Serge Bourgoin: Hey everyone, it's Serge here again from FindMyHouse.ca eXp Realty with another edition of what you need to know about real estate. Today, I'm with Carl Bosecke, a long time friend of mine and real estate lawyer. We're going to talk about title insurance versus maybe a real property report and compliance. So what can you tell us about that?
Charles Bosecke: So, this is probably one of the most problematic areas in real estate purchase transactions. Real property reports, just as a background, is a survey of the property, which shows all of the structures and improvements on the property. And it indicates all of the dimensions of the size of the structure and the location of the buildings and the structure of the property.
Serge Bourgoin: So it's kind of like what we used to call a service of good buck several years ago. A little more detail.
Charles Bosecke: A little bit more detail, it's basically a surveyor certificate with fancier name and some more details.
Serge Bourgoin: Some more details. Perfect.
Charles Bosecke: So, from a legal point of view, the survey has no value. What it does is it just shows what's on the property. The value in a real property report is once we send it to the city, we request the city to provide us with something called a compliance. So the city reviews its development records for that property to ensure that there's building permits and development permits issued for all of the structures that require those permits. They will review the real property report to make sure none of the structures encroach on utility right aways, including city utility right ways. And then they'll tell us whether or not buildings are located properly according to the city bylaws. So setback from property. That document is typically called a compliance report, and that has legal import for both the sellers and the buyers in the real estate transaction.
Serge Bourgoin: So sometimes when we see that report, it says everything's okay, but something's nonconforming. So what would that mean?
Charles Bosecke: So nonconforming means that either the property, sorry, the proper permit has not been issued for that structure, or it's located improperly. So it's not setback from the property lines properly.
Serge Bourgoin: Okay.
Charles Bosecke: However, due to the age of the structure, the city allows it to remain as is, either contravening the location bylaw, or without a permit because of its age. However, when a buyer or a homeowner changes that structure, they then have to bring it up to current city standards in terms of permits and location. This transcript was exported on Nov 06, 2019 - view latest version here.
Serge Bourgoin: So basically nonconforming says, I guess, it doesn't fit the requirements, but we're okay with you keeping it the way it is. But, if you ever do make changes in the future, you have to make it comply.
Charles Bosecke: Correct. Basically, they're grandfathering that structure.
Serge Bourgoin: Okay. So why would a buyer insist on having an RPR versus accepting a title insurance?
Charles Bosecke: So as a buyer, there's a couple of important reasons why you want a real property report. Number one is, as a homeowner, it gives you the location of the structure. So when you do future work, you have all of that information at hand. Number two, as a buyer, it gives you assurance that all of the proper permits have been issued. So you don't need to deal with that property in the future if you're altering the structure or, ultimately when you sell the property and you need to get the permits for your buyer down the road.
Serge Bourgoin: I know that we're running across this more and more often where the banks are now asking for title insurance to be in play. So, why would you want title insurance? What benefits are there for our clients to have title insurance, or what's reasons why they may not want to have title insurance.
Charles Bosecke: So depends which hat I'm wearing. As a seller, I always want to offer title insurance instead of a compliance certificate for two reasons. It's cost effective and it's time efficient. So cost effective means it costs approximately $225 to get title insurance and we can get it typically within two days. Whereas getting a real property report and compliance certificate can take up to a month and will cost a seller upwards of 8, $900. So that's the big reason why sellers want it and it doesn't delay closings.
From a buyer though, it's the opposite. You want to get an RPR because it shows the location and you know the permits are there. Title insurance gives some added benefits to a buyer on top of that, not necessarily for permits but for outside problems such as fraudulent transactions or things that are unknown at the time the deal closes. So an RPR and compliance gives best assurance to a buyer, title insurance supplements that.
From a bank's of view, they're quite comfortable with just title insurance because they're only worried about whether there's a lack of permits if the city comes back and request permits to be issued. And the title insurance company covers the bank for those problems.
Serge Bourgoin: Now, in an earlier discussion, you mentioned that really the benefits of title insurance can be somewhat limited as to when they might pay out.
Charles Bosecke: So typically a title insurance policy, when it comes to permit and zoning issues, only applies if the municipality comes to the homeowner and requests that This transcript was exported on Nov 06, 2019 - view latest version here.
certain things be done. So, if there's no standing permit, if the municipality comes to the owner and requests that the owner gets the proper permits. That happens so infrequently because the municipality doesn't have the time and resources to monitor and go out and inspect properties. They only do it if the homeowner requests work to be done. Title insurance excludes that situation where the homeowner makes a request to the city for additional permits or a compliance certificate if that shows up problems the title insurance coverage excludes those situations.
Serge Bourgoin: So, really, there's limited coverage.
Charles Bosecke: For a homeowner. It's quite [inaudible 00:07:30] .
Serge Bourgoin: So is there anything else that people should be aware about RPR and compliance and title insurance?
Charles Bosecke: Well, I think we've hit on the basics for a seller, the timeliness and cost effectiveness. For a buyer, if I'm representing a buyer, my position is always going to be let's get an RBR and compliance, however that should be tempered with buyers and sellers acting reasonably for minor issues. And sometimes files get delayed for quite a bit of time and at a huge expense for minor permit issues. And so that's where parties need to act a little bit more reasonably at times. So, if we can approach those problems in advance [inaudible 00:08:25] by offering an RBR or compliance and title insurance, that eliminates a lot of the stress for homeowners on closing.
Serge Bourgoin: Of course. So it takes much smoother quote.
Charles Bosecke: Correct.
Serge Bourgoin: Yeah. Okay.
Charles Bosecke: And it saves them legal fees.
Serge Bourgoin: Saves them legal fees, well there you go. Hey, wherever you can save money and don't have to pay more, I think that's a great idea. Sorry. Anyway, I hope that you found this useful and got great information for you. If you're looking a great real estate lawyer, I can definitely recommend Carl been working with Carl for such a long time. I don't want to think about how long, but a long time. He's one of the best in the industry. If you want to contact Carl as you can see, the numbers right here in front of him, four six nine zero, sorry, (780) 469-0494 and his email is also there. If you need to contact him yourself, ask a quick question. So again, thank you. Have a great day. Take care.
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