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Title Insurance: What Good is it Anyway?
(courtesy of real estate lawyer Nancie-Anne Heaphy at 613)731-7999.
What is a Title Insurance Policy?
A title insurance policy is a guarantee of good title which replaces a solicitor’s opinion to the purchaser (and the lender if applicable.)
What does the Title Policy cover?
1.Liens, encumbrances, or defects in the title to a property
2.Defects that would have been revealed by an accurate up to date survey/location certificate/Real Property Report.
3.Forced removal of an existing structure, other than a boundary wall of fence.
4.Work order, zoning and set back non-compliance/deficiency.
5.Another party claiming interest in the property.
6.The land is unmarketable, which allows another person to refuse to perform a contract to purchase, lease or secure a mortgage.
7.Fraud, Forgery, duress, incompetence, incapacity or impersonation.
8.Unregistered easements and rights of way.
9.Loss of priority due to matters such as construction liens, agreements registered on title, and other mortgages.
The title insurance process
Whether a transaction proceeds by title insurance and/or a lawyer’s opinion must be the client’s decision, and it must be an informed decision. Consequently, the Purchaser should make the final decision to insure after speaking with their lawyer. Pursuant to the Law Society Rules of professional Conduct, lawyers have an obligation to advise clients about the option of title insurance. Advising the client means that they must be provided with sufficient information to make an informed decision. It is also a decision that should be made at the outset of the file, as it may dictate the searched required by the purchaser.
Having elected to proceed with title insurance, the transaction proceeds as normal, save and except that the lawyer may not be performing some of the off title searches not required by the insurer. The lawyer arranges the policy prior to closing and will review the policy- or at the very least the relevant exceptions set out in the schedules- with the client. The lawyer then remits the necessary premium to the insurer after closing, who in turn forwards the original policy back to the lawyer.
A lawyer’s interest in title insurance can be summarized in four main points:
1.Superior protection for clients
2.Keep the practice cost competitive
3.Streamline the administration of files
4.Significantly reduce liability
The fee for title insurance paid by Purchasers when buying a home is under $300. But what good is it? Well, here are some examples of claims paid and covered as a result of title insurance.
A few months after moving in, the basement flooded and smelled of sewage. It was discovered the the Vendor had previously received a work order to correct the septic system and failed to do so. Because there was an outstanding municipal work order at the time of the purchase, the title insurance company paid the Purchaser the total replacement cost of the septic system.
In another case, the Vendor signed the Deed and said his wife had released all her interest in the property by way of a separation agreement. The wife later claimed an interest in the property purchased. The title insurance company paid for all the legal fees to defend the Purchaser's title because the Purchaser bought Title Insurance. Title Insurance also covers situations where there is no survey.
For legal advice, we recommend Nancie-Anne Heaphy to all our friends and clients. She returns calls quickly (a rarity these days)! If you have any questions related to real estate or any other legal issue. Simply callNancie-Anne Heaphy at (613)731-7999.