The standard sale and purchase contract used in Alberta is provided by the Alberta Real Estate Association (AREA). In that contract, it is stated that the seller is required to provide the buyer with a Real Property Report “showing the current improvements on the property according to the Alberta Land Surveyors’ Association Manual of Standard Practice, with evidence of municipal compliance or non-conformance and confirming the seller’s warranties about the land and buildings. This obligation will not apply if there are no structures on the land.”.
Confirmation of municipal compliance should be established well in advance of entering into the Purchase and Sale Agreement. Otherwise, the seller may be making representations and warranties that they cannot fulfill and may therefore be indirectly but unintentionally in breach of the contract.
In the event that such representations are made by the Seller, when indeed municipal compliance or non-conformance has not been obtained at the appropriate time, lawyers will typically discuss and agree to hold-back funds from the seller until the seller has obtained such compliance or non-conformance. An alternative, where there are compliance issues at the time of closing, would be to obtain a title insurance policy.
What is Compliance?
Compliance is evidence that your property complies with municipal by-laws and regulations, including evidence that your property does not encroach on to property of another, such as your neighbour’s land or the Municipality’s land.
Obtaining municipal compliance does not mean that the use of the building automatically complies with any covenants or laws, including land-use by-laws, easements, etc. Municipal compliance simply confirms that the improvements on the land, some of which are discussed above, conform with the bylaws and regulations specific to those improvements and that they have the proper development permits, among other things.
What is Non-Conformance
Non-Conformance simply means that the buildings and structures on the property you are buying or selling did, at one point in time, comply with the municipality’s bylaws and regulations. However, bylaws and regulations have since changed and, therefore, the property is no longer in compliance. If this is the case, the improvements on your property may be deemed non-conforming. Non-conformance is still permitted under the standard real estate purchase and sale contract.