The title insurance landscape

Oct 17th, 2013 | By Michael LeBlanc

When you walk down the street, drive downtown, take a train through the countryside or fly over Canada the landscape features many different types of property. You will see homes, condos, apartment buildings, strip malls, schools, hospitals, office towers, hotels, industrial buildings, infrastructure like power plants, agricultural and wind farms, recreational properties – to name a few.  Each type of property has different characteristics and benefits that come with ownership or “title” to the property.

Title insurance at its core, has one common role – to protect your rights of ownership in a property.  When you buy or take an interest in a property, you want to make sure it is yours and that no one else has, or will have, a claim against your ownership.  As well, you want to know that your use and enjoyment of the property will continue, whether it is for a store, an office or simply your home.  Just as real estate property across Canada varies, so does the title insurance policy to ensure your ownership rights are fully protected.

In future posts, we will cross Canada and visit various properties, in some cases specific properties that we have title insured, to discuss the unique features of title insurance by property type.  For our first stop let’s visit the one that affects most of us – Title Insurance for homeowners.

FCT’s Vice President of Residential Title Insurance Services, Lori Sartor, explains:

When you buy something, usually you pay for it and you take it with you.  You have possession of it, so it is yours to eat, drink, use or throw away.  But real estate is a little different.  When you buy a home, it stays put.  You pay your money and receive a deed to say the home is yours.  In doing this, you assume the vendors actually owned it and had the right to sell it to you.  But what if they didn’t?  What if you are a victim of fraud?  What if someone else were to claim that they own your property?  Your largest single investment in life (and your home) could be at risk.  That’s why all Canadians need title insurance.

A residential home owner policy insures you against loss if you don’t have the ownership you paid for.  Your title insurance company will defend your rights against any valid claim insured under the policy, and compensate you for your loss.  And this coverage remains in place for as long as you or your heirs own the property.  There are no renewals to worry about and no further premium payments.

Generally, title insurance is arranged by your lawyer at the time you purchase your home.  He or she will order a policy from the title insurer and the one-time premium (usually in the range of $200-$350) will be included in the disbursements portion of the lawyer’s invoice.  However, if title insurance was not purchased when you bought your home, it is also possible to buy it afterward.  Simply contact your lawyer or, if you prefer, you can contact a title insurer directly.

In addition to the basic coverage outlined above, there are other areas of protection in a residential owner policy.  They may include the following; however, you should refer to the actual policy for specific coverage and exclusions:

  • Protection against municipal enforcement of outstanding building permit requirements for work done prior to your purchase without a required permit
  • Protection against outstanding work orders prior to your purchase
  • Protection against tax payments owed by the previous owner
  • Protection against encroachments on your property and the forced removal of encroaching structures onto your neighbour’s property
  • Protection against  zoning infractions to ensure you can continue to use your property as a residence
  • Protection against fraudulent mortgages registered illegally against your property or if your property is fraudulently transferred out of your name through forgery or impersonation

Should you wish to learn more about title insurance, you may refer to a publication entitled UNDERSTANDING TITLE INSURANCE, provided by the Financial Services Commission of Ontario (FSCO).  To view this document, please click the link provided below.

http://www.fsco.gov.on.ca/en/insurance/brochures/Documents/undstitins.pdf

So there it is – a summary view of residential title insurance for home owners.  Perhaps you have further questions or thoughts about title insurance.  Well, this is your opportunity to get them answered or shared.  We would love to hear from you.

3 Responses to “The title insurance landscape”

  1. Real Estate Closing Solutions says:

    You ask some very valid questions about purchasing a home that people should definitely be considering!

  2. Jennifer says:

    When we bought our last house – the lawyer described a scenario where we could return from an extended vacation and find strangers living in our home, it having been sold by fraudsters to a legitimate family while we were off exploring the world. He also said, in that scenario, the family that would ‘loose’ would be us, not the new family living in our home. This is how I understand Title Insurance. The real question would be – what if we both had it? Who would get the home then?

    • John Tracy says:

      Hi Jennifer
      That is a really great question that we do not have the answer for -yet, because as far as we are aware, no Canadian court has ever been called upon to rule on a situation where an innocent homeowner fraudulently loses their title and it is purchased by another innocent party. The land titles statutes in some provinces would dictate that the home remains with the second innocent purchaser. If both innocent owners have title insurance one innocent owner would retain the title and the other would be compensated for their loss by their title insurance coverage. The judge would determine who receives title and who receives compensation if there is no out of court agreement. If a case of this nature ever appears in court, we will be sure to write about it on this blog.

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