What is a Real Property Report with Compliance and What is Title Insurance?

There is an unusual trend of Sellers offering Title Insurance instead of a Real Property Report with municipal compliance. Real Property Reports with municipal compliance are a pre-written term in the Standard form purchase contract in Alberta. A Seller is to provide one to the buyers and their lawyer before closing.

A Real Property Report is report, drafted by land surveyors that show where the permanent structures on the property are regards the property line. (Permanent structures being fixtures to the land like the home, fence, garage, concrete, pergolas, decks). This report is then sent to the local municipality for “compliance”. The municipality confirms that the structures on the property are permitted and comply with municipal bylaw, the Real Property Report is the stamped and a letter of approval is given. For the most part, this takes about 10 days and $800.

There has been a trend for Sellers and their agents to offer Title Insurance in “Lieu” of a Real Property Report with compliance. Title Insurance is meant to protect a buyer by removing any unknown title defects discovered after closing. So if, let’s say the garage is discovered to be non-compliant after closing, and those affected by the noncompliant structure (the neighbour, the municipality or whomever) request the new owner do something, the buyer (new owner) can request insurance company remove their garage. At best, the insurance will remove the garage, not replace. This insurance is a one-time fee at closing and ranges from $200-$400.

So why as a home buyer would I ever accept Title Insurance in Lieu of a Real Property Report given the readiness and relative inexpensiveness an RPR with compliance can be obtained? It would save the Seller $300 bucks or so, but why would anyone buy a home without at least not knowing where the property lines are?

My understanding is the insurance product, title insurance, (it is a product, pitched by insurance companies to Real Estate Brokerages everywhere) makes good sense in older markets where homes, lots and properties are hundred of years old, in population centers that are enormous I make sense to me that title mistakes are a real and common occurrence. Our land title system is relatively new, low volume, and covers a lot of uninteresting property. I would not refuse title insurance with a RPR with compliance, but I would never accept it without.

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