| Post Co Title insurance shouldn’t be an option when buying a house Helen Morris, National Post Published: Thursday, November 12, 2009 Tyler Brownbridge / Canwest News Service If you want to entertain your kids and their friends in your new backyard pool next summer, be sure to check municipal codes — and get title insurance. Buying a house is likely the biggest financial investment you are going to make. The last thing you want is for some dastardly fraudster to get their hands on it. "You're sitting in your property, minding your own business and all of a sudden you get served with a letter saying you're in default of some mortgage that you've never even heard of, because a fraudster stole your identity, went to the bank and got a mortgage on your property," says Kathleen Waters, president and CEO of Lawpro and former vice-president of TitlePlus. While it is not compulsory in Ontario, Lorne Shuman, director of legal services at First Canadian Title, says that more and more homebuyers are taking out title insurance to protect themselves - for a premium of only a few hundred dollars - against losses related to title or legal ownership of their property, including fraud. "Title insurance is essentially a product that protects homeowners against a number of possible defects: title problems, survey problems and fraud," says Mr. Shuman. "It's a one-time premium that lasts as long as you own the house. Typically, you obtain it through your lawyer when you buy the house and it lasts for as long as you own the house." (Title insurance products are also available for existing homeowners, to protect them for just such situations as identity theft leading to a fraudulent mortgage placed on your home.) A range of policies exist, so you and your real estate lawyer will need to check which one suits your needs. Prior to obtaining the insurance, your lawyer (who cannot work for the title insurance company) must issue an opinion on the title of the property to ascertain whether the title is clean or if there are risks such as unclear record of transfer of ownership (in which case the insurer may exclude them from your policy). The Financial Services Commission of Ontario notes that a residential title insurance policy may protect you from unknown title defects as well as existing liens against the property's title such as an unpaid mortgage, utility or condominium charges. And if there's no survey to be found, a policy with survey coverage may be accepted by lenders instead of a new survey or Real Property Report (which sets out lot lines, structures, rights-of-way and the like). However, Ms. Waters says that homeowners must be aware that title insurance may only provide cash compensation and does not necessarily rectify all situations. For example, if you move in and discover that an existing deck encroaches on your neighbour's lot line, the title insurance will compensate you for the cost of removing and rebuilding it. But as another example, "Let's say you only want to buy that property if you know for sure you can put a pool in the backyard or ... an addition on the back of the house," says Ms. Waters. "Your real estate lawyer would say to you ‘We'd better make sure your agreement of purchase and sale is conditional on giving us a period [to] do the necessary investigation with the municipality'." If you buy a property only to discover later that a pool is not allowed, you would negotiate a value of loss for which the insurer would then compensate you. Mr. Shuman says it is crucial to work with your lawyer to make sure the policy meets your coverage needs. "It is really important to look at the claims-paying ability of the title insurer," says Mr. Shuman. "The policy is only good if the company behind it is able to handle the claims fairly and efficiently." A side-effect of title insurance may be that it simplifies the closing process for your lawyer, which could cut your costs. "The standard of practice for lawyers on residential real estate deals used to be a bit extreme," says Ms. Waters. "I can remember, back in the 1980s, doing a Conservation Authority search on properties which may not even have been anywhere near Conservation Authority land, but the standard of practice said you had to do it." Ms. Waters says that having title insurance can reduce the need for some searches and streamline the real estate purchasing process. Title insurance policies focus on legal issues, so it is vital to be aware of exclusions, Mr. Shuman says, and to work with your lawyer to make sure title insurance is for you and covers what you need. Environmental hazards and general wear and tear of your home are not covered, nor is needing to replace an old furnace six months after moving in; while it may be expensive and annoying, it is not a legal issue dealing with ownership, so there is no coverage for this type of situation under title insurance. For more information, visit the Financial Services Commission of Ontario Information on Title Insurance site: fsco.gov.on.ca/English/PUBS/consumerbrochures/undstitins.pdf ntent |
