Real Property Reports: Tricks and Traps

People are often puzzled why mortgage brokers and banks require them to retain a lawyer to handle their real estate matter. Legal services can seem to be just another in a long line of expenses relating to purchasing or selling a home. However, real estate lawyers and conveyancers are highly specialized and efficient at identifying and resolving issues which have the potential to impede or even implode real estate deals. Additionally, mortgage companies require lawyers to access their professional liability insurance if the mortgage security is not properly registered.

The issue which most often holds up real estate matters is the Real Property Report. Real Property Reports are a standard requirement of real estate contracts involving mortgages. Sometimes, realtors forget to ensure that the seller has a current Real Property Report; mortgage lenders, however, will not forget, and if the closing date approaches with the seller still not having a report, the deal is in danger of falling through. Our conveyancers, Shelly and Dorothy, often assist clients with getting Real Property Reports on very short notice to make sure that deals close on time.

Occasionally, Real Property Reports disclose compliance issues with the property in question. This can also endanger real estate transactions as compliance typically must be achieved prior to closing. If, for instance, a homeowner obtained a permit to build a deck but then constructed the deck to specifications that differ from those in the permit, that deck may be noncompliant with zoning laws. With closing dates often set very soon after real estate contracts are signed, it can be a challenge to resolve compliance issues by the possession date. James Weary has over three decades’ experience in real estate law which enables him to help clients resolve their compliance issues in a timely manner.

Sometimes realtors and/or mortgage lenders will suggest purchasing title insurance in lieu of requiring a Real Property Report. Title insurance, amongst other things, insures the buyer against financial loss for any defects which may turn up in terms of real property compliance. The main benefits of title insurance are that it is usually cheaper than a Real Property Report and it does not require the urgent and often expensive resolution of compliance issues prior to closing. There are, however, potential drawbacks to title insurance. If a buyer purchases a home and later discovers noncompliance with zoning laws, they will have to submit a claim to their title insurer and persuade them that it is a valid claim. Insurance companies have their own policies governing what types of claims are payable, and there are worries that, as title insurance becomes increasingly prevalent as a shortcut to facilitating real estate deals, insurers will increasingly find reasons to deny individual claims, as has been occurring in the US. Another potential drawback is that where there are unknown compliance issues, purchasing title insurance does not remove the need to deal with them but rather simply “kicks the can down the road” so to speak. Whether you are buying or selling, anyone involved in real estate transactions could benefit by retaining legal services earlier on in the process in order to obtain advice about the relative merits and drawbacks of title insurance in lieu of a Real Property Report.

Moving can be a very stressful experience, but it is particularly stressful when last-minute issues arise that require navigating the tricky world of land title registration. Contact our office today to discuss your real estate matter.