The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses encroachments and other encumbrances.

The situation

Not every encumbrance on a property can be identified through a title search or will show up on a survey (even an up-to-date one). For example, fences may not be on the property lines. Utilities staff may have shifted from authorized locations when doing an installation. There may be a building overhang onto the property. There may be unrecorded leases and licences. There may be unrecorded liens encumbering the property by operation of law, or that may exist without registration in the applicable land records.

A lawyer is not in a position to provide a lender with an opinion on the marketability of title given all the possibilities for encroachments and encumbrances unless they have completed all appropriate due diligence and are able to limit their opinion to the content of the searches conducted, documents found, and any survey reviewed.

Sample lender instructions

[If no title insurance] You will immediately advise the Bank of any discrepancies in the … encroachments, restrictions, covenants, charges or any other encumbrances which, in your opinion, will affect the marketability or use of the Mortgaged Property or the validity, enforceability or priority of the Mortgage or Other Documents (if applicable) which are not Permitted Encumbrances.

Practice Guidance

• Do all the necessary title registry searches.
• Speak to your borrower client about what they know about the property to try to identify potential issues.
• Document your borrower client’s understanding of the risks and their agreement to accept them.
• Consider the need for an up-to-date survey.
• Describe the documents that you reviewed and what you found. For example, “I reviewed survey X, dated Y, completed by Z, for the property known as A. The survey does not show any encroachments,” or “The survey shows an “x” at [location] as [describe encroachment].”
• Make it clear that your evaluation is based solely on the results of the specified searches you conducted and the specific documents you reviewed.
• Do not give an opinion on the marketability of the property.
• Limit your opinion to the facts shown by your searches, the documents that were available for your review, any survey map you reviewed and any relevant information provided by borrower.

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