Title insurance provides protection to the new owner of a property, absent a current land survey, against losses that are based around the ownership of the property.
Properly transferring title, when you purchase a home or plot of land, usually involves having a land survey completed that will ensure your property is the right lot size, does not encroach on any neighbour’s land and that the property is within current municipal bylaws among other potential issues.
What Does Title Insurance Cover?
Title insurance takes the place of having a new land survey (but is not a substitute for having an up-to-date land survey completed) and is generally the route most property purchasers take. The added benefits of this type of insurance are many, including:
Protection against unknown defects in the title that would otherwise affect your clear ownership of the property (other owners holding title on the property in an example)
Existing liens against the title that are not revealed by the seller but are public record
Errors about the property in land surveys or public records
Encroachment issues, such as if you have a structure that partly is over the property line and is on a neighbour’s property
Other title related issues that would pose a conflict with your ability to sell, finance or lease the property in the future
Your title insurance policy will cover the costs and losses incurred by any of the above things happening to you for the entire period that you own the property for a one-time fee. Some title insurance companies even allow the title to be transferred to your heirs should they inherit the property or to a spouse in the event of a divorce, or if the property is gifted to your children.
You will need to confirm these clauses in your policy with your title insurance company.
Some title insurance policies will also cover mistakes that the lawyer may make in the transfer of the title, such as an incorrect condo unit or address being recorded in the title, allowing you to be compensated directly from the insurer rather than having to sue the lawyer.
What Does Title Insurance Not Cover?
While it may seem that title insurance protects the buyer against any loss against the ownership of the property this is not the case. There are many instances where your title insurance may not protect you against claims against the property, these may include:
Native land claims
Soil contamination and other environmental hazards on the property
Defects in the current title that were known before the transfer and sale of the property to the new owner
Problems with the property that only a new land survey would have discovered, such as the lot size being recorded incorrectly
Zoning bylaw violations due to renovations, changes or additions performed by the holder of the policy
Government land rights
Title issues that the buyer has agreed to handle and not informed the title insurer or lawyer about
Land use issues, such as if the buyer wants to change the land use purpose, rezone, or undertake renovations construction or any expansion of the property
What Types of Title Insurance Are Available?
Title insurance is available for almost every time of real property but the availability of a specific policy for title insurance coverage is dependent upon the insurance company offering that type of policy. Your real estate lawyer can help you to be informed about the title insurance policy you should have and what the coverage against losses are.
The most common types of title insurance are:
New homeowner policies
Existing homeowner policies
Residential mortgage lenders (banks, trusts or private lenders included)
Also available is a form of title insurance that is called “gap coverage” which will protect the buyer for any loss due to a delay in the transfer and receipt of the funds of the purchase money and the registration of the property in the buyer’s name (essentially is there is a problem with the closing of the sale).
Discuss your title insurance with your real estate lawyer to ensure you have the appropriate coverage and that you are aware of any exclusions or exceptions in the policy coverage with respect to your property and the real estate transaction.
Financial Services Commission of Ontario “Understanding Title Insurance” PDF //www.fsco.gov.on.ca/en/insurance/brochures/Documents/undstitins.pdf
Chicago Title Insurance Company //www.ctic.com
FCT Insurance Company Ltd. //www.firstcanadiantitle.com
Lawyers' Professional Indemnity Company (TitlePlus) //www.lawpro.ca
Travelers Guarantee Company of Canada //www.travelersguarantee.com
Stewart Title Guaranty Company //www.stewart.ca