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Real Estate Law

Oct 24, 2022

Title Insurance: What You Need to Know

4 minute read

Title insurance is an insurance policy with a one-time fee that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership, including losses related to title fraud, unknown title defects, water and tax arrears, encroachment issues, issues with surveys and public records, and other issues that affect the owner’s ability to sell, mortgage, or lease the property.

A title insurance policy lasts for as long as you own the property.

What is “title”?

Every property you purchase is comprised of at least one parcel, and each parcel has a record, commonly known as “title”, which identifies every person and corporation who has or had an interest in the parcel. 

When you purchase a parcel, title will be updated with a document called a “Transfer”, which shows the seller transferring their ownership in the parcel to you. When you borrow money through a mortgage or a line of credit, the lender will register a document called a “Charge” on title, which shows the value of their interest in your property. Old and irrelevant documents will be deleted from title, but can still be viewed when searching title.

What is a “title search”?

The title to your property is in the public record, meaning anyone can view what is on title to any parcel in Ontario by paying an access fee.

When you are purchasing a property, your lawyer will perform a title search, to determine if there are any issues on title that the seller will have to address in order to provide you with “clear title.” Issues might include outstanding mortgages or liens, expired agreements or restrictions, etc.

If there are issues with title that cannot be resolved by the closing date, sometimes title insurance will provide coverage for the issue for an additional fee.

If there are issues on title your lawyer overlooked when they performed their title search, title insurance may not provide coverage. This is why it is important to choose a reputable and knowledgeable lawyer to close your transaction, such as the lawyers employed by Doormat.

Not every issue with a property will appear on title. Title insurance providers often provide coverage for certain off-title issues, such as unpaid water bills, outstanding work permits, and encroachments on your property by neighbours.

What is “title fraud”?

Because it costs money to view the up-to-date title to your property, it is not uncommon for the owner of the parcel to go years without actually viewing the current registrations on title. This creates an opportunity for fraudulent actors to register instruments on title without the knowledge of the legal owner by committing identity fraud. A fraudster could transfer title to themselves, or register a fraudulent mortgage and disappear with the funds.

If this happens to you, your title insurance policy will provide coverage for the costs of straightening out this issue. You may also be able to receive compensation for your losses if you submit a claim through the government’s Land Titles Assurance Fund.

Is title insurance required?

Generally, no. You can choose not to order a title insurance policy if you believe you will not require one.

However, if you are purchasing with a mortgage, your lender will usually require you to either purchase title insurance, or obtain a “lawyer’s opinion on title.” For the lawyer to be able to provide their written opinion, they will need to do a number of searches, including a water arrears search, work permit search, zoning search, and possibly order an up-to-date survey of the property. The cost for performing these searches can add up to hundreds or thousands of dollars, so it is oftentimes more economical to order a title insurance policy than to perform these searches. A lawyer’s opinion on title also provides no coverage for title fraud that may occur in the future. In most cases, your lawyer will recommend ordering a title insurance policy rather than relying on the lawyer’s opinion on title.

What Does Title Insurance Not Cover? 

Be sure to review your title insurance policy and ask questions to be aware of the coverage that is provided. Exclusions may include: title defects that were revealed to you before you purchased your property; environmental hazards, like soil contamination; indigenous land claims; problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought); and zoning bylaw violations.

Title Insurance at Doormat

Title insurance is an important form of protection for any property owner, providing coverage in the event that any issues arise with the ownership of your property. At Doormat, we understand the importance of proper title insurance coverage, which is why we work with only the best providers in the industry. We will ensure that you receive the appropriate coverage for your property and provide peace of mind knowing that your investment is protected. Contact us today to learn more about our services.