Traditionally a Real Property Report (RPR) and compliance letter or stamp (or non-conformance, referred to throughout as simply compliance) has traditionally been the preferred method of providing security to a buyer. However, as some municipalities no longer offer compliance documents, the contractual requirements to provide a RPR with compliance documents are increasingly difficult for sellers to meet. It is important to ensure that you are aware of the alternatives, such as title insurance, and that the appropriate steps are taken to ensure that all parties involved are properly protected. RPRs, compliance, and title insurance are all useful. On their own, each has its distinct benefits and both buyers and sellers are best served when all three are in place. However, this is often not practicable or possible.
It is important for buyers and sellers to understand both the benefits and shortcomings of each one. The below list, is a short version of the benefits and disadvantages of each option. If you would like the full report, feel free to email me at adam@adamtwilson.com and I would be happy to send you the full report.
REAL PROPERTY REPORT
BENEFITS- It provides a complete disclosure of all structures on the property, the exact location of property lines and the location of fences
- It discloses the exact location of non-physical items such as easements and utility right-of-way’s.
- It provides certainty to the buyer so they know exactly what they are buying and an opportunity to remedy any deficiencies such as encroachments before or concurrent with the closing of the purchase and sale.
- On its own, it does not provide any disclosure or information as to the compliance issues which are warranted by the seller in 6.1(d) and (e)(ii) of the AREA contract.
- The cost of an RPR is typically many times higher than the cost of title insurance, especially in outlying areas.
- It does not provide any information on the interior portion of any of the structures of the property.
COMPLIANCE OR NON-CONFORMANCE
BENEFITS- It provides certainty for both the buyer and seller at the time of closing regarding compliance with development issues.
- It provides the opportunity for the buyer to have the seller remedy any deficiencies in this regard prior to or in conjunction with the closing.
- If a buyer decides to accept a certain deficiency, it provides both the buyer and the seller with the certainty of knowing exactly the deficiencies they are accepting.
- It only provides information on compliance with municipal land use and related bylaws for the exterior dimensions of structures on the land.
- It does not provide any information that allows a municipality to confirm or deny compliance with any interior developments.
- A request to the municipality for a certificate may lead to a requirement for substantial alterations, relocation or destruction of certain structures.
TITLE INSURANCE
BENEFITS- Title insurance without a RPR and compliance is acceptable all the major mortgage lenders
- Title insurance will often provide coverage for the lender for known defects.
- Unlike other insurance products, there is only one premium paid at the time of closing which provides coverage to the owner throughout their ownership of the property.
- It is an insurance product. This means when an issue arises, it may not be covered by the policy and if there is coverage the insurer can decide the method used to solve the issue which may not be the preferred choice of the insured party.
- There is a lack of disclosure and certainty, especially for the buyer, at the time of closing. If an issue is discovered later, it is more difficult to pursue the seller for a fix after closing.
- In most instances, title insurance only defers the need to deal with a particular issue. It does not solve it. The issues will still be there when the property is resold.
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