Title Insurance: The Basics
Title insurance is an insurance policy issued by an insurance company, which insures or indemnifies the home buyer and mortgage lender (where mortgage financing is provided) against loss or damage sustained as a result of covered title risks and defects. It further insures against various problems which would have been disclosed by an up-to-date survey of the property and against the property’s failure to comply with municipal or other applicable regulatory authority requirements. In essence, it transfers the risks connected with the property’s title from the home buyer and mortgage lender to the title insurance company. While coverage varies depending on the insurer, below is a general overview of title insurance policies.
- Unknown title defects (issues that prevent you from having clear ownership of the property);
- Liens and encumbrances against the property (ex. when the previous owner had unpaid debts from utilities, mortgages, property taxes secured against the property);
- Rights of way or easements over the property;
- Someone else having an interest in the lands, such as adverse possession rights;
- Issues that would have been discovered by an up-to-date survey;
- Irregularities in the title documents;
- Pedestrian and vehicular access to the property;
- Zoning infractions;
- Outstanding building permits or work orders;
- Issues related to septic systems and wells;
- Non-compliance with restrictions or agreements registered on title
- Loss or damages suffered as a result of fraud/forgery (ex. identity theft);
- Lawyer negligence
- Known title defects (if purchaser or mortgagee was made aware of a title defect before the property was purchased, title insurance will not cover that defect);
- Environmental hazards (ex. soil contamination);
- Native land claims;
- Septic systems (functionality);
- Problems that would only be discovered by a new survey or inspection (such as a smaller lot size than originally anticipated);
- Personal Property Security Act (PPSA) – title insurance does not cover chattels, it only covers title to land;
- Matters not listed in public records, such as unrecorded liens;
- Zoning bylaw violations caused by changes, renovations or additions performed by the policy owner;
- Certain government rights in the land (such as the right of expropriation);
- Problems the buyer agreed to assume but failed to inform the title insurer or lawyer about;
- The buyer’s ability to change the use of the land or undertake renovations, construction or expansion.
Here are links to some of the most common questions we receive:
- A guide to our services when you are purchasing a home
- A guide to our services when you are selling a home
- When should I contact my lawyer and what info will they need to complete my purchase?
- Handling utilities and insurance when purchasing or selling a home.
- What new home buyers should know about Tarion Warranty Corporation
- Non-residents guide to purchasing real estate in Canada
Still have questions? Please contact a member of ou residential real esate team. We'd be pleased to help.