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 customers.
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 for legal professionals that benefits every transaction, residential or commercial: title insurance.
Some of your customers may be familiar with how title insurance can protect them against identity theft-driven title fraud and other expensive risks. But what they may not know is that it starts benefiting them well before close.
One thing many customers underestimate is how much time a legal professional needs for title searches, as well as the additional searches that go into due diligence.
This is especially true for commercial properties, which usually require all the same searches as residential ones, but can also include health and fire department searches, corporate status, bankruptcy, litigation and more.
One major benefit that title insurance brings to 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 for your business 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 ultimately grows your business: creating a great experience for your customers.
The trouble with title searches on both residential and commercial properties is that, even after taking the time to complete them, they don’t always reveal a property’s hidden risks, and aren’t always accurate.
Mistakes at government offices can introduce errors into the legal description 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—after a new land survey is later conducted, for example—they’re often expensive. In many cases, a defect on your customer’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, and that continues for as long as your customer has an interest in the property.
Your customers 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—a legal opinion won’t be able to help a transaction that’s stuck in the queue at the land titles office.
That’s where having title insurance in place for each transaction becomes so important: having ordered title insurance for your customer will sometimes have made the difference between their transaction closing on time, and not closing at all.
Consider these two scenarios:
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 mortgage 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 evidence from financial institutions, 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?
You’re handling the purchase of an older home, and after your customer’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 customer 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 your customer’s closing date. What options do you have?
Neither of these scenarios have a problem that 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, with title insurance that can let transactions close as planned, without waiting to resolve certain issues.
By protecting your closing date, it can help prevent the worst-case scenario of a customer coming to you after their transaction falls through. By protecting your customer’s title, it 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 customers’ 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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