Legal Brief for May, 2011

Compliance Certificates

In April's Legal Brief, I discussed what a Real Property Report document contains.  As noted, they are standard documents provided by a seller to a purchaser in a real estate transaction involving a single family dwelling (i.e. house or duplex), and which show the details of any structures built on a property, the distances from the structures to the boundaries of the lot and the presence of any rights of way, easements or related items.  This is certainly useful information to have, but why have these Reports become such a critical part of the documentation that a purchaser receives in a purchase transaction?

Their importance arises from the variety of laws and regulations that affect property.  The municipal authority for the property will have enacted what are known as zoning bylaws for the area in which the property is located.  These bylaws contain provisions which require homes to take up no greater than a specified percentage of the size of the lot, and for homes and garages to be located certain minimum distances from the boundaries of the lot.  These provisions are in place to ensure a general basis of consistency and safety within a neighbourhood.

There will also be regulations requiring builders and homeowners to obtain development permits and building permits for any construction that takes place on a residential property.  The builder or homeower will need to pay specified fees for the permits, and to establish that the proposed construction complies with the applicable building codes.  The permit process also allows neighbouring property owners to object to the proposed construction if it adversely affects their interests.

A Compliance Certificate is a document that is issued by the municipal authority after it has reviewed a Real Property Report to confirm if what has been built on the property complies with the terms of the applicable zoning bylaw, and if all required permits have been obtained for what is shown on the Report.

If there are discrepancies, it will be up to the property owner to pay the fees, and in some cases penalties or extra assessments, required to obtain the appropriate permits or take such steps as may be necessary to make the property "comply" with the zoning bylaws.  The costs of these permits and changes often are at least several hundred dollars and sometimes can run into the thousands of dollars, depending on the circumstances.

It is therefore one of the critical responsibilities of the lawyer for a purchaser to make sure that they obtain a proper Real Property Report, and Compliance Certificate, at the time of the purchase.  If these documents are not obtained, the purchaser may be inheriting a property with several zoning or permit related deficiencies.  If they are detected at the time of a property sale, the seller will be responsible for all costs of correcting them.  If they aren't dealt with at the time the property is being transferred, guess who will have to pay for the cost of rectifying them when the purchaser eventually sells the property? If you answered: the purchaser, you are right.

Compliance Certificates - don't buy your new home without one!