What’s not covered by title insurance?

By FCT

Jen and Henry* saved up for years and finally bought a house, even though it needed a little work. They considered themselves pretty handy and to save a few bucks, they decided to do the renovations themselves. While demolishing walls, they found that mould was growing in the guest bathroom. Jen was distraught at the thought of spending more money to clean up and fix the issue, but Henry was not. “It’s not a problem,” Henry said. “We’ve got title insurance!”

Unfortunately, Henry, like many others, didn’t understand what title insurance covers. While title insurance does cover renovations and repairs that are enforced by the local municipality due to work that previous homeowners did without permits, it does not include all repairs.

We often get claims that are more suited to home insurance. For example, Michelle and Jake*, title insured homeowners, noticed that the carpet in their basement was wet and they could see water coming in from the side of the house. They found a crack in the foundation wall where the water was coming in. Had the previous homeowners finished their basement without a permit which caused this issue, title insurance would likely have covered it if the municipality required the removal or repair because it was done without a permit. However, since this was not the case, we were not able to pay out the claim.

Other claims that are not covered by title insurance (but may be covered by home insurance, depending on your policy) are a leaking roof, fire or weather damage, infestations, etc. Title insurance protects your ownership of the home and covers unknown issues like fraud, forgery, encroachments (if your shed turns out to be on your neighbour’s property or vice versa), previous homeowner’s lack of building permits, and more.

If you’re ever in doubt, feel free to call us to confirm your coverage!

*Names were used for illustrative purposes and have been changed to protect the privacy of our clients.

This is for general information only. For specific coverage, please contact your title insurer or home insurance company.

Categories: Title Insurance

26 Responses to “What’s not covered by title insurance?”

  1. Nneka Isibor says:

    Does title insurance protect you from contractor fraud? We hired a contractor to flip a house we bought and he left the job without finishing the job. And even made it worse.

  2. Carla says:

    My basement wall is leaking. The basement is unfinished and I noticed cracks at all the corners of the floor. These are not leaking but I’m afraid it’s only a matter of time that they leak because of the wall. Is fixing the leaking wall covered by title insurance. I have a feeling it has leaked previously because the previous owner had things stacked up in front of that wall when we had the home inspection done.

    • FCT says:

      Hi Carla, unfortunately there is no specific coverage for leaking basements in a title insurance policy. Amongst other things the policy contains coverage for outstanding work orders, open building permits and the forced removal and remediation by a governmental authority because of work done without a required building permit. If you’d like us to investigate this for you, please visit the “Make a Claim” section of our website and we’d be happy to help!

  3. Scott says:

    We recently purchased an older home.. we removed the glass sliding doors on the bathtub and found mold in behind the tub surround. It appears the home owner did the tub surround. Is this something title insurance would cover.

    • FCT says:

      Hi Scott, sorry to hear that. Unfortunately there is no coverage for mold specifically in the title insurance policy. As we mentioned in our previous comment, the policy contains coverage for outstanding work orders, open building permits and the forced removal and remediation by a governmental authority because of work done without a required building permit, in addition to other coverage. If you’d like to submit a claim, please visit the “Make a Claim” section of our website and we’d be happy to help!

  4. David Cameron says:

    How about paint used to cover up an existing ceiling mould problem and within 2 months after purchasing the residence, the mould is now leaching through the paint revealing itself to the bedroom areas. Seems like it is some what fraudulent to hide and not disclose the problem. Is this something title insurance would cover?

    • FCT says:

      That’s a tough situation, David. Unfortunately this type of fraud is not covered by title insurance. Our policy includes coverage for title fraud where the ownership or title of a property is fraudulently changed or documents are forged to illegally sell or refinance the property. Have you spoken to your home insurance company? We’d recommend that you check with them about your coverage. If you would like a definitive coverage position from us, you could submit a formal claim at https://fct.ca/make-a-claim/.

