Proper Survey of Land May be Critical

Survey certificates are routinely requested by mortgage lenders in order to gain some assurance that the property which is the subject of a mortgage has buildings which are located within the boundaries of the property. This reduces the risk of subsequent discovery of encroachment on neighboring property which might devalue the land charged by the mortgage. Survey Certificates are rarely referenced in the purchase and sale document. The subjects of boundaries, encroachments and compliance with setbacks are rarely referred to in contracts of purchase and sale. This month’s case* illustrates the dangers in this approach for properties which are not new and routine residential subdivisions with clearly marked boundaries.

The property in this case was a campground. The purchase and sale proceeded in the usual fashion, with the purchaser’s lawyer requesting a survey certificate in order to satisfy mortgage lending requirements. This survey was completed and delivered to the purchaser’s solicitor. The buildings were shown within the boundaries of the property and the mortgage funds were advanced to close the deal. It was only after the completion that the purchaser in taking possession of the property discovered that the survey had been completed incorrectly and that improvements and structures on the campground did encroach upon neighboring property.

The purchaser brought the action confidently believing that either the surveyor or the vendor should pay for damages arising from the defect in the property, either on the grounds of negligence on the part of the surveyor or negligent misrepresentation on the part of the vendor and the vendor’s company. The court did find the surveyor to be negligent in preparing the certificate however, no doubt to the surprises of the purchaser, the action against the surveyor, the vendor and vendor’s company was dismissed.

The court found that the surveyor’s negligence caused no loss or damage. The survey was prepared for mortgage purposes only and in fact the mortgage monies were advanced, albeit on the incorrect survey information. The survey was not prepared for the purpose of meeting any condition in the contract.

In fact the contract contained no representation by the vendor with respect to location of boundaries. On the contrary, the contract contained the standard clause indicating that the property on closing was to be in the same condition as viewed by the purchaser before closing. The court specifically found that " condition" included the fact that certain building and improvements encroached on adjoining property. There was no express representation as to the location of improvements nor, as mentioned, had the purchaser included a condition that the purchase was subject to verification of the lot lines or the location of the structures.

The purchaser in this case was left holding the bag. The innocent standard term in the contract of purchase and sale regarding condition of property was broadly interpreted by the court in this case. Most people assume that condition of property refers to the state or condition of repair of the buildings and perhaps landscaping. In fact, condition may refer to any condition related to the property including lot lines, soil conditions, slope stability and so on. Prudent realtors will insist on including a subject condition calling for a proper survey prepared for the purpose of verifying the location of lot lines and buildings within them, where there is any possibility that the boundaries may not be certain.

This article was prepared by Geord Holland of Pushor Mitchell LLP of Kelowna B.C. This column is not to be taken as legal advice and readers with any particular requirements should seek legal advice from a lawyer with experience in the area of concern.

* Petersen v. Power (December 11, 1997), Nelson 5905, Melnick J. B.C.S.C.

By Geord Holland