Many purchase and sale contracts are signed and delivered to real estate lawyers’ offices only a few weeks, or even days, before the contract closes without sufficient documentation to close the sale. If you do not have a current Real Property Report and a Compliance Certificate, the title transfer will be delayed and money will be held back from the vendor.
A Real Property Report is a land survey that shows the location of the house and other improvements to the property including driveways, garages, and decks. A Compliance Certificate certifies that the location of the buildings and improvements comply with regulations. A Compliance Certificate will not be issued if permits were not obtained for improvements, such as garages and decks, or if a fence or driveway encroach on another property. In these cases an encroachment agreement must be obtained.
A Real Property Report and a Compliance Certificate ensure that the purchaser is not buying property with improvements that breach municipal regulations. The signed Offer to Purchase states that the vendor will provide a current Real Property Report and Compliance Certificate, and mortgage companies require these documents before approving a mortgage.
Some purchasers buy title insurance that guarantees compensation if the purchaser suffers a loss because the property does not comply with municipal regulations. For example, if the purchaser is required to remove cement that encroaches on city property, the insurance company will pay for that expense. But it is a mistake to believe that title insurance will protect you from all losses. Often the policy’s exclusion clauses limit recovery. Before you purchase a property you should know if there are any defects disclosed on a current Real Property Report.
Municipalities often take longer than ten business days to issue a Compliance Certificate. You do not want to wait until your offer is pending to obtain these documents. If you are selling property you should obtain a current Real Property Report and a Compliance Certificate as soon as you list the property so that the sale can proceed smoothly.