INSURING TITLE TO YOUR PROPERTY WITH TITLE INSURANCE
Title insurance is insurance that protects a person from losses that arise from a property ownership dispute. With title insurance, an owner and lender can protect their interest in the property. When the transaction closes, the owner makes a one-time payment on the cost of the title coverage. This is important coverage to have – protect your property investment! The minute you figure out that someone else can claim to own the property, after the transaction closes, it may be too late to get title protection.
A good title policy will protect you against any reasonable losses. If a previous owner was passed over while you were examining the title, you really need to look at the fine print of the title document and get in touch with a good real estate lawyer who can help protect you from litigation. Buyers want “good and marketable” title to a property – good title means title appropriate for the buyer’s purposes; marketable title means title the buyer can convey to someone else. Prior to closing, public records are “searched” to determine the previous ownership of the property, as well as prior dealings related to it. The search might reveal, for example, existing mortgages, liens for outstanding taxes, utility charges, etc., registered against the property. By conducting a title search, a lawyer looks at past versions of the title and related contracts to make sure that all the owners have received the title properly (for example, after paying off all the necessary liens or mortgages). If there are any defects (“clouds”), these need to be rectified before any new transfer of the title is closed. Good insurance will cover you if any defects are discovered despite your best efforts. Of course, the title policy won’t cover clouds that crop up after you buy the property.
Title insurance policies can be issued in favour of a purchaser (on new/resale homes, condos and vacation properties), a lender, or both the purchaser and lender. Lenders will sometimes require title insurance as a condition of making the loan. Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made. Types of risks that are usually covered under a title insurance policy include: survey irregularities; forced removal of existing structures; claims due to fraud, forgery or duress; unregistered easements and rights of-way; lack of pedestrian or vehicular access to the property; work orders; zoning and set back non-compliance or deficiencies; etc. For a risk to be covered, generally it has to have existed as of the date of the policy. As with any type of insurance policy, certain types of risks might not be covered, for example, native land claims and environmental hazards are normally excluded. Be sure to discuss with your lawyer what risks are covered and what are excluded. The insured purchaser is indemnified for actual loss of damage sustained up to the amount of the policy, which is based on the purchase price. As well, some policies have inflation coverage, which means that if the fair market value of the property increases, the policy amount will also increase (up to a set maximum). If you plan to pay cash for the property, there is no need for you to insure the title. Just make sure to have this relatively cheap insurance in case someone comes to your home one day and claims to have a right to the property.
Real estate title insurance is economical, often saves you in disbursements more than it costs, and is required by most mortgagees. Title insurance can help ensure that a closing is not delayed due to defects in title. And, if an issue relating to title arises with respect to a risk covered under the policy, the title insurance covers the legal fees and expenses associated with defending the insured’s title and pays in the event of loss. I recommend it on all real estate purchases and refinancing, and will obtain it for you in accordance with your instructions.Lawyers acting for purchasers in Ontario are required as part of their responsibilities to advise their clients as to their options with respect to insuring the title to their property. You may opt for a lawyer’s opinion on title or you may choose to purchase a title insurance policy from one of the various title insurance companies operating in Ontario.
If you opt for a lawyer’s opinion on title, after your transaction has been completed, you will receive from me an opinion as to whether you have good and marketable title to your property. My opinion will be based on the title and off title inquiries that I make on your behalf and the availability of an up to date survey showing the location of the buildings and boundaries. My opinion of course will be subject to the accuracy of the information that I am provided with from the various governmental offices, and the currency and accuracy of any survey provided to me (which I have already discussed above) for review. Unlike a title insurance policy, which is discussed below, I cannot provide you with any opinion or protection from losses with respect to title fraud.
Your other option is to purchase a title insurance policy. In that case, I do not provide you with a lawyer’s opinion on title; instead, I give my opinion to the title insurer who in turn issues a policy to you. A policy of title insurance will insure you against losses resulting from the various covered matters in the policy-including the matters that I would otherwise be giving an opinion to you-such as (i) your title being defective or unmarketable because of someone else owning an interest in your title, (ii) outstanding liens, work orders or encumbrances, and (iii) realty tax arrears. There is also coverage for many survey related matters, including encroachments (other than fences and boundary walls) and violations of municipal set back requirements. With certain exceptions, such as for post-policy date title fraud, coverage for losses applies to the extent that these matters exist as of the policy date (being the date your transfer/deed is registered) but that are unknown to you at that time.
In addition, the benefits of a title insurance policy include:
- acceptance by most lenders of a title insurance policy in lieu of an up to date survey (which is often required by a lender), therefore, saving you the cost of obtaining a new survey should you not require one for yourself;
- coverage for loss or damage arising from many forms of title fraud;
- a no fault claims process such that you do not have to demonstrate negligence in order to make a claim; and
- coverage for legal fees related to defending your interest in title for matters covered under the policy.
As with all insurance products, title insurance does not cover defects which you are aware of prior to the closing of the transaction (such as adverse circumstances disclosed in a home inspection report or seller property information statement) or which you may have agreed to in your Agreement of Purchase and Sale. All policies are subject to exclusions and exceptions, including, but not necessarily limited to environmental matters and native land claims.
