BASIC FACTS ABOUT TITLE INSURANCE
TITLE INSURANCE AS AN OPTION
Long a feature in American real estate transactions, title insurance has only recently gained popularity in Ontario residential real estate transactions.
NATURE OF TITLE INSURANCE
Title insurance is essentially an insurance policy issued by an insurance company to provide compensation in the event that there are defects in title on your home.
CONSIDERATIONS IN CHOOSING TITLE INSURANCE
In the usual transaction, your lawyer searches title to your property and also performs a number of other searches such as zoning, work orders and tax arrears to ensure that the property you are purchasing can be legally occupied and that there are no tax arrears or other liens against the property. This will include a review of the survey to ensure that there are no encroachments affecting the property and a search of executions against the vendors, and in some instances, predecessors in title. An execution is a writ of seizure and sale of property placed by a creditor who has obtained a court judgment against a property owner. Executions must be paid off in order to pass clear title to a purchaser.
In a title insured transaction, some of these searches can be skipped or a survey can be omitted. Instead, a policy of insurance is issued to the purchasers and their mortgage lender. Unlike a lawyer’s searches, a title insurance policy does not ensure that clear title passes to the purchaser, but instead it provides for compensation to be paid in the event that a cloud on title is later discovered. For most transactions, a policy of title insurance can be purchased for a cost in the range of $270.00. The purchasers can use title insurance to avoid the cost of having a new survey prepared. In recent years, municipalities have substantially increased the costs of zoning, subdivision and tax searches making title insurance an increasingly competitive option in some transactions.
SITUATIONS WHERE TIME IS A FACTOR
When a vendor or purchaser wishes to close a transaction quickly, a policy of title insurance is often the best option. By eliminating many of the searches otherwise required, a policy of title insurance can facilitate closings on very short notice.
NOTE: This information is based on Ontario law. It is intended to inform and not to advise and does not create a solicitor/client relationship. The statements above are general in nature. The individual facts in a given case may alter their application or involve other laws not referred to here. Any amounts referred to are subject to change.