What is Title?
If a person holds title to a property, it means they have its legal ownership. The title refers to the legal owner of any property. Any person obtains a title to a property once they receive the transfer document or deed from the property’s owner. Once the title is received, it needs to be registered with the land registration department of the government.
What is Title Insurance?
Title Insurance safeguards residential property owners and their mortgage lenders from any losses arising from the property’s ownership or title.
Is Title Insurance mandatory?
In Ontario, Title insurance is not a mandatory requirement.
It is advisable to discuss the details to purchase title insurance with your real estate lawyer, and the title insurance company. Doing this will help you gain clarity on the coverage of title insurance and its consequent benefits for your situation.
When you have a title insurance policy, most off-title searches are not required. The cost and effort of doing such off-title searches is thus removed from the purchase process.
Do keep in mind that title insurance offers you protection against any losses arising from the legal ownership and related factors. Possessing title insurance does not take away the need for title searches and title opinion from your real estate lawyer.
What is the coverage in Title Insurance?
A title insurance policy safeguards against losses arising from:
- Unidentified title defects (any title issues preventing you from clean property ownership);
- Current property liens against its title (outstanding utility debts, mortgages, property taxes);
- All encroachment issues;
- Title fraud issues;
- Public records and survey errors;
- Any title-related issues which have a direct impact on your capacity to sell, lease or mortgage your property in the future.
The title insurance policy covers the losses up to the coverage limits laid down in the policy. The policy remains valid for as long as you retain legal ownership of the property.
It is advisable to obtain the title insurance policy for the total value of the property purchased.
For all existing homeowner policies, fair market value of the property at the time of taking the policy will be the amount of the insurance.
Possessing the title insurance policy also satisfies lender requirements of the latest building location certificate or property survey, saving you many thousands of dollars in the process.
What are the different types of Title Insurance?
Primarily, title insurance has two types:
The Owner’s Policy safeguards the property owner as long as the property is owned. All title-related losses included in the insurance policy are covered with a maximum coverage limit specified.
The Lender’s Policy safeguards the lender in all cases when the mortgage of the property becomes invalid or unenforceable. It covers the mortgage amount on the property.
Residential title insurance is available for existing homeowners, residential mortgage lenders and for new homeowners.
What Kind of Properties Can Be Insured with Title Insurance?
- Rental units and leased properties
- Plots of vacant land
- Cooperative properties
- Rural properties
What is Existing Homeowner Title Insurance Policy?
This policy safeguards the title of a home owner who did not purchase a title insurance at the time when they purchased the residential property.
The types of property which can be covered include vacant land, cooperatives, cottages and condominiums and residential dwellings. A maximum of 6 residential units are included in the policy post which the they are classified as commercial units.
The risks covered are all the risks which should be unknown to insured and existed on the date of the original purchase of the property. The insurance policy is customized for the home owner to actually reflect the original transactions’ details. The existing homeowner policy is an option for people who brought their homes decades ago or did not obtain any policy.
It is a convenient and useful option to safeguard your home and purchase title insurance by paying a one time premium. The premium amount is based on the home value at the time of taking the policy.
Policy obligations are limited to payment of the lump sum premium amount and no renewal fees exist. If you wish, you can include the theft protection option as well, which can be conveniently added to the main title insurance policy.
This policy protects the person’s who will inherit the insured property and the insurance amount if calculated post an MPAC property assessment.
The insured policy amount is typically higher of the current fair market value as per the assessment of the amount paid for the property at the time of purchase. The coverage goes up with an increase in the property value up to a maximum of 200%.
How are Title Insurance and Property Survey linked?
A Title insurance policy does not eliminate the need for a physical survey. In case a homeowner does not get a new survey of the property done, then efforts should be made to get a legible copy of an existing survey.
For any changes made to the property, survey will be required. Second dwelling unit is not covered under the title insurance until the city provides the zoning search which confirms the legality of the second unit.
Change of use of property is not covered under title insurance. In case the purchaser has any plans to change the property use, the real estate lawyer should be made aware of those plans so that proper due diligence can be carried out.
Title Insurance covers the losses arising from the title but is not a substitute for any information gleaned from a survey. For example, if a person purchases a property that had a backyard which the survey revealed to be an encroachment, which was actually a part of the neighbour’s property, title insurance will not be covering this.
What is not covered in Title Insurance?
There are standard exclusions in a title insurance policy which are as following:
- Any title defects which are known to you or agreed to by you;
- Environmental hazards;
- All native land claims;
- Issues discovered by a new inspection or survey of your property;
- All unrecorded encroachments and liens, not available in public records;
- Any changes, renovations to your property under your responsibility which result in changes to Zoning bylaw violations
How We Can Help
At Nanda & Associate Lawyers, our experienced Real Estate lawyers understand your specific circumstances and provide tailored and customized solutions for each of them.
Our Mississauga Real Estate Lawyers are available for a no-obligation free consultation. Come and experience our quality legal counsel and personalized care we give to each client.