You’ve likely heard of title insurance.
But why is title insurance important and what does it cover?
How Title Insurance Works
Legal property ownership is referred to as the title. When property ownership is attained and the transfer document is signed, the buyer acquires the title. The title is then recorded with the government under their land registration system. When you need to show proof of ownership, this is it.
If you don’t have title insurance, it can be purchased through a title insurance company or a lawyer.
You may think that your homeowner’s insurance covers you for most problems, but title insurance protects the homeowner from issues related to the title of property ownership. Title insurance is a one-time payment and lasts for as long as you own the property.
Title insurance protects you from real estate fraud and the expensive issues below:
What Title Insurance Covers
- Unpaid Bills and Claims
- Construction/Renovation Liens
- Additional Issues
Unpaid Bills and Claims
- Mortgage, property taxes, maintenance fees, and utility bills that were unpaid by the previous owner.
- An interest or an ownership claim by someone else.
- Fraudulent or forged aspects of the property’s legal description; typos or minor errors.
Construction/Renovation Liens
Another way that title insurance protects the new owner concerns construction liens. A title search before the closing of the home sale will reveal any liens against the title. If any liens are discovered, the buyer’s lawyer will ensure that the lien is removed before purchase. Additionally, those liens cannot be registered against the property once it has changed ownership.
Title insurance also covers you should your new neighbour file an encroachment issue regarding property lines or if a portion of your home is on their property (roof overhang, fence, shed, etc.).
Additional Issues
Any issues that are related to the title are covered by this insurance. This includes anything that can affect your capability to sell, mortgage, or lease your property. The cost of title insurance is much less than rectifying these problems without it.
What It Does Not Protect Against
Title insurance does not protect against issues with the physical structure of the home. Nor does it protect against water damage (that would be flood insurance under your home insurance plan). It also does not protect against:
- Issues that arise from new surveys or property inspections.
- Home renovations completed under your ownership.
- Zoning bylaw infractions.
- Environmental threats, such as contaminated soil.
- Natural wear and tear on your home and property.
- Fire and water damage.
- Title defects that were known before the property purchase.
- Theft or burglary.
Cost
In Ontario, the title insurance premium depends on the purchase price, property type, number of mortgages and their amount, and whether those mortgages are private or institutional. The fee is typically paid to your lawyer. This one-time premium covers you for as long as you own the property.
Would you like some additional details on purchasing title insurance? I can help review your options and provide support to ensure that you’re covered for everything that you need!
Are you ready to move to the next stage? Let’s chat. Send me an email (hillary@hillarylane.ca) or text/phone (416-882-4707).
Photo by Alex Block on Unsplash