  5. Moi says:

    How does Title Insurance work for a residential rental property? A former renter left without notice and their own brand of home renos seem shoddy at best. Second hand appliances were ‘patch worked’ installed and our kitchen counter tops and cabinetry were altered and damaged in the process. An attempt to replace the bathroom floor was made, but incomplete and now the toilet leaks. I could go on, but it would be depressing. I was not aware that these alterations were being made or attempted until after the renter was long gone. This was our home before we decided to rent it out and we are guessing that the flooring was also replaced by the previous owners prior to us moving in. If we have to do a proper reno on the kitchen, would Title Insurance cover that, new flooring, cabinetry, toilets….etc?

    • FCT says:

      Hi Moi, sorry to hear that. There isn’t a significant difference on how a title insurance policy works on a residential rental property as opposed to an owner occupied property. The policy contains coverage for the costs of correcting work done without a required building permit if the insured is forced by a governmental authority to correct it. However the coverage only applies to work done before the insured becomes an owner of the property. Have you spoken to your home insurance company? We’d recommend that you check with them about your coverage. If you want a definitive coverage position from FCT, you could submit a formal claim at https://fct.ca/make-a-claim/

  6. Nicole says:

    Does title insurance cancel itself out if you bought the house ‘as is’?

    • FCT says:

      Hi Nicole,
      A residential owner’s policy has an exclusion to coverage for things agreed to by the insured, but the mere fact that an agreement says the house is being purchased “as is” will not in and of itself lead to an exclusion of coverage. We sometimes see agreements of purchase and sale (especially in the context of foreclosures or powers of sale) that say the purchaser agrees to accept things like work orders, open permits or lack of permits, and if this is the case, this could lead to an exclusion of coverage. Like all insurance policies, there are exclusions to coverage to coverage in a title insurance policy, but the specific wording of the agreement of purchase and sale is very important and each case is decided on its own particular facts.

  7. Shanna Cruz says:

    The previous owner made a bathroom renovation and did not put a heating vent. We also have a window in the bathroom, and we have noticed that moisture is building up every time we take shower. I have requested to the City if there is any permit requested prior to the renovation. If there is none, does title insurance cover for fixing the bathroom?

    • FCT says:

      Hi Shanna,
      Covered Risk 24 of the residential owner’s policy provides coverage when “You are forced by a Governmental Authority to remove or remedy your existing structures or any part of them, other than a boundary wall or fence, because any portion of your existing structures was built without obtaining a required building permit from the proper Governmental Authority office.” This coverage is expanded in western Canada to also include situations where permits have not been signed off. If your situation falls under this and you believe you have a claim, please see the “Make a Claim” section of our website.

  8. Tim says:

    My wife and I recently got an offer accepted on a property. The closing is soon. The property was purchased to build a family home. We decided to perform a survey of the lot prior to closing. The survey revealed significant encroachment from one of the adjacent neighbours. We would like to approach the seller about a price abatement given this fact and the impact on our build. The encroachment is approximately 5%. Therefore, we will be requesting 5% of the purchase price + legal fees as an abatement. We are concerned that the seller won’t budge on price. Assuming the seller has Title Insurance, is this something they can try claim back from their title insurance company given they were unaware of this fact when they bought the property.

    • FCT says:

      Hi Tim, generally speaking a title insurance policy insures against matters that would have been disclosed by an up to date survey. Assuming the sellers have a policy of title insurance, they should immediately submit a claim to their insurer. Because there is an on-going transaction, we would recommend that your lawyer raise the survey issues with the sellers’ lawyer.

  9. Jone says:

    Hi, I need some advice here. I try to sell my property with a Realtor and it turns out this Realtor was forwarding private information she learned from my property to the city. Instead of trying to sell my property she back stab me with lies and manipulations which now put me in trouble with the city threatened to put charges on my property if I don’t do what the city want me to do on my property. Yes I am facing a big mess from this Realtor.

