What exactly does title insurance to for a buyer? First to carry on with my Grow op investigation I searched to find if title insurance could help an unsuspecting buyer. I found the following question and answer:
"A question was asked that the CMHC presenter couldn't answer - if the Grow Op was sold - with a superficial fix so it 'looked normal' - the Buyer closes with Title Insurance and for some reason finds out - either by neighbours or through problems with mold respiratory symptoms or any other reason - and they pull away the drywall and there is all the mold and damage typical of a Grow house - will the Title Insurance pay to remediate the house?:
Answer from an Ontario based title insurance company:
"We are pleased to respond to your inquiry regarding title insurance coverage for common grow house issues.
The answer to your question requires a review of some of the coverage provisions of a title insurance policy. This response is based on the TitlePLUS Version 2.0 Policy (the "Policy").
The Policy provides coverage in accordance with the terms and conditions of the Policy, up to the Policy Amount, for actual losses resulting from:
(i) an order by a court or other authority (including the municipal Building Department) forcing the buyers to remedy any of the following conditions, if the conditions existed as of the date on which the buyers closed their purchase of the property:
(a) a breach of a zoning by-law, a property standards by-law or the building code of a governmental authority having jurisdiction (such as the municipal Building Department);
(b) the lack of a building permit for the existing building or other improvements on the property, or any part thereof; or
(ii) any work orders issued as of the date on which the buyers closed their purchase of the property.
In the situation you describe, the "superficial fix" that was done on the property (such as cosmetic work like painting and decorating) may conceal the fact that the operators of the grow op made changes to important aspects of the house, such as walls, structure and wiring. These changes may have been made without the required permits, and may violate the municipal property standards by-law and/or the requirements of the Building Codes. In these cases, there would likely be coverage under the Policy for the work done without permits, or not up to the requirements of the Building Code.
The Policy contains a standard exclusion for "the existence or presence of any dangerous or hazardous substance" on the property. Because of this exclusion, it appears that any losses resulting from the presence of mould or other environmental hazards on the property would likely not be covered by the Policy. "
Okay - that was all I could find - if anyone has any more information please advise below. Now for the other reasons why a buyer might want title insurance the stock or standard answers are:
From First Canadian Title Insurance Brochure:
What Does Title Insurance Cover?
-
Unknown title defects (title issues that prevent you from having clear ownership of the property);
-
Existing liens against the property's title (e.g. the previous owner had unpaid debts from
utilities, mortgages, property taxes or condominium charges secured against the property); -
Encroachment issues (e.g. a structure on your property needs to be removed because it is on
your neighbour's property); -
Title fraud;
- Errors in surveys and public records; and
-
Other title-related issues that can affect your ability to sell, mortgage, or lease your property in
the future.
Your title insurance policy will protect you as long as you own your property, and will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property's title.
From Stewart Title Guaranty Company:
For a one-time fee, some of the covered title risks for residential properties include:
- someone else owns an interest in your title
- existing liens against the title
- violations of municipal zoning by-laws
- encroachments onto an adjoining property (other than fences and boundary walls)
- setback violations
- realty tax arrears
- outstanding municipal utility charges, provided such charges form a lien on title
- existing work orders
- lack of legal access to the property
- marketability of the land due to adverse matters that would have been revealed by an up-to-date survey / RPR/ Building Location Certificate
-
fraud, forgery and false impersonation to the extent they affect the validity of title.
They are all pretty much the same. Title insurance companies do not do any investigations, they strictly play the numbers game.
So do you recommend title insurance to your buyers when they ask? I see it as being a long shot that it would ever come into play but it's a long shot that your house is going to burn down too. We all get house insurance that we pay for annually. And, if it does offer some financial assistance to the poor homebuyer who finds they have bought a grow op then it just might be a good idea for the price.
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