Property Report to the purchaser prior to possession of the home. If you are planning to sell your home in the near future, understanding what a Real Property Report is, why it is useful, and how it can impact your transaction can save you a lot of unnecessary last-minute stress and headache.
What is a Real Property Report?
A Real Property Report (“RPR”) is a survey of the property, completed by a professional survey company. It shows the location and dimensions of any permanent structures, and it is generally the responsibility of the seller to provide the RPR to the Purchaser. An RPR only applies to transactions involving a home or bare-land condominium and is not applicable for standard condominium transactions.
Most municipalities have particular by-law requirements for permanent structures. Before being provided to the Purchaser, the RPR is reviewed by the applicable municipality, and provided with a “Stamp of Compliance” indicating that the property and its structures comply with the municipal by-laws. Acquiring an RPR from the Seller is the purchaser’s best protection to ensure that all the structures on the property have the correct building permits and will not be subject to a municipal fine or, in the most extreme cases, be torn down by the municipality. Therefore, the requirement that the Seller provide an up-to-date RPR with the municipal “Stamp of Compliance” is a standard clause in most real estate contracts. Particularly in a tougher market, you would be hard pressed to find a purchaser who would not stick to this requirement, and therefore it is vital for the seller to ensure their RPR documentation is in order.
What if I already have a Real Property Report?
When you purchased your home, there is a good chance you received a Real Property Report with the final package of documents provided to you by your lawyer. An older RPR can be acceptable so long as the RPR is accurate, (for example, shows all the permanent structures currently located on the property) and complies with the current standards of practice for surveyors. Stick by a twenty-year rule – if an RPR is older than 20 years, good chances are it will need to be updated to conform with current standards, even if no changes have been made to the property since it was issued. Apart from your home and garage, other structures that must show on a Real Property Report include:
- Permanent fences;
- Sheds that are non-movable and affixed to the ground;
- Staircases; and
- Air Conditioning Units.
Depending on how they are installed, other items such as hot tubs, ponds and walkways may also need to show on the RPR.
It is not uncommon for there to be issues identified on the RPR, which would require correction by the Seller prior to the municipality issuing the “Stamp of Compliance”. Most often, the seller is unaware of any of these issues, including structures encroaching on neighboring property, or a lack of building permits for a deck or shed. Most of these defects can be cured either through simple construction work, or by entering into agreements with neighbors or the municipality to allow structures to remain where they are. However, the municipality will not provide a “Stamp of Compliance” until all issues identified by the surveyor have been remedied.
When should a Seller acquire a new Real Property Report?
If you have built permanent structures on the land that do not appear on your old RPR, you will need to order an updated survey. Best practice as a seller is to acquire the RPR as soon as you list your home for sale. Standard practice is that the RPR be provided to the Purchaser on the possession date. It can take up to a month for the survey to be completed, and the “Stamp of Compliance acquired by the municipality, so timing is of the essence, especially if you are looking for a quick possession. Most survey companies are able to respond to a request for an RPR within days, but during the busier real estate seasons of spring and summer, this can be delayed as well.
Ordering your RPR right away means that you can identify and get ahead of any issues with your property. It may be necessary to move fences, sheds, or apply for building permits and encroachment agreements with the municipality to cure any defects.
What happens if I do not have my Real Property Report by possession?
Getting an RPR at the last minute is not recommended, as it can lead to issues with your purchaser, delays in possession, and potentially put your entire transaction at risk:
- If an issue with the property does show up on an RPR right before possession, you may not have time to fix it yourself. At this point the Purchaser is in a stronger bargaining position, and they may require that the purchase price be lowered significantly, and their own trades be hired, to correct any problems.
- It is becoming more common for Purchasers under advice from their lawyer to refuse to complete the transaction until such time as the seller can provide the RPR and delay the possession date. Obviously, this can cause problems if you were counting on receiving the money from your sale right away.
- Technically you may be in breach of your contract, which could give the Purchaser the right to withdraw from the deal altogether and receive return of their deposit.
Is There An Alternative To Acquiring a Real Property Report?
While not common, you can complete the sale of a home using Title Insurance rather that providing a Real Property Report to the Purchaser. Title Insurance covers the Purchaser for most defects with a property of which the Purchaser is not aware, and which would be covered by a Real Property Report. Depending on the home and the insurance company you choose, however, Title Insurance may be more expensive than acquiring a new or updated Real Property Report. If a seller does wish to proceed with Title Insurance, the consent of the Purchaser is also required.
It is always a good idea to review your RPR status with your Realtor® when you decide to list your home, as they should be able to provide you guidance as to whether you need a new or updated survey. If you have any questions or require further clarity, contact your lawyer.
Dan Hawkwood is an Associate Lawyer at Beaumont Church LLP in Calgary.