Despite the media’s focus on B.C.’s hot residential market, the province’s commercial sector continues to represent massive opportunities, from the lower mainland to the mountains. For many lawyers in B.C., writing an opinion of title for each deal has become a natural and automatic part of the commercial real estate lifecycle. But is it the only option? Why would lawyers consider commercial title insurance as a viable alternative to their legal opinion?
The Torrens system
It’s no secret that B.C. has one of, if not the, best land title registry systems in Canada. The Torrens-style system in B.C.—the first adopted in the country—and its centralized register reduces many of the issues that can come up in title transfers, to the point where insuring a buyer’s claim to title can seem unnecessary. But for all its benefits, the Torrens system can only help so much, which is why real estate deals still rely on title insurance or an opinion of title. Buyer clients face exposure to tax and utilities arrears from prior owners, encroachment issues and survey problems. Which option offers the best protection against losses from these kinds of issues?
Title registration: a matter of opinion?
The main benefit of a legal opinion, from the client perspective, is the extensive due diligence required to prepare it. The title searches and new surveys performed can reveal those hidden title defects and property issues that would trigger a title insurance claim down the road—assuming the new survey is accurate. The surveyor could make a mistake, and even expert and thorough title searches can miss problems if the government’s documents are inaccurate.
Your opinion always takes into account these possibilities by qualifying itself against the accuracy of its documents. While that can feel like sufficient protection for you and your practice, the risks associated with title defects can come back to you more easily than you might expect.
The question of risk
If a client purchases a property and later runs into losses from title issues like survey errors, zoning and compliance problems, or encroachment issues, they face one of two scenarios with very different means of recourse:
If the deal was supported by a legal opinion, the client’s only option to cover costs may be to bring a negligence action in court. Not only is this time-consuming and potentially expensive, it will likely damage your relationship with that client and jeopardize future business with them.
If the deal was protected with title insurance, the insurer takes on the responsibility of resolving the issue, whether that means covering arrears, paying for improvements on the property to be moved or taken down, or reaching a settlement with the other parties.
At first glance, it can seem as though the question of risk that title insurance addresses only affects your clients. But there are many cases where your commercial client’s title insurance policy means the difference between you facing legal action and you continuing to build your client relationship.
Title insurance offers more than a policy
Title insurance offers you more than protection-by-proxy if your client encounters issues for which they could claim negligence on your part. In addition to offloading your risk, you can also save time and client costs by removing the need to write an opinion.
Some title defects discovered during the search process can prove challenging to resolve by the closing date, which can put deals in jeopardy. A team of underwriters can provide creative solution for the most complex commercial deals, and even cover over some known defects. By eliminating the need for specific or additional searches, you can pass the savings along to your clients, all while providing them—and by extension you—with more protection.
Get commercial title insurance to protect your clients while closing faster and more safely, with every deal.
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. Reference should be made to policy documents to confirm the insurer on any individual transaction. 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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