    I don’t have mortgage on my property so the title is clear no mortgage. My question is do I have to buy this title insurance if my property has no mortgage on the title? Can someone like the city or a Realtor change things on the title and take my property without me knowing? How to find out the real information on a property if someone recently change the title? Thank you.

    • FCT says:

      Hi, sorry to hear you are having trouble. The issues raised in your post about your realtor are outside the scope of title insurance. If you have concerns about her behavior, you should consult the provincial regulator. Concerning your question about buying title insurance if a property has no mortgage on title, this can certainly be done and is a good idea. FCT offers a product we call an existing homeowner policy. For more information, please give us a call at 1.877.888.1153. Thank you.

  10. KD says:

    I purchased a property several years ago that had many known defects. These were obvious/ discovered / discover in Our home inspection.

    Over the three years that we have owned the property we have made many upgrades to resolves these known issues at our own expense including upgrading wiring, replacing a furnace and resolving issues with asbestos ducts and lack of ducts in some parts of the house. We also waterproofed a portion of the foundation from the outside.

    We have recently gutted the interior basement walls and found that there are major structural issues with the foundation. They seem to stem from the area where a previous owner opened the foundation to create a basement entrance and windows. It is unlikely that a permit was acquired to complete this work and it is obvious that at the very least these obvious structural defects (a large hole in the foundation wall for example) were visible and covered up by framing and drywall (also without permit). This is particularly obvious because th most glaring hole was stuffed full of insulation.

    What evidence would I need to seek a title insurance claim for this work?

    • FCT says:

      Hi KD,
      A residential owner’s title insurance policy provides coverage for losses when you are forced by a governmental authority to remove or remedy any part of your building because it was constructed without a required building permit. You can submit a claim on-line at https://fct.ca/make-a-claim. Just follow the instructions on our website. We will ask to see certain documentation like the agreement of purchase and sale and home inspection, but the claims handler reviewing your claim will guide you through the process.

  11. Christie says:

    Hello! We recently purchased our first home and discovered the previous owners took out a load baring wall without permits and also closed sealed up the air circulating vents in the bedrooms. Would this be covered?

    • FCT says:

      Hi Christie,
      Our residential owner’s policy provides coverage when “You are forced by a Governmental Authority to remove or remedy your existing structures or any part of them, other than a boundary wall or fence, because any portion of your existing structures was built without obtaining a required building permit from the proper Governmental Authority office.” If you believe you have a claim, please visit the “Make a Claim” section of our website, and we’ll be happy to help!

  12. Bruce says:

    We bought a condominium in 1982 and got title insurance much later around 2005/6. In 2017/18, a design flaw in the original construction of the underground parking was found by the Condo Board. This has resulted in a special assessment for all owners in 2019 and 2020 to bring the parking area up to code. Would the special assessment be recoverable under the title insurance, under any circumstances?

    • FCT says:

      Hi Bruce, unfortunately, it would likely not be covered as the policy obtained in 2005 or 2006 would have a policy date of the original acquisition in 1982. The special assessment coverage that the policy provides is for situations in which at the time of purchase, the condo corporation knew of an issue and failed to disclose it. In this particular case, as the defect was only discovered about 36 years after the acquisition of the unit, it would likely not fall under the coverage. If you would like a definitive coverage position from us, you can always submit a formal claim at https://fct.ca/make-a-claim/.

  13. Karen says:

    Hi there. We bought a property with a pool which we thought complied with bylaws in regards to pool fence height. Now we find that we do not have compliance with the city or the insurance company and we need to install a higher fence. Would title insurance cover this?

    • FCT says:

      Hi Karen, is the municipality forcing you to install a higher fence? The residential owner’s policy provides coverage when “You are forced by a Governmental Authority to remove or remedy your existing structures or any part of them, other than a boundary wall or fence, because any portion of your existing structures was built without obtaining a required building permit from the proper Governmental Authority office.” If your situation falls under this and you believe you have a claim, please see the “Make a Claim” section of our website.

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