Why Do you Need Title Insurance?

 

Written by on August 28, 2018

Title insurance became commonplace for real estate transactions in Ontario in the late 1990s. It replaces some expensive and time-consuming searches like building permit and work order searches. For a one-time fee, title insurance offers coverage for a variety of title issues, and is often cheaper and always faster to obtain than searches.

Title insurance includes coverage for the following:

  • Unknown title defects that could affect clear ownership of the property (for example, improperly registered transfers of title prior to you purchasing the home);
  • Existing liens against the property (for example, a prior owner of the property owed mortgages, utilities, or taxes)
  • Encroachment issues (for example, a structure on your property encroaches on to your neighbour’s property and needs to be removed)
  • Title fraud (someone attempts or successfully alters the legal ownership of your home, and/or registers false mortgages or loans against your property)
  • Errors in surveys and public records
  • Other title-related issues that could affect your ability to buy, sell or mortgage the property in the future

Title insurance covers you for as long as you own the property, up to the maximum value set out in the policy. It may also cover most if not all legal expenses in restoring title to your property.

There are things that title insurance does not cover. These include:

  • Known title defects (if you are purchasing a house and are aware, for instance, that a structure on the property was built without a permit, title insurance will not cover the removal of such a structure after you purchase the property. Insurance covers only problems you were not aware of upon closing a purchase);
  • Environmental hazards;
  • Native land claims;
  • Problems that could only be discovered through a new survey or inspection of the property (for instance, the property is smaller than originally believed)
  • Matters not listed in public records (ie unregistered debts of the previous owner of a property)
  • Anything that you as an owner do after closing a purchase on the property that violates local by-laws (ie building illegal structures or fences)

Title insurance only covers title related issues, not things like structural damage due to weather events, theft, or other situations that are covered by your home insurance.

If you have a mortgage on your property, title insurance covering the mortgage lender is NOT optional. All mortgage lenders in Ontario will require a title insurance policy that protects their interest. Generally speaking, purchasing an owners’ title insurance policy as part of your closing package simplifies the search process when buying a home, saving you time and money, as well as providing valuable coverage for not only the period when you own your home, but also “gap coverage” just in case issues arise on the closing day of your purchase and you want to take possession of a home before the transfer has been registered with the Ontario Land Registry Office.

There are alternatives to purchasing title insurance, but you should discuss these with your lawyer up front at the beginning of the transaction, as doing all the necessary searches takes more time than obtaining a policy.

Purchasing title insurance can be completely handled by your lawyer’s office during a real estate transaction to make obtaining a policy an easy experience. Most firms will utilize a variety of companies who offer title insurance and will select the company that will best provide coverage for your specific needs. If you have any questions about your policy and coverage, be sure to ask your lawyer prior to closing.

Questions about buying a home, mortgages, or title insurance? Contact us!

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