Real Property Reports vs. Title Insurance: Advising Your Client

You’re working with a buyer who has just found their proverbial dream home. The buyer and seller have gone back and forth with offers and counter offers, and now the details become even more important.  Is your buyer going to require a Real Property Report (RPR) from the seller prior to closing? Could title insurance be used as a substitute for the RPR, particularly if there could be delays in obtaining an RPR?

An RPR is a legal document prepared by an Alberta Land Surveyor that clearly illustrates the boundaries of a property and the location of improvements (structures), such as buildings, decks, garages, sheds and fences, relative to property boundaries. An RPR with a stamp of municipal compliance provides some protection for all parties in a real estate transaction. Title insurance policies protect the insured against losses arising from some title related and non-title related matters. It works like a standard insurance policy, which protects against future discoveries about the subject property.

While those who err on the side of caution may advocate for obtaining both an RPR and title insurance, some real estate professionals favour one over the other.

While the standard residential purchase contract in Alberta requires the seller or the seller’s lawyer to deliver normal closing documents, including an RPR, the buyer and seller can agree to remove that requirement if both parties consent. In some cases this may be because of a short closing date or to avoid uncovering costly deficiencies that aren’t deal breakers for the buyer (i.e. a garage that may encroach on a neighbouring property but that the buyer plans to tear down anyway).  Some real estate professionals prefer title insurance as a means to protect the policy holder should a deficiency be uncovered at a later point. Problem solved right? Not so fast.

RPRs can uncover problems associated with a property before a buyer completes a purchase. Purchasing title insurance as a substitute only pushes any issues associated with the property to the back burner. It’s like hiding all the messy contents of your room in your closet; it may seem neat and tidy, but you’re just avoiding the inevitable cleanup to come. These issues can become extremely problematic when the buyer wishes to sell the property and the issues still remain. Maybe the original buyer has protection vis a vis a title insurance policy – but an RPR with municipal compliance at the time of the original purchase could have avoided the hassle of going through an insurance claim process.

What is your practice when it comes to discussing RPRs and title insurance with buyer and seller clients?