Habib & Associates
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Real Estate Law

Title Insurance


What is Title Insurance?

Title Insurance is an insurance policy issued by one of several specialized insurance companies currently operating in Canada. The major providers are Stewart Title Guaranty Company, First Canadian Title, Chicago Title and TitlePlus. The policies underwritten by these companies are generally very similar and they provide broad coverage against many unknown risks for both home buyers and mortgage lenders.

We asked Canadians what they know about title insurance. The answers might surprise you. A real estate lawyer can help you find the title insurance that is right for you.

A typical residential policy can provide coverage for the following issues:

  • Outstanding work orders issued by a municipality;
  • Existing unregistered liens against the title;
  • Violations of municipal zoning by-laws;
  • Encroachments onto an adjoining property (other than fences and boundary walls);
  • Realty tax and water arrears;
  • Outstanding municipal utility charges, provided such charges form a lien on title;
  • Existing work orders;
  • Fraud, forgery and false impersonation to the extent they affect the validity of title.

For a homeowners policy, the premium is only paid once at the time of closing and is included in the legal fees and disbursements charged by the lawyer. For a lender policy, the premium is valid only as long as your mortgage with a particular lender is existing. If you refinance your home in the future, a new premium is payable for the new mortgage that is arranged. A Homeowner's Policy is valid for the entire time the homeowner holds title to the home and the policy need not be renewed. In Canada today, almost all residential transactions are title insured unless there are reasons not to insure, such as the need to conduct certain searches that you would not otherwise need to do because the risk is otherwise insured under the policy.

The main benefit of title insurance is cost savings and efficiency. Historically, real estate lawyers were required to provide an opinion on title to their buyer clients and their banks. To do this, they would require an up-to-date, building location survey of the property. This would confirm whether or not the building was located wholly within the boundaries of the lot and that the building complied with municipal zoning regulations regarding minimum set-backs and to confirm that there were no encroachments. Often a survey was not available or was not current resulting in the need to update or purchase a new survey at considerable cost ($1200).

Sometimes, there are problems with title to a property that aren't obvious when you buy the house. Title insurance can help fix the problem or pay for a loss. A real estate lawyer can help you choose insurance that's right for you.

In addition, certain required searches such as municipal compliance reports were both costly ($200) and would often not be provided by the City in a timely fashion, resulting in closing delays. Many other searches that were obtained for utility and tax accounts would also add to the high cost of legal disbursements. With title insurance, no survey is required to certify title and most of the "off title" searches are now covered under a standard policy, resulting in considerable savings to home buyers.

Today, almost all mortgage lenders require that the lawyer purchase a Lender Policy for a new mortgage. It therefore only made sense to purchase the additional Owner policy at the same time when ordering the Lender policy thereby avoiding the cost of unnecessary searches.

Title insurance has the added benefit of covering both buyers and lenders for title fraud and identity theft, an insidious modern development that lawyers have never historically been responsible for or could protect against.

It should be noted that Title Insurance is not the answer for everyone in every case and that there are circumstances where a buyer would want their lawyer to conduct a particular search that would otherwise not be required. For example, if a buyer was purchasing a home that had been recently renovated or expanded, a local authority Zoning & Building Compliance search would be highly recommended. This search would ensure that all necessary building permits were taken out by the seller, final inspections conducted by the local building inspector and a final occupancy permit issued. This would otherwise avoid significant problems for a home buyer after the fact had he simply taken title insurance. Although the problem would be an insured risk under the policy, (assuming the buyer was not aware of the lack of permits), the owner would still have to go through the insurance claim process and may be required to live through further renovations in order to legalize the property.

If you have any questions about title insurance, you are encouraged to browse the website of various title insurance companies or speak to your real estate professional.