All About Title Insurance in Ontario, Canada
I’m sure that most of you have heard about title insurance, and have probably used it during the course of a home purchase. On the other hand, I often meet people who don’t really know what it is or why it’s become such an important feature of many real estate transactions. So, with apologies to those of you who are already well-versed in this topic, here’s a little primer courtesy of William Foden, LL.B of Foden and Doucette.
In Ontario title insurance is commonly used for residential purchase transactions as a cost-effective method to close a deal. Certain off-title searches which must be performed for the buyer's solicitor to form his or her opinion on title are not required when title insurance is purchased. The policy will provide similar coverage to that of a lawyer's opinion on title and usually adds coverage against fraud. One of the disadvantages of title insurance is that it simply masks a title problem, encroachment or zoning non-compliance, rather than repairs it. Also, it is not transferable from one owner to the next, so must be repurchased when ownership changes. Notwithstanding these concerns, title insurance has become the norm.
Building location surveys are of great value, but the cost of obtaining one ($1,000 or more) can be prohibitive. Most buyers are content to pass the risk of any discrepancies which might be revealed by a new survey to the title insurer in exchange for the policy premium of a couple of hundred dollars. Claims based on length of possession are becoming less common as titles are converted to the Land Titles system of land registration by the province.
Existing homeowner's title insurance policies have also become popular, partly as a result of the recent increase in identity theft. If a property was purchased years ago, it is unlikely that title insurance was obtained at the time. At particular risk is the owner of an investment property, or the owner of a property which is either mortgage-free, or in which there is substantial equity. For less than $500, most homeowners can rest easy by arranging for a title insurance policy through a real estate lawyer. Given the increase in title fraud claims, the province has amended the terms of the Land Titles Assurance Fund to make it easier for a defrauded property-owner to recover their loss. This makes title insurance less important, but certainly does not make it unnecessary.
To determine whether you have title insurance on your property, check the reporting letter you received from your real estate counsel when you bought your property. If you are concerned, or would like to obtain title insurance, consult with the office of your real estate solicitor, who will be happy to make the arrangements for you. They will ask you for a copy of your tax bill or MPAC notice of assessment as the policy will normally be issued for that value.
My thanks to Bill for contributing this article. If you have any questions, he’ll be glad to take your calls at his law offices, Foden and Doucette LLP, 905-428-8200, extension 24.