Calgary Real Estate — The Real Importance of Real Property Reports
Several years ago, I became aware of an individual who had bought a home he had fallen in love with a home that came with a beautiful, backyard deck. As per the contract, the vendor (seller) was responsible to supply a Real Property Report (RPR) to the purchaser (buyer). The RPR was not ready at the time of closing and the individual had agreed that the seller could provide the RPR as soon as he received it from the Surveyor.
However what seemed like a minor timing technicality turned out to be a really big problem.
What is a Real Property Report (“RPR”)?
An RPR is a detailed drawing, which is prepared by a surveyor, which shows the size and location of all permanent structures on the property, as well as the property’s boundaries. It looks like an overhead blueprint, and should reflect the property’s current state, including the location of structures such as garages, decks, sheds, fences, swimming pools, etc.
RPRs must be done by a licensed surveyor, and typically cost between $450-$650. They can take up to 2 or 3 weeks to obtain.
A Real Property Report is a critical part of residential real estate transactions. Nearly all residential real estate purchase contracts in Calgary and the rest of Alberta require the seller to provide the purchaser with a current RPR.
One More Expense:
A Real Property Report also needs a compliance stamp or letter from the city, town or municipal district where the property is located that shows the municipality has examined the document and found the property to be compliant with relevant bylaws. Without the compliance stamp, a cost of approximately $160, the RPR is not valid. (It should be noted that fees may vary.)
Why do I need a Real Property Report (and a compliance stamp)?
It is useful to the buyer to see if there are any problems with the property before the deal is closed. A RPR will show whether the buildings or other structures encroach on to neighbor’s property or whether the neighbor’s structures encroach on the property you are buying. The RPR will also show whether the house, garage, deck or other structures are too close to the property lines. RPRs are usually required by mortgage lenders. You and your mortgage company will want to ensure that the land and all the buildings on it are properly situated and compliant with municipal bylaws.
Finally, an RPR also protects the purchaser because if there are any significant problems that need to be addressed, the transaction may be cancelled or the associated expenses negotiated, before the sale is final.
The Problem with the Deck…
And that brings me back to the beginning. After the sale, when the RPR was examined by the municipality, it turned out that the deck was too close to the rear property line. In order to be compliant with the bylaw, a significant part of the wooden structure had to be removed. This did not make the purchaser very happy. He considered the larger deck to be the best feature of the house, and had he known the square footage would have to be reduced, he would not have purchased the home at all. Lastly, he was also concerned the value of the property might be diminished now that the deck was reduced.
Avoid Costly Mistakes:
The real tragedy of this example is that all of this stress and disappointment could have been avoided. If the buyer had required the RPR at the outset, the seller would have discovered his error, and the parties could have negotiated a revised sale price, or reached another solution.
As a lawyer, I cannot over emphasis the importance of obtaining a Real Property Report before residential real estate transactions are complete.
If you are contemplating selling your home, be aware of your need to provide an RPR to the potential buyer. If your RPR is not current, because changes have been made to your property, fences have been rebuilt, decks have been enlarged or removed or garages have been added, be sure to order a RPR as soon as possible, hopefully before you even list the property, so that delays at closing can be avoided.
And if you are looking at purchasing property, take the time to make sure the RPR is available before signing on the dotted line.
Mullen and Company can help you navigate the many legal challenges associated with buying and selling homes. With many years of experience, our legal team can help you negotiate the legalities of the real estate market.
If you’re ready to buy or sell, let your agent know you want to work with Mullen & Company or give us a call directly at 403-271-9710. We are a full service Calgary Real Estate Lawyer.