Real Estate

What is a Real Property Report:  A Real Property Report is prepared by an accredited Alberta Land Surveyor and is comprised of a legal survey of a parcel of real estate, a printed representation of the registered legal title of that parcel of real estate, and the certification and opinion of the accredited Alberta Land Surveyor who prepared the Real Property Report.

The survey portion of the Real Property Report will show where the property lines are located, the location of improvements within the survey area (e.g. buildings, decks, patios, hot tubs, fences, etc.) and the location of identifiable third party interests and rights-of-way within the survey area.

The printed representation of the registered legal title will identify all of the registered interests in the property and registered agreements concerning the property, including registered rights-of-way and encroachment agreements on the date that it is searched.

The certification and opinion of the accredited Alberta Land Surveyor who prepared the Real Property Report will include a certification that the Real Property Report accurately reflects the state of the property at the time of the legal survey in accordance with the Alberta Land Surveyors’ Manual of Standard Practice, as well as the written opinion of the Surveyor with respect to any issues concerning the legal survey such as encroachments.

Do I Need a Real Property Report to Buy:   As a Buyer you are not required to obtain a Real Property Report to buy real estate in Alberta if you are paying for the property using only your own existing resources and without any form of third party financing. (Please note that any debt secured by an interest in land creates a mortgage. This is true whether the debt is repaid in a fixed instalment manner or if it is revolving debt, such as a line of credit. If a lender is registered against your title as a condition of advancing a loan or establishing a line of credit, then that lender, by definition, has a mortgage against that property.)

However, most lenders will require you as a Borrower to provide a Real Property Report and evidence of the property’s compliance with the municipal land use bylaw to the lender as a condition of financing. Alternatively, if a Real Property Report is not available most of these lenders will accept a policy of title insurance in lieu of a Real Property Report, but such a relaxation is not guaranteed and should be confirmed by the Buyer.

As a Buyer, you are only entitled to have a Real Property Report provided to you by the Seller, if the Seller is obligated by contract to give you one. Accordingly, if you intend to obtain financing to assist in the purchase of real estate, you should make sure that you will be able to satisfy all of the lender’s requirements for financing, including a Real Property Report and evidence of the property’s compliance with the municipal land use bylaw if it is required.

Condominium Units that are made up of the right to occupy an identified space within a building, but do not create an exclusive right to land, are an exception to this because the legal title to the Unit is identified on the registered Condominium Plan, and there is no land exclusively associated with the Unit to survey. A Condominium Unit that does create an exclusive right to land is known as a Bare-land Condominium, and is subject to the same concerns previously addressed concerning Real Property Reports.

Are There Other Costs:   Most contracts dealing with real estate allow for adjustments to be made for costs that are paid for by either the Buyer or the Seller directly, but benefit both the Buyer and the Seller. These adjustments are presented on a document known as the Statement of Adjustments and commonly include an adjustment for property taxes that have either been paid by the Seller or will be paid by the Buyer, an adjustment for condominium fees in the case of transactions involving Condominium Units, and adjustments for damage deposits and paid up rental in the case of transactions involving rental property.

When a Seller has made payments that are adjusted to reflect the fact that the Buyer will have a benefit from that payment after becoming the owner of a property, then those amounts are added to the total that the Buyer must pay to the Seller on closing. When the Buyer must make payments after becoming the owner that the Seller has already received a benefit for, such as property taxes, then those amounts are deducted from the total that the Buyer must pay to the Seller on closing.

Additionally, Buyers and Sellers will need to pay legal costs. A Buyer will need to pay the costs of registration of the transfer of land and, in the case of a Buyer with financing, the Buyer will also have to pay for the costs of preparation of financing documents and registration of security, usually by way of a mortgage, for the Buyer’s lender.

How Fast Can I Close a Deal in Alberta:  In recent years, due to the volume of transactions being submitted to the Alberta Land Titles Offices (i.e. North and South), the turn around time for registrations has gone from an ideal of 2 business days to more than 20 business days during some periods. This means that many transactions will not be completed for several weeks after all of the legal conveyancing documents and financing documents have been signed and sent for registration.

Accordingly, depending on the turn around time for the registration of a transaction, a real estate deal may easily take 8 weeks or more from the date of signing until all elements of the transaction are registered.

Because of this periodic slow down, a parallel method of closing a real estate deal has developed using insurance coverage provided through third party Title Insurance providers or by virtue of the use of the Western Law Societies Conveyancing Protocol. When closing a real estate deal using “gap” insurance coverage, funds are paid to the Seller before the Buyer is registered as the owner, provided that the only remaining steps is to secure registration at the Land Titles Office.

If closing using insurance coverage is possible for a particular transaction, and if a Buyer is comfortable using an insurance based closing, and a Buyer’s lender (if any) will allow it, then a real estate deal can be closed without the delay associated with waiting for registration at the Land Titles Office. However, the Buyer will not be the legally registered owner of the property until such registration occurs and the insurance coverage in place for the purposes of closing the real estate deal is intended to protect any funds advanced until the Buyer becomes the legally registered owner.

How Soon should I Contact a Bank:  In truth, a Buyer should look into financing before even starting to look for real estate. Accordingly, the answer must be to do so as soon as possible, if a Buyer intends to finance part of a purchase of real estate with borrowed funds.

Pre-Approval and "subject to Financing":  Yes. Pre-approval for a mortgage loan does not mean that a lender will approve financing for the purchase of any particular piece of real estate.

It is wise to seek pre-approval for financing, as it will give a Buyer an idea of what kind of real estate is reasonably available, but a lender will need to review any contract and usually obtain an appraisal prior to finally approving financing.

What About Assuming a Mortgage:  It may be beneficial for a Buyer to assume an existing mortgage if that mortgage loan was granted at a lower rate of interest than the interest rates available to a Buyer on mortgage loans at the time that the Buyer is seeking to Purchase real estate.

Conversely, if a Seller can market an existing mortgage debt which carries a lower rate of interest than the interest rates available to a Buyer on mortgage loans at the time that the Seller is seeking to sell real estate, then the Seller may be able to ask a higher price for the real estate than the existing market might otherwise support.

However, in the event that a Seller obtained a mortgage loan that is insured in favour of the lender against default, then the Seller should be very careful about allowing a Buyer to assume that existing mortgage as the Seller has personally guaranteed the mortgage debt. In our office, we recommend that any Seller whose existing mortgage is insured by the Canadian Mortgage Housing Corporation, or a private insurer for high-ration mortgage loans not allow that mortgage to be assumed.