TITLE INSURANCE
A basic overview of Title Insurance in Ontario
The Law Society of Ontario requires that all lawyers, when acting for buyers, to inform their clients about title insurance and its benefits.
Title Insurance is an insurance policy covering the condition of title or ownership of real property at the time the policy is issued and is used to provide ownership protection for a buyer against losses or damages suffered as a result of title problems. Title insurance is obtained, usually by the buyer's lawyer before closing a purchase for the benefit of the buyer.
AVAILABLE IN ONTARIO: Although title insurance has been standard in U.S. real estate transactions, this insurance has just gained popularity in recent years as part of the standard Ontario residential real estate purchase transaction.
TYPICAL NON-INSURED TRANSACTION: Traditionally, Ontario buyers have relied solely on their lawyer's "legal opinion" that they have "good and marketable title" in order to confirm a clean title.
Unfortunately, no lawyer can completely guarantee a buyer that there is absolutely no chance of a mistake in the government records, that there are no undisclosed claims, or that what appears to be the signature of the previous owner or consenting spouse is a true signature, there having been no previous fraud or forgery on title. Title Insurance can satisfy such "gaps" in a lawyer's opinion to cover not only frauds or forgeries prior to closing but also beyond closing.
TYPICAL INSURED TRANSACTION: Title insurance does not replace the role of the lawyer. It simply provides an additional level of protection for the buyer(s). Lawyers in Ontario still must search title and certify the status of title before a title insurance policy can be issued.
THE BOTTOM LINE IS THAT: Title insurance is ideal for the buyer as it can be included in a buyer's total legal costs when one considers typical total legal fees and legal expenses, and since it is a form of NO-FAULT CERTIFICATION of clean title with (typically) NO DEDUCTIBLE and with more extensive coverages than the certification of title that has been traditionally provided by lawyers for real estate transactions.
TYPICAL RESIDENTIAL POLICY COVERAGE For a one-time premium, the policy protects the buyer(s) and the mortgage lender against losses suffered from matters set out below as well as other matters more specifically outlined in the policy. Please note that this is an example. Coverage may vary between policies and insurance companies. Your lawyer will review and advise you on available policies prior to closing:
• defects that would have been revealed by an up-to-date survey
• survey errors or illegibility of survey
• encroachments (before or after closing)
• contravention of municipal zoning by-laws
• unmarketability of title
• defects in the title
• invalidity or unenforceability of the mortgage on title
• liens
• easements (besides the usual easements for utilities, etc.)
• contravention of subdivision, development and other agreements
• priority of certain construction liens
• priority of unregistered easements and rights of way
• fraud or forgery (prior to and after closing)
• solicitor error, omission or fraud
• unpaid property taxes or local improvement charges by a previous owner
In addition to policy coverage, the insured may also receive:
• indemnity for actual loss or damage for the amount of the policy (being the price paid for the property) and automatically increasing coverage (with inflation and rising property value)overtime to a coverage which can be double the price originally paid for the property.
• payment of legal fees and costs to address title issues
• a "no-fault" method to resolve title problems
Typically title insurance won’t cover pre-existing matters known to a buyer; fence issues; building inadequacies (which should be checked prior to closing by a home inspector during a home inspection condition) unless such inadequacies relate to a lack of building permit or city by-law compliance.
SECURITY: Because buying a home is such an huge investment, you want assurance that title is "100% yours" (except, of course for any mortgage). You don't want to find out, after closing, that an old lien was never discharged, that the previous owners didn't pay their property taxes, their utilities, or that someone has a claim against your land.
TYPICAL COST: For residential real estate transactions with a purchase price of less than $500,000.00, a policy can be purchased for $150-$299 (depending on the type of residential property and whether there is a mortgage). This cost is largely offset by the cost of certain legal disbursements which are no longer required in title insured transactions. As municipalities continue to increase their fees for zoning, subdivision and tax searches, title insurance is becoming an increasingly competitive option.
QUICK CLOSINGS: When a buyer or seller wishes to close a transaction quickly, a policy of title insurance is often the best option. By eliminating some of the procedures otherwise required, a policy of title insurance can facilitate closings on very short notice.
DEFERRED COSTS: As a further benefit, First Canadian Title Insurance Company offers an option of deferring closing costs, including legal fees, title insurance, land transfer tax, and closing adjustments for up to six months (for a small fee). For more information, phone 1-800-307-0370 or 905-287-1000
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