Title insurance is an insurance policy which provides coverage for risks to title in real estate transactions. Typically, title insurance policies include unpredictable issues including
- forgery
- fraud
- missing heirs who make a claim to the property
Practically speaking, if there is an issue on title that only becomes known after the transaction closes, the title insurer will step in to either remedy the defect on title or compensate the policyholder (assuming that the defect is covered by the policy).
Types of Title Insurance Policies
Generally, there are two different types of title insurance policies
- lender policies
- a policy taken at the request of the lender upon the closing of the transaction. These policies may provide coverage to both the lender and the homeowner, which is recommended
- Homeowner policies
- a policy taken by the homeowner when purchasing a property; however, it is important to note that title insurance can be purchased at any time during the homeowner’s ownership of the property.
When advising our real estate purchaser clients, we strongly recommend purchasing title insurance at the time of closing. It offers significant protection for a modest policy fee of typically between $400 – $1,700. The cost of a specific policy depends on several factors, including the geographic location of the property and the amount of any mortgage balance on the property.
What Does Title Insurance Protect Against?
Title insurance protects against the following risks:
- defence of title
- fraud and forgery (including registration of a fraudulent mortgage)
- unenforceability of the insured mortgage
- defects that would have been revealed by a current survey
- errors in the survey
- legal services, including negligence or fraud on the part of a lawyer
- defects in title such as liens, executions, adverse claims, encroachments, unregistered easements, mortgages and other encumbrances
- unmarketability of title
- hydro, tax, water and gas arrears
- executions against prior owners
- condo status certificate (defects, omissions or fraud)
- septic system violations
- work orders & non-conforming zoning
- restrictive covenants
- municipal work orders & permits
- unregistered hydro easements
A title insurance policy will not protect against the following:
- title issues which arise after the policy date that were not present before
- title defects that the homeowner was aware of and to which the homeowner agreed
- title defects that the homeowner was aware of and about which the homeowner did not inform the insurer
- environmental hazards, unless noted on title
- legality or rents
- fire retrofit compliance
- costs of moving fences or boundary walls
- losses from failing to make a claim in a timely fashion
- other exclusions included in the policy’
Providers of Title Insurance
In Ontario, there are several insurance companies licensed to provide title insurance:
- Stewart Title
- Chicago Title Insurance Company
- FCT Insurance Company Ltd (First Canadian Title)
- Lawyer’s Professional Indemnity Company (LawPRO)
In my real estate practice advising on purchasing, sale, refinance & lending, I advise my clients on navigating title insurance policies, including lender policies. Contact me if you wish to discuss anything in this article or real estate law in general.
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