Real Property Report vs. Title Insurance in Alberta Residential Real Estate:

By Mae L. Chow, KC, Partner, Duncan Craig LLP

Title insurance and a Real Property Report (RPR) are different tools used in a real estate transaction. They both protect buyers, but approach this protection in different ways. An RPR is prepared in Alberta by an accredited Alberta Land Surveyor who renders a drawing of the improvements to a parcel of land along with measurements of the parcel, in accordance with rules for an RPR. It is then sent to the municipality for their review of zoning compliance (compliance with the rules for development of that particular parcel of land) as well as a check that all required development permits have been obtained for the improvements. Title insurance, in contrast, is usually obtained where no current RPR exists, and is an insurance policy, not unlike your car insurance, that provides coverage in the event that in the future it is determined that there is a problem with the lack of a permit, or the improvements are not in compliance with the municipal bylaws, along with a demand to remediate the defect.

Most lenders will accept title insurance for a purchase as the lender portion of the policy will assist the lender if it becomes the owner of the property through foreclosure and a defect is discovered at the time of bank sale.

An RPR and municipal compliance provides assurance today, that the improvements to the land are within the required boundaries of the land and municipal compliance conforms all zoning bylaws and permits for improvements have been obtained. The downside of an RPR is both the time to obtain it (though some surveyors have an expedited service) and cost. The bigger issue can be, after requesting the zoning compliance, discovering a lack of permit, non-compliance with the setback rules from the property lines, or an improvement that encroaches onto neighbouring lands.

This discovery at the 11th hour of a real estate transaction may cause delays, extra legal fees, unexpected addition work and costs to the property. If you intend to provide an RPR and compliance as a seller, ordering it should occur in good time before the closing date of a sale.

Title insurance is usually dealt with as a credit to the buyer from the seller. This credit is part of the lawyer calculated adjustments. The buyer's lawyer obtains the title insurance policy, tailored to their lender, advises the seller's lawyer, who adjusts the purchase price to deduct this cost from the sale proceeds. The cost of TI is a one-time payment and is valid for so long as the same owners own the property. Changing banks requires a new lender policy.

If an older RPR and compliance exists, and shows a defect on title, the title insurance policy will not cover this, not unlike a health insurance policy will not provide coverage for a preexisting illness.