When it comes to cottage properties, due diligence is particularly important
This article by Mahwash Khan (Training & Communication Counsel at LAWPRO) originally appeared in the July 4, 2014 issue of The Lawyers Weekly published by LexisNexis Canada Inc.
It has been a long and harsh winter. Summer is here and your clients are now looking to purchase an oasis of joy and peace – away from it all. Help their dream become a reality and not your nightmare.
Rural and cottage conveyancing issues make up a significant number of real estate law claims – the most common reoccurring themes being inadequate investigation and communication errors.
Picture this: a hard-working couple finally have enough money to buy their dream cottage. On closing day, they collect their keys. As they drive up to the cottage, they see that a neighbour has blocked the driveway. They have no legal right of access to their strip of paradise; their cottage is landlocked. As if that isn’t bad enough, after getting permission to drive across the neighbours’ property, they arrive only to discover a group of strangers are walking across their cottage lot to get to the water. The shore road allowance is open to the public. Let’s add in an unsatisfactory septic system and contaminated water.
Their dream rapidly turns into a nightmare and they look for someone to blame.
A rural property transaction is more complex than the average urban or suburban transaction. The first step towards protecting yourself and your clients’ interests is to understand the unique nuances of rural and cottage properties.
An initial consideration: is there a legal right of access? Limited, shared or lack of access can severely affect the marketability and value of the property.
Access to the property may be over someone else’s land. If it is, is there a registered easement or right of way granting a legal right to cross over the land to get to the property? On the flip side – do others have a right of way over your client’s property? Is there a road at all?
Conducting searches to ensure there is a legal right of access is a must for a rural purchase transaction. Unless the property is on an open municipal road, sit down with your clients and ask them to explain and show you how they get to the cottage using the registered plan, or online tools such as Google Maps.
Shoreline road allowance
For waterfront cottages, having access to the water forms an integral part of the enjoyment of the property. This enjoyment may come with a caveat.
Many lakes and rivers have a shoreline road allowance “reservation” running back from the water’s edge (between the property line and the lake or river), which is owned by the municipality. The issue to consider here is whether there is a bylaw closing the road allowance and whether the municipality has conveyed parts of the road to adjacent property owners. If not, members of the public may have a right to go on the road allowance. The title search, registered plans, a survey and/or the assessment maps for the area may help in determining whether there is a road allowance in front of the property.
Private sewage systems
Rural and cottage properties are normally served by private sewage systems. Issues with the sewage system are often costly and can include lack of a use permit, expansion of an older system without the proper permit, or encroachments by the system on to neighbouring properties. It is important to determine whether the septic system is compliant with the local authority’s requirements and whether a permit for the septic system was issued.
A non-exhaustive list of other issues to consider:
- Water supply and structures: Where is the water coming from? The lake, a well or cistern? The water should be tested for potability. If there is a dock, pier or boat house built in the water, check if the necessary approvals and permits were obtained for the structures. This includes municipal permits as well as a licence from the Ministry of Natural Resources, where necessary.
- Accretion and diminution: Has the water receded or advanced from the edge due to natural causes? If the water has receded, the extra land that appears may then belong to the owner of the adjacent land. If the water advances, the ownership belongs to the Crown.
- Zoning: Appropriate zoning inquiries should be made to check any land use restrictions. Some cottages are zoned for “seasonal” use only. If access to these types of cottages is by a municipally maintained road, the municipality may not maintain it year-round and may not provide garbage collection, snow removal or emergency services during the winter.
- Unregistered hydro easements: Ask your clients if they noticed any lines or poles across the property. A search can be conducted with the appropriate hydro authority.
Understanding cottage and rural conveyancing can enable you to position yourself as your clients’ trusted advisor. If you are new to this type of transaction, don’t go it alone: consider speaking with a lawyer who is familiar with the area. You should also conduct a full title search and communicate the special risks (and related options) clearly to clients, and document their instructions. Finally, encourage clients to purchase title insurance with an endorsement covering rural property issues and help them realize their dreams of owning a small piece of paradise.