Title insurance often guarantees that any improvements on a property comply with applicable zoning bylaws and that there are no encroachments on either the property or the adjoining property. If either situation exists, the title insurance company will pay the costs associated with obtaining compliance or the removal of an encroachment.
Real property reports (RPRs) provide the same information but the insurance premiums for title insurance may be less than the cost of a RPR and may allow a transaction to close faster. For these reasons, sellers may elect to buy the insurance instead. However, when the property is sold by the new owner, the title insurance will not transfer, as title insurance is only valid for the original purchaser. RPRs, however, can be passed onto a new buyer upon resale.
Alberta’s land registration system is based on the Torrens System, under which the government has custody and legal responsibility for the validity of all titles, documents and plans. If a person suffers a loss due to an error on title or as a result of a fraudulent transaction, the person may claim compensation from the government’s Assurance Fund.
Title insurance may offer owners protection against issues involving encroachments (as well as various other issues) but buyers are advised not to use title insurance as a replacement for RPRs.
Commissioning a RPR when considering a property purchase provides the prospective buyer accurate information about the state of the property. It can help buyers make informed decisions by revealing the existence of any encroachments before purchasing the property, rather than worrying about whether or not a problem will arise and hoping that the title insurance will cover it.
Copyright Alberta Real Estate Association. Reprinted with permission” AREA
makes no guarantee as to the accuracy or completeness of this information