Title insurance is a form of indemnity insurance that insures against financial losses from defects in title to real property and from the invalidity and unenforceability of mortgages.
Where title insurance is obtained, the title insurance stands in place of the lawyer’s opinion on title that lawyers historically provided to purchasing clients. Although the opinion on title is not provided where title insurance is obtained, at Lawrence’s we still conduct a full title search of the property, examining registered documents that have bearing on the quality of the title being transferred by the Seller. We will bring these encumbrances to your attention, even if they must be accepted, e.g. utility easements. Where title insurance is used, there are a number of municipal searches which we are no longer required to undertake pursuant to the title insurance policy. Closings are often rushed and not having to write to municipalities for records of zoning and building compliance does permit us to proceed with closings more quickly and with less cost than would be the case if we had to wait for municipalities to respond. Typically, responses from municipalities were qualified to exclude errors and omissions and therefore may not have been very reliable in any event. If you have no title insurance and the municipality makes an error in its response, you would still have been left with the cost of correcting the noncompliance. Subject to certain exclusions, the insurance will cover the cost of remediation. Title insurance typically protects against losses arising from issues such as:
- Another party claiming an interest in your property
- Title defects caused by forged documents, false impersonations or other frauds
- Contravention of zoning bylaws
- Outstanding work orders
- Existing liens against the property
- Encroachments onto or from adjoining properties
- Errors in surveys and public documents
Like all insurance policies, there are exclusions to coverage. It is very important to read the insurance policy thoroughly and make yourself aware of the exclusions. Exclusions can include defects in title that you knew about before closing; aboriginal claims; environmental contamination; problems that would be discovered only by a new survey or inspection (such as a smaller lot size than originally anticipated); matters not listed in public records, such as unrecorded liens; zoning bylaw violations caused by changes, renovations or additions performed by the policy owner; tenancy issues, such as the legality of rents or basement apartments; functionality of septic systems; water potability; matters disclosed in a home inspection report, and the Buyer’s ability to change the use of the land or undertake renovations or expansion. For a risk to be covered, it generally has to have existed prior to the policy date and not be something that you created after you became an owner.
Title insurance is not mandatory in Ontario; however, many mortgage lenders require it, particularly if no building location survey is available. The cost of title insurance varies based on the use and value of the property. Most premiums for residential properties are less than $300-$400 for both policies (owner’s and lender’s). For the owner, this is a one-time fee due on closing, and protects you and your title for as long as you own the property.
Title insurance is intended to protect you against title risks. It is not a substitute for a lawyer’s services in a real estate transaction and like any policy of insurance, if a loss occurs, you would have to submit, process and prove a claim for reimbursement in the event of a loss. The appropriate remedy is also at the discretion of the title insurer and may therefore not be satisfactory to you, e.g. the payment of money to you instead of the corrected building permit approval process for a non-compliant building on the property. Some buyers still prefer us to undertake municipal off-title searches. If you are planning to complete any renovations on the property, you should bring this to your lawyer’s attention so that separate municipal building and zoning and potentially heritage designation searches can be undertaken to determine if your plans will be permitted. It may still be preferable to conduct some of the municipal off-title searches, depending upon your individual circumstances and intentions for the property. We invite you to contact us to discuss whether title insurance would be appropriate for your transaction.