Relaxation and Encroachment Information updated for 2022
What are encroachment agreements and encroachment consent letters, and why are they required?
Encroachment agreements are legal agreements between two parties that resolve the issue created when the improvements made by one party encroach onto the property (or rights) of another party. “Improvements” used in this context usually refer to a structure such as a fence, deck, retaining wall, or other construction that increases the value of the property. Most commonly, encroachment agreements are required when property improvements encroach on municipal property or a right-of-way granted to the municipality. Encroachment agreements may also be made between neighbors, these are usually termed private encroachment agreements.
Encroachments may go many years, even decades, without being noticed or causing issues, and in fact, often do. However, when you go to sell your home, the encroachments may cause undue stress and delays in attempts to rectify the situation. To execute the real estate transaction, the seller will be required to provide a Real Property Report (RPR) to the buyer. The Land Surveyor will identify all encroachments on the Real Property Report (RPR). Subsequently, the RPR will be submitted for evaluation to the municipality. This evaluation process is known as getting a stamp of compliance or a letter of certificate of compliance. At this point, the municipality will require some resolution to the encroachments and will put an encroachment advisory on the report to indicate an unresolved issue relating to encroachments on the property. This must be resolved either through an encroachment agreement or by removing/moving the encroachment. Because of the high cost of construction and demolition, the encroachment agreement is usually the cheaper, preferred option.
How can an encroachment agreement/encroachment consent letter or advisory affect the sale of my property?
Encroachment advisories, agreements, and consent letters typically do not stop the sale of your property. If the encroachment agreement has not been finalized at the time you are conveying the property sale, it is typical for the buyer to request a holdback of some of the funds from the sale. Holdback amounts usually range from $5,000 to $15,000. This money is held by the lawyers in trust until the encroachment is resolved, which is usually indicated by the RPR receiving a Certificate or Stamp of Compliance.
It is important to know that the buyer can place a condition on the purchase regarding encroachments and encroachment agreements, OR they can accept the RPR without compliance. The latter of these is rare, as the mortgaging bank often refuses to mortgage a property that is lacking full compliance, and it is generally in the buyer's best interests to require this from the seller. One case where it might be reasonable for a buyer to accept a property without the issue being resolved is if they plan to demolish the property to build an infill development. In this case, the entire property is usually rebuilt, and so the encroachment is of little concern as it will ultimately be removed.
An encroachment agreement will take quite some time to complete, so it is best to expect lengthy delays ranging between 4 and 6 months to be completed and registered. While the city will quote faster timelines than this, however, in our experience, these timelines are not even close to realistic. The encroachment agreement is a document that gets registered at the Alberta Land Titles Office. Because of this, the agreement does have certain requirements such as original “wet” signatures, no digital signing, witness signatures, and a Commissioner for Oaths. Because of all these requirements and steps, encroachment agreements are not usually as simple to execute. The last thing to note about these agreements is that once offered, it is a matter of submitting the forms, and it will be registered, it will not be rejected after the fact.
What is a relaxation application and why is it required?
Relaxation applications are required when an improvement on the property (building, garage, retaining wall, deck, fence, etc.) does not meet the requirements of a municipal bylaw. It is important to note that bylaws are not the same as “building codes”. A very common comment from our clients that they think they will have issues with obtaining the compliance certificate because the railing or steps on the deck are “not to code”, however the municipality will only be evaluating the deck’s compliance with their own bylaws, which generally relate only to height and location on the property and to do not make mention of building codes. Applications for relaxations can take 6-8 weeks to complete, but in some locations can take much longer. Relaxation applications are truly applications, they can be rejected by the city or approved with conditions, though most applications are approved without conditions.
A relaxation may also be called a variance. If you encounter this term, you can assume that variance and relaxations are synonyms.
How can a relaxation/variance application affect the sale of my property?
Relaxation applications, and the associated delays, do not normally stop the sale of your property. If the processing time for the relaxation goes past your closing date, and given the significant delays at the city, it likely will, the buyer will ask for a holdback of some of the funds (typically a few thousand) until the Certificate of Compliance is issued.
It is important to know that the buyer can place conditions on the purchase in regards to these relaxation issues, OR they can also accept the RPR without compliance. The latter of these is a very rare circumstance, as the mortgaging bank often will not mortgage the property without compliance. Accepting these deficiencies, like encroachment issues, is usually only done with the intent to develop an infill, and thus the existing structures will be demolished anyway; in all other cases, it is best to resolve the issues at the time of sale.