The word “title” is a legal term that means you have legal ownership of real property (ie. land). You obtain title to real property when the owner signs the transfer (Form A Transfer) over to you when you purchase the property and the transfer then receives final registration in the Land Title Office by the registrars and examiners of title at the BC Land Title & Survey offices.
What is Title Insurance?
There are various title insurance providers, each of whom will provide different policies with different coverages depending on the transaction. This is intended to be a general overview of some of the benefits that may be obtained from a title insurance policy and to provide some information so you can make an informed decision as to whether to order title insurance or not.
Title insurance is an insurance policy that helps to provide an assurance as to the state of title of a given property. In practical terms, it protects lenders and purchasers against loss or damage suffered due to matters such as survey issues, defects in title characterized by the existence of an interest in a particular property that was unknown at the time of the transaction and other matters relating to title as specified in the policy. Conversely, home insurance protects homeowners for the physical damage or loss resulting from an event such as fire or theft.
Traditionally, lending institutions required an up-to-date survey showing that there were no encroachments or setback problems relating to the property being mortgaged. More commonly now most lenders will either require or accept title insurance in lieu of a survey certificate to protect their interest in the property. In addition, with the increasing number of fraud claims,
Lenders and homeowners are protecting their interest in property with title insurance.
You should also be aware that title insurance is in place for a specific mortgage which means that if/when you refinance the property, another policy may be required for the new lender (although if you purchased a homeowner policy, it would continue to apply).
What Does Title Insurance Cover?
Although different policies cover different losses and claims, some examples of items that may be covered by a policy in favour of a lender or an owner are:
- Someone else claiming an interest in your title
- Fraud, forgery and false impersonation affecting the validity of your title
- Existing unregistered liens against the title including realty tax arrears and municipal utility charges
- Violations of municipal setback by-laws
- Unknown water potability issues
- Septic compliance
- Many forms of encroachments onto the property or adjoining land
- Existing work orders
- Lack of legal access to the property
- Unmarketability of land due to adverse matters that an up-to-date survey would have revealed
Protection from fraud and forgery is an important aspect of coverage provided by many title insurance policies. Before title insurance, recovery from loss or damage incurred as a result of title related problems was dependent upon a successful claim being made against the seller, solicitor, realtor or third party. Conversely, title insurance indemnifies the insured against loss and damage covered under the policy on a no-fault basis. The insured does not need to prove negligence to make a claim under their policy. Claims are underwritten on a case-by-case basis.
What is not Covered?
There are standard exclusions and exceptions from coverage contained in most title insurance policies, including items such as the following:
- Title or other defects created, allowed, or agreed to by the homeowner
- Title or other defects known to the homeowner but not to the insurer prior to the policy date
- Environmental matters
- Native land claims
- Matters that result in no loss to the homeowner
- Matters disclosed in home inspection or building inspection reports obtained by the homeowner
What Does Title Insurance Cost?
The cost of a title insurance policy varies between title insurance companies. However, the approximate range in price for both a lender’s policy and a purchaser’s policy is from $150.00 to $450.00 per residential property under $100,000.00.
The cost of title insurance is paid on a one-time basis when the policy is put in place. The title insurance policy should be put in place on the same day as when you obtain title to your property. If you obtain a title insurance policy after you have title to your property, your coverage may be reduced as you may be deemed to have knowledge of certain defects which would have otherwise been covered under the title insurance policy.
It should be noted that most title insurance policies must be ordered through a lawyer or notary and cannot be obtained directly by the homeowner (there may be some exceptions to this depending on the provider).
Commercial Title Insurance?
Title insurance is also available for commercial lenders and purchasers. In commercial
transactions title insurance may assist with concerns related to survey matters and known defects, as well as easements and access to a property, matters which may otherwise qualify a solicitor’s opinion. Given the unique nature of each transaction, commercial policies are customized for each transaction and the coverage available to a lender and home owner may differ. The cost for commercial policies also varies greatly depending on the property and a quote should be obtained for the specific transaction.
One matter of importance is that for commercial policies, the owner policy can only be ordered at the time the owner acquires the property. With residential policies, an existing homeowner policy may be available after the fact but there is no equivalent policy in a commercial setting.
Is Title Insurance Mandatory?
Title insurance is not mandatory in every case. However, if you are getting a mortgage to purchase your property your lender will likely require a lender’s title insurance policy. You are not required to obtain a homeowner’s title insurance policy. In addition, if you are doing a cash purchase there will be no requirement for a lender’s title insurance policy.
In saying the above, we strongly recommend that you speak to us regarding your circumstances prior to purchasing your residential or commercial property. We can advise you the benefits to purchasing the one-time title insurance policy appropriate for your needs to give you protection and peace of mind. In addition, in many cases, if you are ordering a lender policy, it is fairly inexpensive to add on a homeowner policy at the same time, particularly in residential transactions.
Author: Jaime M. Boyle
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your estate planning needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of wills & estates at the following:
Una Gabie: firstname.lastname@example.org
Jennette Vopicka: email@example.com
Danielle (Dani) Brito: firstname.lastname@example.org