Buying a property can be a stressful experience, especially if you’re a first-time home buyer. Part of the stress is not being fully aware of what issues you might be taking on when you take over ownership of the property. What people typically think about is the physical issues that might arise when you really start to live in the home (ie. leaks, broken appliances, etc.) but the even scarier issues are those that you can’t physically see but you may be legally responsible for. This is why a “title search” is so important, but what exactly does this mean? Let's unravel the mystery of title searches and understand why they are a key piece of the property closing process.
Understanding Title Searches
At its core, a title search is an examination of public records to confirm a property's legal ownership and uncover any claims or liens against it. This process ensures that the seller actually has the right to sell the property and that the buyer is getting a clear title, free of legal headaches.
While we’re on the topic of terms that you may not be familiar with, a lien is a legal claim or right against a property, typically used as security for a debt or obligation. It grants the lienholder the right to seize the property if the debt is not repaid or the obligation is not met. Needless to say, if you’re buying a property, you want to make sure that the title is free of claims and/or liens and the title search is what identifies what needs to be cleared.
Purpose a Title Search
The main goal of a title search is to verify the property's legal ownership and to identify any issues, like unpaid taxes or legal judgments, that could affect your rights as a new owner. Think of it as a background check for your property, providing peace of mind and legal protection.
The Title Search Process
The title search process in Ontario is usually completed by the buyer's real estate lawyer. Through their title search, the lawyer is able to identify what issues on title may need to be addressed. To perform a title search, a lawyer will embark on a number of steps:
Property Identification: The first step is to identify the property in question, usually by its municipal address or legal description.
Land Registry Office Identification: Ontario maintains a land registration system where all documents related to property transactions are recorded. The lawyer needs to determine which Land Registry Office is responsible for your properties area and access its records. Note that it costs money to access these records and these costs are typically charged back to you as the client in the form of disbursements.
Document Retrieval: Search for and retrieve documents related to the property, including the deed, which shows ownership, as well as any mortgages, liens, easements, and covenants affecting the property.
Review Historical Records: Conduct a historical review of the property’s title to trace its ownership over time and ensure that there have been no breaks in the chain of title.
Check for Encumbrances: Identify any encumbrances on the property such as mortgages, liens (e.g., tax liens, construction liens), and non-financial claims like easements, covenants, or zoning restrictions.
Survey and Compliance: Review any available land surveys to verify the property boundaries and ensure compliance with local zoning and building codes.
Title Insurance: While not necessarily a mandatory step in the process, obtaining title insurance can provide protection against any title defects that were not discovered during the title search. This often does become a mandatory step when a mortgage is in the picture as lenders typically require title insurance.
It’s important to engage the support of an experienced real estate lawyer when closing on the purchase or sale of a home. This experience is particularly valuable when completing the title search as their experience will lend well to identifying issues that need to be addressed.
Why Title Searches Are Crucial
Skipping a title search or missing a requisition date is a mistake that you cannot afford for your real estate lawyer to make. The requisition date is the date by which the purchaser's lawyer must inform the seller's lawyer what needs to be removed from title (this is done via a Requisition Letter). If the title search is missed entirely or the Requisition Letter is submitted past the requisition date, the seller’s lawyer (and by extension, the seller) is under no obligation to address any issues on title. This would leave you as the buyer exposed to unexpected challenges and issues after purchase.
What Happens After Title Search
Through their title search, the buyer's lawyer will identify the items that need to be removed from title before ownership is transferred. Typically this will be an existing mortgage that is registered to the property, but other items can be identified as well. Through the Requisition Letter, the buyer's lawyer communicates to the seller's lawyer what issues need to be addressed in advance of the closing date in order to successfully complete the transaction.
Summing It Up
Title searches are more than just a formality; they're a crucial step in ensuring that your property transaction is safe and sound. By understanding what a title search involves and why it's important, you're better equipped to navigate the complexities of real estate and protect your investment.
At Doormat, we do a thorough title search for every property purchase we work on. We have experienced lawyers that have done title searches for properties all across Ontario, so they have experience with all property types, from urban to rural areas. We also facilitate the purchase of title insurance for you so that you can feel confident that you are protected.
If you are purchasing (or selling) a home, you’ll need a real estate lawyer. We deliver an incredible client experience through experienced lawyers and an easy-to-use app that keeps you informed every step of the way.
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