When Paul and Stefanie Macdonald bought their Toronto home, they likely didn’t expect to play a role in what the Toronto Star describes as “one of the most important title-insurance cases of this generation.” Now, after years of litigation, their ordeal is over, and the Supreme Court of Canada has delivered an important decision benefiting homeowners. The Macdonalds’ case serves as an example of the complexities of real estate law, and the value of an experienced real estate lawyer.
What is Title Insurance?
The Financial Services Commission of Ontario defines the word “title” as “a legal term that means you have legal ownership of property.” When an owner signs a property’s transfer document over to you, you obtain title to that property.
As such, title insurance is a policy that protects property owners against “losses related to the property’s title or ownership.”
What does Title Insurance Protect Against?
With the help of a real estate lawyer, prospective home owners can acquire a title insurance policy that covers a variety of loses, including: unknown defects that would affect ownership; existing liens against title; encroachment issues; title fraud; and survey errors.
Paul and Stefanie Macdonald
During a series of renovations, the Macdonalds discovered that their home’s previous owner had removed a critical load-bearing wall without the necessary building permits. As a result, the second story of the home was deemed unsafe, and the City of Toronto issued a work order for additional supports. The Macdonalds completed the work for $75,000, and filed a claim for the costs with their title insurer, Chicago Title. According to the Star, the Macdonalds’ policy “provided coverage to the owners if the title was unmarketable, which means that a buyer could refuse to complete a purchase agreement.”
Chicago Title denied the claim, and in October 2014 the Macdonalds asked the Superior Court of Ontario to declare that they were covered for city-mandated work and repairs. The court sided with the insurer.
In 2015, the Ontario Court of Appeal reversed the Superior Court’s decision, and ruled that Chicago Title was responsible for both the repair costs and $50,000 in additional costs. “A central part of the court’s ruling,” the Star reports, “was that a significant but hidden physical defect made the title unmarketable, and the insurance policy covered the owners for that.”
The ruling, which the Star says runs contrary to “centuries of common law that has underpinned marketability of title,” says that “a house with significant hidden construction defects has an unmarketable title.” In response to the ruling, a number of insurers have changed their policies to restrict coverage for hidden defects.
How can a real estate lawyer help?
When you purchase a new home or property, your lawyer will inform you of the advantages of title insurance and obtain it on your behalf. An experienced real estate lawyer will do everything in their power to ensure that the acquired title is clean, and that you are fully protected by your title insurance policy.
