Creekside View – September 30, 2024 – "Real Estate Jargon"

Realtors and lawyers use a lot of jargon that may be confusing to their clients.??

I thought it would be helpful to explain what some of terms mean and their importance when we strive to draft legal contracts to protect the interests of everyone involved in a transaction.

A buyer is advised to request a current Real Property Report and Letter of Municipal Compliance as part of their offer when buying a home.?

Commonly referred to as an RPR, this is a Land Surveyor’s certificate that outlines the boundaries of a parcel of land and the location of the buildings on it.?

Every municipality has regulations within its zoning bylaw that specifies the distance structures must be from the property line at the time of the survey.?

This is for several reasons, with one being enough space between adjacent buildings to allow entry into the back yard of emergency responders and utility providers.

The Real Property Report is submitted to municipality with a request for it to issue a letter stating the current zoning of the parcel and current use of the property, including location of the improvements, complies with the bylaw.?

Admittedly, here in the Midwest we are somewhat relaxed about the need for a current RPR, often substituting title insurance purchased by the buyer to satisfy mortgage conditions.?

In larger centers like Edmonton or Calgary, a current RPR and Compliance Letter are the norm not the exception, and frankly, I think prudent buyers should always obtain both before committing on a property, certainly those with improvements on them.

It has become the standard in lake resort subdivisions, due to too many encroachment issues arising between neighbouring properties built “by guess and by golly” in years past.

We discovered a lake front cabin with detached garage overlapped the lot boundaries on both sides; the resolution of which cost the seller thousands of dollars.

Sellers who occupy a home personally are usually asked to supply a Property Condition Disclosure Statement so the buyer may be alerted to defects that possibly only the current owner may be aware of.

For example, if there has been seepage into a basement or a sewage back up caused by deteriorating drainage lines to the street.

If provided, it will form part of the contract of purchase and sale between the parties and a seller may be held legally responsible for its accuracy.?

Personally, I see it only as a starting point for the buyer.? Buyers should always conduct their own diligence.

Unless you plan of climbing on the roof, or poking your head into the attic, a competent home inspector should be engaged, and written report received.?

If there are any significant concerns with structural integrity or safety, further investigation by a professional tradesman is advisable and advice on the appropriate remediation sought.

In the case of rural homes, the quantity and quality of the well water should be tested to ensure it is suitable for domestic purposes.?

Septic systems should also be reviewed although because of their underground infrastructure this can often prove to be difficult.

Often in the back-and-forth flurry of negotiating an offer between a buyer and seller, the focus is on price and possession, and the role of the deposit is overlooked or misunderstood.?

The deposit is held in trust by the buyer’s brokerage unless otherwise agreed, and forms part of the purchase price should all the conditions to the contract be met.?

However, if the buyer cannot achieve financing, is not satisfied with the results of the home inspection, or some other condition in the offer to purchase has not been met, the contract is terminated, and the deposit returned.?

Although it is rare for a buyer to remove all conditions then not take possession, it does happen.?

In this case, the seller has the right to ask for the deposit as compensation for the inconvenience and costs associated with a defaulted contract.?

It does not relieve the buyer from further legal action brought by the seller seeking to recover damages.

Sellers will often impose an Option Clause on buyers who need to sell their current home to purchase the one on which they wish to trade to.?

This allows the current owner to continue marketing their property seeking a better arrangement but does give the buyer with the accepted offer the opportunity to step up and remove all conditions upon being given the agreed upon notice, which is usually between 24 and 72 hours.

An alternative approach in a purchase contract is a seller condition for an agreed upon time allowance to secure suitable accommodation before establishing the possession date with the buyer.?

Either way, it is a dance that should only be undertaken by people of good will or it will lead to significant frustration by all involved.

Vern McClelland is an associate broker with RE/MAX of Lloydminster, founder of ProgressiveTender.com, and an active partner in his family’s livestock operation.? Comments on this article are welcome either by emailing [email protected]? or calling (306) 821-0611.

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