Everything you need to know about title insurance in Ontario.
Although title insurance is optional in Ontario, it is likely a requirement for your mortgage lender–and the reasons for acquiring title insurance doesn’t stop there. Here are common title issues that can cause a snag your home closing and title insurance may provide a solution:
Existing Liens
Existing liens against the property’s title can hinder your ability to successfully close on your new home. Unpaid debts of the previous owner in the way of utilities, property taxes, mortgages or condominium fees are secured against the property and should be cleared prior to taking possession.
Survey Errors
Surveys are used to establish the legal boundaries of a property. Sometimes a survey may be available from the current owner, however, the only way to confirm the accuracy of the legal boundaries is for the buyer to commission a new survey before closing. This is unlikely to happen as surveys can take up to 3 months to be produced. Getting a new survey before closing is not as popular due to the growth of title insurance, which provides the buyer and the buyer’s lender coverage against any deficiencies that may have been found had they obtained a survey. When issues in accuracy are found within a property’s survey, the responsibility lies with the current owner. This could cause significant financial issues in the way of encroachment, which we will discuss next.
Encroachment Issues
Encroachment issues can vary in severity. While this real estate law term could be used to describe a new fence just inches over the property line, it also includes everything from a new extension to your home and inground pool to a paved driveway. As you can imagine, issues of encroachment can become extremely expensive and stressful.
Title Fraud
Forged documents or stolen personal information are commonly used to commit title fraud without the property owner’s knowledge. Once the title transfer is complete unknowingly with the fraudster, the fraudster will use the mortgage on your home to get the cash and typically, disappear. This is another title issue that is covered by Title Insurance. If you are buying a property or currently, own a property without Title Insurance, it is a good idea to get an existing homeowner’s policy to protect you from the growing amount of fraud in Ontario.
Legal Use & Zoning Issues
Sometimes a property’s use does not comply with the municipal zoning bylaw. For example, a residential home may be in an area zoned for commercial uses. This is a tricky legal issue that sometimes can be solved by the municipal records or speaking with previous owners, or in some cases a rezoning. It is always worth speaking to your title insurer to see what coverage they may be able to provide if you were not aware of this issue when you bought.
Public Record Errors
During the purchase of a new home, a title search is conducted to ensure there are no title defects that can impact the closing process. For example, if a property is listed with an inaccurate, smaller square footage, banks and lenders may only offer 80 to 90 percent of your home’s appraised value. In addition, there may be grounds to negotiate a reduction in the purchase price.
Legal Fee Coverage
If a title issue arises post-purchase, obtaining title insurance means the company may pay for the legal expenses incurred in defending the property’s title.
When should I get title insurance?
While we recommend purchasing title insurance at the time of purchase of your new home, title insurance policies for existing homeowners are available (though they differ slightly).
What does title insurance not cover?
It is vital you read and understand your title insurance coverage policy, as not everything is included such as:
- Any known title defects revealed prior to purchase
- Any deficiencies known by you at the time of your purchase
- Environmental hazards
- Indigenous land claims
- Unrecorded liens and encroachments not listed in public records
- Zoning bylaw violations from renovations completed post-purchase.
- Problems revealed by new surveys after purchase
How important is title insurance in Ontario?
While technically all title issues, no matter how small, need to be resolved to offer a clear title to the buyer for closing, title insurance can protect you from unknown title defects, existing liens against the property’s title, encroachment issues, title fraud, and errors in surveys and public records.
If you’re looking for more information, the Financial Services Commission of Ontario provides an excellent brochure, Understanding Title Insurance. To learn more about Title Insurance through Titlers Professional Corporation and for specific questions surrounding the topic, click here. Our firm, located in Port Perry ON, has been well-known title insurers serving communities in Durham Region for over 40 years.
Disclaimer: This information is not intended to be legal advice. For appropriate legal advice based on your circumstances, please speak directly with a lawyer.