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As a legal professional dealing in both residential and commercial real estate, you navigate a unique set of risks every day.
Both types of properties have their own set of best practices for managing transactions, and often involve very different clients—it can sometimes feel like you’re operating from two sets of rules, and that you need two sets of tactics and tools in order to succeed.
But there’s one resource that benefits every transaction, residential or commercial: title insurance.
Some of your clients may be familiar with how title insurance can protect them against title fraud and other expensive risks. But what they may not know is that the benefits start well before close.
Can title insurance help your property searches?
One thing many buyers underestimate is how much time you need for title searches, as well as the additional searches that go into your due diligence.
This is especially true for commercial properties, which usually need all the same searches as residential ones, but can also include health and fire department searches, corporate status, bankruptcy, litigation and more.
Title searches take time you don’t always have
One major benefit of title insurance for commercial transactions is that it can reduce the need for certain searches as part of closing. These searches take your time, while not generating the same revenue as other, higher-value activities.
Title insurance—as well as Search Assist, for legal professionals in Ontario—helps you take that time back, and focus on what matters most to you and your business.
Title search results can carry hidden risks
The trouble with title searches on both residential and commercial properties is that, even after taking the time to complete them, they aren’t always accurate.
Mistakes at government offices can introduce errors that render a property’s title defective. A title search can’t reveal those errors, since the problem is with the source of the information. The documents for some rural and remote properties aren’t yet digitized, which can add time to the closing process, and also leaves them vulnerable to physical damage.
Hidden issues that aren’t revealed by property searches can take years to reveal themselves, and when they do, they’re often expensive. In many cases, a defect on your client’s title can prevent them from selling the property, or even refinancing, until it’s resolved.
Title insurance helps manage those risks by providing coverage that starts before the transaction closes.
Your due diligence is essential, but it’s not always enough for every risk
Your clients rely on you to make sure they can close on time, but sometimes the issues that block a property sale are completely out of your control. That’s where having title insurance in place for each transaction becomes so important: having ordered title insurance for your client will sometimes have made the difference between closing on time, and not closing at all.
Consider these two scenarios:
Scenario 1: an undischarged mortgage
You complete a title search for a small commercial space two weeks before close. To your surprise, you find a mortgage registered in favour of a lender that doesn’t exist anymore, either because it merged with another lender or went out of business.
Vendors’ counsel tells you that they already paid that mortgage out, and even provides copies of the payment cheques. Despite this, the deal still can’t close without a court order to strike the mortgage from title, which there isn’t time for before the closing date. What do you do?
Scenario 2: a zoning variance issue
You’re handling the purchase of an older home, and after the buyer’s new survey of the property is completed, the City gives notice that the home is too close to the street—the municipal setback by-laws changed between when the home was built, and today.
You help your client apply for a zoning variance that will allow the home to stay as it is, but the variance has a 30-day appeal process before it becomes final. The lender is refusing to release funds until the variance is finalized, but there are only three weeks until the closing date. What options do you have?
Title insurance helps you close easily and on time
Neither of the scenarios above could have been prevented by your due diligence, and a legal opinion wouldn’t be enough to get either transaction closed on time. At FCT, we’re able help legal professionals with situations like this by assuming certain known risks, and letting the transaction proceed uninterrupted.
Protecting your clients’ closing dates can help prevent a worst-case scenario. Protecting their title lets you provide them with peace of mind for years to come.
But like any tool, title insurance only helps you if you use it—any property can end up being the one that needed protection. Manage your clients’ risk, as well as your own, by making title insurance from FCT part of your due diligence on every transaction.
Insurance by FCT Insurance Company Ltd., with the exception of commercial policies. Subject to certain exceptions, commercial title insurance policies equal or below $10M CAD are provided by FCT Insurance Company Ltd. Commercial title insurance policies above $10M CAD are provided by First American Title Insurance Company. Services by First Canadian Title Company Limited. The services company does not provide insurance products. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.
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