Title Insurance

Long a feature in American real estate transactions, title insurance has gained popularity in Ontario residential real estate transactions. Title insurance is essentially an insurance policy issued by an insurance company to provide compensation in the event that there are defects in title on your home.

In the usual transaction, your lawyer searches title to your property and also performs a number of other searches such as zoning, work orders and tax arrears to ensure that the property you are purchasing can be legally occupied and that there are no tax arrears or other liens against the property. This will include a review of the survey to ensure that there are no encroachments affecting the property and a search of executions against the vendors, and in some instances, predecessors in title. An execution is a writ of seizure and sale of property placed by a creditor who has obtained a court judgment against a property owner. Executions must be paid off in order to pass clear title to a purchaser.

In a title insured transaction, some of these searches can be omitted and instead a policy of insurance issued to the purchasers and their mortgage lender. Unlike a lawyer=s searches, a title insurance policy does not ensure that clear title passes to the purchaser, but instead it provides for compensation to be paid in the event that a cloud on title is later discovered. For most transactions, a policy of title insurance can be purchased for $200-$250. This is a one-time premium and coverage is provided for the entire time you own the property. This can save money for a purchaser in situations where the searches which can be avoided would have cost more than $200, or where an adequate survey is not available and the purchasers can use title insurance to avoid the cost of having a new survey prepared. In recent years, municipalities have substantially increased the costs of zoning, subdivision and tax searches making title insurance an increasingly competitive option in some transactions.

Some of the covered title risks include:

• someone else owns an interest in your title
• existing liens against the title
• violations of municipal zoning by-laws
• encroachments onto an adjoining property (other than fences and boundary walls)
• setback violations
• realty tax arrears
• outstanding municipal utility charges, provided such charges form a lien on title
• existing work orders
• lack of legal access to the property
• unmarketability of the land due to adverse matters that would have been revealed by an up-to-date survey/Building Location Certificate
• fraud, forgery and false impersonation to the extent they affect the validity of title

In addition, title insurance provides coverage against losses arising from fraud, forgery and false impersonation of an instrument, i.e., deed or mortgage, by which someone else claims an interest in or fraudulently places a mortgage on your home.

Title insurance can also be obtained by those homeowners who already own their home but did not obtain a title insurance policy when they purchased their home.