Homes & Land of Ottawa

Title Insurance

from the files of Poulsen Law Office

Buying a home is an investment as it is likely the largest single purchase you will make in your life. You clearly will want assurances that title is "100%" yours (except for any mortgage). You don't want to find out, after closing, that an old lien was never discharged, that the previous owners didn't pay their property taxes, their utilities, or that someone has a claim against your land.

The Law Society of Ontario requires all lawyers, when acting for purchasers, to inform clients about title insurance and its advantages.

Title Insurance is an insurance policy covering the condition of title or ownership of real property at the time the policy is issued. It is used to provide ownership protection for a purchaser against losses or damages suffered as a result of title problems.

Typically, title insurance is obtained by the purchaser's lawyer prior to closing a purchase. Although title insurance has been standard in American real estate transactions, it has gained popularity in recent years as part of the typical Ontario residential real estate purchase transaction.

TYPICAL NON-INSURED TRANSACTION:

Before the late 1990s, Ontario purchasers relied solely on their lawyer's "legal opinion" that they have "good and marketable title" in order to confirm a clean title.

Unfortunately, no lawyer can completely assure a purchaser that there is absolutely no chance of an error in the government records, that there are no undisclosed claims, or that what appears to be the signature of the prior owner or consenting spouse is a true signature, there having been no prior fraud or forgery on title. Title Insurance can satisfy such "gaps" in a lawyer's opinion to cover not only frauds or forgeries prior to closing but also after closing.

Title insurance compliments and does not replace the role of the lawyer. It simply provides an added level of protection for the purchaser(s). An Ontario lawyer still must search title and certify the status of title before a title insurance policy can be issued.

WHICH TITLE INSURER TO USE?

Although several insurance companies have title insurance policy programs, your lawyer can assist you in making your choice about which one is best for you. Some policies cover areas such as legal errors (not related to title), where others may not. Additionally, the claims process and the simplicity of actually filing a claim are important if the policy is to be useful in the future.

TYPICAL RESIDENTIAL POLICY COVERAGE

For a one-time fee the policy protects the purchaser(s) and mortgage lender against losses suffered from matters set out below as well as other matters more specifically outlined in the policy:

• defects that would have been revealed by an up-to-date survey
• survey errors or illegibility of survey
• encroachments (before or after closing)
• contravention of municipal zoning by-laws
• unmarketability or defects of title
• invalidity or unenforceability of the mortgage on title
• liens
• easements (other than usual easements for utilities, etc.)
• contravention of subdivision, development and other agreements
• priority of certain construction liens
• priority of unregistered easements and rights of way
• fraud or forgery (prior to and after closing)
• solicitor error, omission or fraud
• unpaid property taxes or local improvement charges by a prior owner

In addition to policy coverage, the insured also receives:

• indemnity for actual loss or damage for the amount of the policy (being the price paid for the property).
• payment of legal fees and costs to address title issues
• a "no-fault" method to resolve title problems

Title insurance will not typically cover pre-existing matters known to a buyer; fence issues; building inadequacies (which should be checked prior to closing by a home inspector during a home inspection condition) unless such inadequacies relate to a lack of building permit or city by-law compliance.

Brought to you by Poulsen Law Office