Title Insurance
Title insurance is an insurance policy you buy when you purchase your home to protect you from a loss that might arise after you become the owner, if the causes of this loss are detected after you become the owner, and are related to issues that could be a cloud on your title or prevent you from having good marketable title when you want to sell.
Title insurance is a recent arrival on the scene when you consider how real estate purchases have been handled historically in Ontario. Generally, the way most transactions were done up until the mid 1990’s was that a lawyer did detailed searches not only of title but also of all of
the often peripheral areas that could give rise to a cloud to the title of the property. These
included zoning, building standards and compliance, survey compliance, utilities structures,
property taxes, property development, agreement compliances, work orders, easements, etc. Each of these separate searches required a cheque to be sent with a requisition for a report
to respective third parties, who in turn would reply, often not for some time. This procedure is
a full certification procedure and is still the most thorough way to know what you are buying.
Title insurance companies, however, offer an insurance protection against you sustaining an
economic loss if something goes wrong after you have closed your purchase if the loss arises
because of a problem in any of the above areas that traditionally would be searched but are
not because a title insurance policy is bought instead. Using title insurance is less expensive
than doing a full certification on closing, and in many cases allows you to close because you
can’t get a response to a requisition in time for closing.
A lawyer’s search will result in evidence that clear title will pass to the purchaser upon closing. This is so because the rules presently require that a lawyer certify title only to the title insurance company before the title insurance policy may be issued. Title insurance provides for compensation to be paid to the purchaser in the event that a defect on title is later discovered, resulting in damages to the purchaser. Usually, the title insurance covers a defect which would not be possible to discover prior to closing. Also, some types of title insurance also insure you against a possible error by your lawyer resulting in a title defect. The boundaries that establish the kinds of claims title insurance companies acknowledge are covered by a policy and are changing daily. This is primarily because the experience with title insurance is relatively new in Ontario as discussed above.
For most transactions, title insurance can be purchased for around $185.00. In situations where
a search will cost more than this amount, or where an up to date survey is not available and
preparing a new survey is too costly, title insurance is highly recommended. Title insurance is therefore a simple, inexpensive, quick, and effective method of providing additional protection against a defect and is a useful tool to help you close a transaction that time limits or survey costs might otherwise prevent you from closing. However, when an out-dated survey is relied
on and a purchaser is covered by a title insurance policy, purchasers should note that their lawyer
cannot provide an opinion on survey-related events affecting title, such as encroachments, which could have been discovered if an up to date survey had been made.