Recent news reports from Ottawa have highlighted a troubling issue: some homeowners are being hit with years-old water bills — sometimes amounting to thousands of dollars — for charges incurred by previous owners. Understandably, these surprise costs are causing frustration and confusion.

So, how can homebuyers protect themselves from this kind of financial risk? One possible answer is title insurance.

What Is Title Insurance?

Title insurance is a policy that protects property owners and lenders from certain losses related to the title, or ownership, of a property. This includes problems like:

• Unpaid property taxes or utility bills registered as liens
• Title defects or errors in public records
• Encroachments by neighbouring structures
• Fraud or forgery affecting title
• Zoning non-compliance or permit issues (in some policies)

Title insurance is a one-time premium paid at the time of purchase and provides coverage for as long as the homeowner owns the property.

Would Title Insurance Help in These Cases?

Possibly — but it depends on the specific circumstances.

If the unpaid water bills were registered as a lien against the property before closing, a title insurance policy would likely cover them. In that case, the title insurer may either pay the debt or resolve the issue on your behalf.

However, if the unpaid bills were not registered, or if the utility provider is pursuing collection without having placed a lien, coverage may not apply. Policies differ between insurers, so coverage depends on the exact terms of your policy.

Most often when purchasing a home your lawyer will ensure that the seller provides a representation and warranty that all utilities will be paid up to the date of closing by the Seller.  Standard language would be:

The Vendor has paid or will pay on time any utility accounts to the Completion Date that may form a lien against the Property.

This can be relied upon by the Buyer and is the basis for a post closing title insurance claim to be reimbursed for unpaid water charges. 

What Can Homeowners Do If They’re Facing Old Water Bills?

If you’re facing unexpected charges from a previous owner, here are steps to take:

1. Review your title insurance policy (if you have one)
   Contact your insurer or lawyer to determine whether your policy covers the claim.
2. Check with your lawyer
   Even if the issue isn’t covered, your real estate lawyer may help determine whether the charges were disclosed or if legal remedies exist against the seller.
3. Contact the utility provider
   Ask for a detailed breakdown of the charges and investigate whether the bill should have been settled before closing.
4. Seek legal advice
   A lawyer can help explore options, including negotiating with the utility or seeking recovery through small claims court or insurance coverage.
5. Communicate with your municipality
   Municipalities may have processes for disputing historical utility charges, especially if they relate to previous occupants and were not disclosed.

Conclusion

Buying a home should not come with financial surprises from the past. While title insurance doesn’t guarantee coverage for every situation, it remains one of the best ways to protect yourself from hidden title-related risks — including certain unpaid bills from previous owners.

If you’re buying a home, ask your real estate lawyer about title insurance and make sure you understand what your policy does — and does not — cover. And if you’re already facing unexpected charges, don’t hesitate to seek legal advice. You may have options.

Michael Abrams
Partner
Certified as a specialist in Real Estate by the Law Society of Ontario