There are a number of searches a lawyer may carry out when working for a buyer on a real estate purchase.
There was a time when lawyers, by way of a requisition letter, would make inquiries to the municipality concerning the property to discover any issues affecting the property. Clause 10 of the standard Agreement of Purchase even speaks to the Buyer being allowed to satisfy himself that there are not outstanding work orders or deficiency notices affecting the property, a responsibility that was carried out by the lawyer.
Resolution of Certain Issues by Title Insurance
Though some still do make a requisition to the municipality, many don’t since Title Insurance came into prominence some years ago. It saves the buyer the additional cost of requisitioning the city. As well, if an issue is discovered after closing Title Insurance would attempt to resolve it depending on what it is.
Yet Buyers Prefer to Know Up Front
In our experience Buyers want to know of any issues up front, or at least before they close and take possession of the property. That’s why the preprinted portion of the Offer to Purchase has certain provisions or built-in conditions. An issue discovered after closing tends to upset Buyers.
Here is an Example of a Municipal Drain Bill
Recently we received a call from one of our buyers who purchased his rural property in the fall of 2016. He was quite upset at having received a bill from the municipality for $2,635. It was noted as a “Drainage Maintenance Billing”. Under provincial legislation a Municipal Drain is part of a municipality’s infrastructure. The cost of repair and maintenance on the drain is “assessed to the lands within the watershed of the municipal drain; in other words to the affected property owners. The maintenance was performed between January 2010 and December 2016 and all land owners were notified.
The Previous Owner Was Notified but….
When the municipality notified all affected owners, the property was still owned by the seller yet the issue was not disclosed. This could easily happen as he seller could have forgotten about the notification. Further, the city letter went on to say that if the amount due was not paid it would be added to the property taxes. Upset, the Buyer felt that he should have been told at the time of buying and felt his lawyer should have discovered the matter. What’s more, in talking to the municipality, the buyer was informed that had a requisition been made, the matter would have been disclosed. This only frustrated the buyer more. We suggested enquiring with their Title Insurance Company to see if they would cover the cost of the billing.
Title Insurance: First No and then Yes
On contacting a representative of the Insurance company, the request was initially denied. The representative disagreed with the decision and went to bat for the buyer. The Title Insurance company reversed its decision and approved the payment. A happy ending but a requisition to the city before closing would have brought the matter to light.