If you’ve bought property in Ontario, your Lawyer has likely asked if you’d like to buy Title Insurance. If you’ve had a mortgage with your home, you may not have had the choice. Today in Ontario, it’s expected for one to buy Title Insurance when closing a property.
But what is Title Insurance? Is it an antiquated, useless cost when closing? Or is it the greatest stopgap between a happy home and calamity?
A Brief History of Title Insurance
In Ontario Law, an individual looking to buy or sell property must hire a solicitor to convey. The goal of the solicitor is to ensure the ownership, or “title” obtained to that property is “Good, free, valid, and marketable.
Valid marketable title is an expression that has countless definitions. Yet, most agree on a few main proponents of the term “Marketable Title”.Good, Free, Valid & Marketable Title in Ontario possesses a few qualifying characteristics:
- Prior authorized transfers – binding & enforceable.
- Clearly defined boundary of the lands
- Conveyance of the land does not contravene any acts (for example, The Planning Act)
- The Title is free of any defects (for example, unregistered Easements)
- There are no outstanding Liens, Claims, or Encumbrances, registered or otherwise. (Except those discharged at closing)
Traditionally, it was a solicitor’s responsibility to ensure the Title delivered to the purchaser was free from any of the above. However, as Real Estate transaction volume increased and became more complex, and fees for services became prohibitive, most Ontario Solicitors could not keep up with the demand for full, extensive research into Title. It was from this idea that Title Insurance was created.
Title “Insurance”…Not Title “Guarantee”
Surprising as it may seem – the term insurance plays a key role in defining the product. The purpose of Title Insurance is to provide a backstop against claims arising from issues not caught at closing.
Not A Catch-All
Title Insurance is NOT meant to be bought in-lieu of a proper Title Search. An increasing number of Lawyers, to keep up with demand for closing, have begun to use Title Insurance as a method of exempting oneself from performing the laborious task of proper searches.
This concept is hotly contested in today’s legal and Real Estate World. Title Insurance companies are beginning to deny claims on the grounds that the Solicitor should have performed adequate due diligence to catch these commonplace errors.
To obtain Fire Insurance, one usually has to prove compliance with Fire codes. The Owner should also be prudent to perform an inspection, as well as maintaining the building in such a way as to lower the risk of fire. Similarly, it is the obligation of the Solicitor to ensure that the risk of a claim following closing is low – and THEN acquire Title Insurance.
Title insurance does not cover future use of a property, either. If you discover that the zoning does not cover, for example, a secondary suite, no claim could be made.
Our Legal Team goes beyond the bare minimum requirements of Title Searching to properly protect you following closing.
The commission you already pay to a Real Estate Brokerage includes the legal fees for these services.
What Does Title Insurance Cover?
The types of Title Insurance available are broad and vary depending on the provider. However, all companies cover a few core areas.
Boundary Disputes
Ontario Solicitors ensure that the legal description accurately depicts the parcel conveyed. This is done by examining a current Survey by an Ontario Land Surveyor. There are a few issues with this. First, most surveys for properties are extremely dated. Minor changes to the property over time aren’t reflected in historical surveys. Encroachments and easements may not be accurately represented. Most owners do not keep updated surveys unless required for building renovations. Second, surveys are costly and time consuming. In 2022, one could be waiting up to 6 months for a survey. In this instance, Title Insurance can help by covering boundary and easement issues found through ordering of a survey.
Claims, Liens, Encumbrances
A Solicitor should still perform parcel register searches on a property. However, these searches will only reveal registered disputes or claims. In some instances, valid claims exist without registration. For example, the Construction Act (formerly Construction Lien Act) allows contractors to place liens for unpaid work on the property. These liens do not have to be registered for a certain period of time. This is another prime example of where Title insurance can help. It can also help with other various claims. For example, a Building Work Order by the Municipality, a mortgage that refuses to discharge, or an unpaid tax bill from the last owner.
Unmarketable Title
In some instances, the issue with title is so great, title is unmarketable. One of the most prominent examples of this would be if the property was conveyed in a matter that contravened the Planning Act. According to the Act, the parcel has no legal status and, in essence, does not exist. Depending on the Title Insurance policy, you may be able to recover the purchase price of the property if you’re legally unable to sell it.
How Much Does Title Insurance Cost?
Costs can vary widely depending on the type of coverage desired. Some policies can only protect the Lender and not the purchaser. Some contain clauses that allow the policy amount to increase with increased market value of the home. As of 2024, the approximate cost of Title Insurance for residential resale properties is a one-time fee of $0.725 per $1,000 of property insured, per party.
Where Can I Buy Title Insurance?
There are a few companies that provide Title Insurance in Ontario. Although your Lawyer may have a preference, it is always prudent to acquire multiple quotes and compare the benefits of each premium.
How Do I Get Title Insurance?
Typically, the Ontario Lawyer that is responsible for closing the transaction will order Title Insurance on your behalf. The underwriters usually have the lawyer fill out a questionnaire related to the purchase. This questionnaire usually provides a brief overview of the transaction such as the intended use of the property, mortgage monies required, etc.
From this information, the underwriters can calculate a quote for Title Insurance based on the perceived risk of the deal. It is important to note that different carriers may have a different definitions of ‘risk’, which explains the difference in price between companies.
Is Title Insurance Mandatory?
In Ontario, Title Insurance is not mandatory. A Lawyer’s opinion on title is completely sufficient to complete a transaction. However, if you purchase a property with a mortgage, most financial institutions usually require the purchase of title insurance to protect their interest in the property.
How Long is Title Insurance Good For?
Title insurance is a one time purchase that protects the property for the period of the ownership. If a problem related to title is discovered years after completion of the transaction, you are likely covered! This can be especially helpful when you extend beyond the Statute of Limitations and would otherwise have no viable recourse.
Questions?
Title insurance can be a confusing topic for a new homeowner. However, it doesn’t have to leave you sleepless! Contact Us with any questions you may have.
When you choose Alloway Property Group for your next Real Property Transaction, we include the legal fees for consulting, buying, and selling in the commission you already pay.
