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 and is used to provide ownership protection for a purchaser against losses or damages suffered as a result of title problems. Title insurance is obtained, typically by the purchaser’s lawyer prior to closing a purchase for the benefit of the purchaser.
AVAILABLE IN ONTARIO: Although title insurance has been standard in American real estate transactions, such insurance has gained popularity as part of the typical Ontario residential real estate purchase transaction.
TYPICAL NON-INSURED TRANSACTION: Traditionally, Ontario purchasers have 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.
TYPICAL INSURED TRANSACTION: Title insurance does not replace the role of the lawyer. It simply provides an added level of protection for the purchaser(s). Ontario lawyers still must search title and certify the status of title before a title insurance policy can be issued.
THE BOTTOM LINE IS THAT: Title insurance is golden for the consumer as it can be included in a purchaser’s total legal costs when one considers typical total legal fees and legal expenses, and since it is a form of NO-FAULT CERTIFICATION of clean title with (typically) NO DEDUCTIBLE and with more extensive coverages than the certification of title that has been traditionally provided by lawyers for real estate transactions.
STANDARD IN EVERY TRANSACTION: The processing of your purchase transaction by a law office typically includes arrangements for a Title Insurance Policy which will provide you with title protection. The lawyer’s role will be to provide purchasers with all required legal services and advice during the course of the transaction. The title insurance policy will be issued to purchasers directly from the insurer after completion of the purchase.
TYPICAL RESIDENTIAL POLICY COVERAGE For a one-time premium, 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 of title
- defects in the title
- invalidity or unenforceability of the mortgage on title
- 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) and automatically increasing coverage (with inflation and rising property value) overtime to a coverage which can be double the price originally paid for the property.
- payment of legal fees and costs to address title issues
- a “no-fault” method to resolve title problems
SECURITY: Because buying a home is such an important investment, you want assurance that title is yours “100%” (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.
TYPICAL COST: For residential real estate transactions with a purchase price of less than $500,000.00, a policy can be purchased for $150-$299 (depending on the type of residential property and whether there is a mortgage). This cost is largely offset by the cost of certain legal disbursements which are no longer required in title insured transactions. As municipalities continue to increase their fees for zoning, subdivision and tax searches, title insurance is becoming an increasingly competitive option.
QUICK CLOSINGS: When a vendor or purchaser wishes to close a transaction quickly, a policy of title insurance is often the best option. By eliminating some of the procedures otherwise required, a policy of title insurance can facilitate closings on very short notice.
TITLE INSURANCE COVERAGE FOR EXISTING HOMEOWNERS: Now all existing homeowners can obtain the same title insurance protection as a purchaser, including coverage against title frauds and a variety of other matters affecting title. Coverage provided is equal to the value of the insured property at the time title insurance is ordered with the coverage being increased as property value increases up to double the face amount of the policy amount.