In the event that title insurance is obtained, there are a number of off title searches that I will not be performing as most losses related thereto that exist as of the closing date, but are unknown to you at that time, are covered in your title insurance policy. You will save the disbursement costs related to these off title searches. However, in certain circumstances, such as where the size of the property is important or if you are planning on adding onto an existing structure or changes to the use of the property are contemplated, I recommend that certain off title searches be done even if title insurance is being purchased. If this is the case, please advise our office as soon as possible.
I am recommending that your transaction be completed by way of title insurance and in the event that our firm does not hear from you to the contrary, I will be ordering a policy from TitlePLUS Title Insurance Company. Prior to closing, you will sign an Acknowledgment confirming the manner in which you have chosen to insure your title and confirming our right to disclose relevant information to the title insurer, in relation to your transaction, for the purposes of obtaining a title insurance policy.
Should you wish to discuss in further detail your options in this regard (including the option to purchase title insurance from another company) or if you wish to receive a sample title insurance policy, please contact us as soon as possible, as your decision will affect the manner in which we proceed with your transaction.
INTENDED USE AND CHARACTERISTICS OF PROPERTY
Please advise us as soon as possible if your plans for the property include uses other than owner-occupied residential (e.g. rental property) and/or if you plan on making any additions and/or substantial renovations.
If your property is to be tenanted on closing or if your Agreement of Purchase and Sale provides for multi-unit use, you may be assuming prior obligations of the landlord(s) to the tenant(s). Subject to the limitations in the agreement, purchasers usually protect themselves by relying on warranties from the vendor(s) and acknowledgments from the tenant(s). If your agreement provides for such documentation, I will ensure that we obtain same from the vendor(s)’ solicitor on closing. If your agreement does not so provide, I will not be making any further inquiries and you may want to consider making your own inquiries directly with the tenant(s) in this regard.
It should be noted that neither a title insurance policy nor my opinion will cover fire retrofit issues (that is, the property, as it sits today, would pass an inspection by the Fire Marshall); the only way to obtain such an assurance would be to have the Fire Marshall inspect the premises some time prior to closing, or at least rely on the services of a qualified home inspector. Please advise immediately if you would like us to pursue either of these avenues (additional costs will apply). Furthermore, a title insurance policy does not cover legality of rents or lost rental income.
Please also advise as to whether the property is located on a waterfront, highway, ravine, escarpment, or is subject to or near any hydro installations. This information may affect the scope of the enquiries we may need to make on your behalf.
About the TitlePLUS Program
For most people, their home may be their largest financial asset. One way to protect that asset is to purchase title insurance.
TitlePLUS title insurance is the only all-Canadian title insurance product on the market today and is available from coast to coast. It was developed in 1997 by Lawyers’ Professional Indemnity Company (LAWPRO) with input from real estate lawyers.
Transactions that qualify
TitlePLUS title insurance is available through real estate lawyers for:
- purchases or refinances of new or resale residential properties, including rural properties and condominiums;
- home owners who did not obtain title insurance at the time of purchase (OwnerEXPRESS®);
- purchases or refinances of commercial and farm properties in Ontario; and
- leasehold properties in Ontario and Nunavut.
A TitlePLUS policy is tailored to the specific property/transaction and provides coverage for:
- the legal services provided by the lawyer closing the real estate deal (excluding OwnerEXPRESS policies and Québec policies);
- unpredictable or undetectable issues such as fraud, forgery, missing heirs and/or unregistered easements;
- issues affecting registered title, including rights-of-way and/or construction liens;
- the legal costs associated with defending title to the property if a fraud is perpetrated against the property; and
- common problems such as access rights and conflicting interests in the property.
TitlePLUS policyholders can be confident that their policy will be valid for as long as they, or their heirs, own the property. Please refer to the TitlePLUS policy for full details, including actual terms and conditions.
A TitlePLUS policy can save money by reducing certain searches and inquiries, and in most cases, eliminating the need for an up-to-date survey. The premium for a TitlePLUS policy is paid only once. Typically the buyers, borrowers or home owners pay the premium for the policy. For policy pricing, click here.
Only TitlePLUS title insurance standardizes legal services by requiring that lawyers follow a defined set of searches, inquires and procedures.
TitlePLUS title insurance works like other types of insurance: if there is a problem that is covered by the policy, the policyholder simply contacts us directly to report a claim.
LEGAL SERVICE COVERAGE
Unlike some other title insurance policies available in the market today, TitlePLUS polices automatically cover all the standard title-related aspects of a real estate deal plus the legal services provided by the lawyer in the transaction (excluding OwnerEXPRESS® policies and Québec policies). Please refer to the TitlePLUS policy for full details, including actual terms and conditions.
If the lawyer overlooks something or makes an error while handling the real estate transaction, the TitlePLUS policyholder can seek compensation directly from us, without having to sue the lawyer for negligence, which can be a time-consuming and potentially costly process.
TitlePLUS title insurance covers many of the risks normally beyond the scope of a lawyer’s opinion, including fraud, forgery, survey errors, and errors made by municipalities and utility companies in providing information to the lawyer. It specifically covers failure to register documents or remove encumbrances, and improper adjustments of any items on closing.
Title Insurance Brochure - Open PDF Here
Title Plus Insurance Brochure - Open PDF Here