First of all, what is "Title"?
We can’t talk about Title Insurance without first diving into what “Title” even is! The word “title” is a legal term that means you have legal ownership of property you have purchased. You obtain title to your new property when the owner signs the deed of the property over to you. While a deed might sound like something from the Wild West, it is still used today to describe the legal document that is signed and delivered, regarding the ownership of property or legal rights to that property. Confused yet? Title is essentially referring to your legal rights and interest to the property (you can access or modify the land for example) and the Deed is the document that transfers that right to someone else upon selling your property.
What is Title Insurance Then?
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. It’s like a guarantee by the title company that a thorough investigation of the title to the property has been conducted and you have been notified of any outstanding claims (or liens) to the property. Obviously, any properties with title issues can make for a messy situation down the road, so making sure you’re in the clear is really important before finalizing the closing.
So what does it cover?
For a one time fee, called a premium, a title insurance policy may provide protection from such losses as:
- Unknown title defects (title issues that
prevent you from having clear ownership of
the property); - Existing liens against the property’s title
(e.g. the previous owner had unpaid debts
from utilities, mortgages, property taxes or
condominium charges secured against the
property); - Encroachment issues (e.g. a structure on
your property needs to be removed because
it is on your neighbour’s property);
- Title fraud;
- Errors in surveys and public records; and
- Other title-related issues that can affect
your ability to sell, mortgage, or lease your
property in the future.
Is there anything Title Insurance doesn't cover?
When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of possible exclusions, which may include:
- Known title defects (that were revealed to
you before you purchased your property); - Environmental hazards (e.g. soil
contamination); - Problems that would only be discovered by
a new survey or inspection of your property
(e.g. the property is smaller than originally
thought);
- Indigenous land claims;
- Matters that are not listed in public records
(e.g. unrecorded liens and encroachments);
and - Zoning bylaw violations from changes,
renovations or additions to your property or
land that you are responsible for creating.
How long does Title Insurance last?
Though you only pay for it once, residential title insurance coverage lasts as long as you own the property. Most residential title insurance policies extend coverage to your heirs through a will, to a spouse in the event of a divorce, or to children when the property is transferred from parents to children for nominal consideration. Basically, once you’re insured, you don’t need to fret about what, when or how the policy is up – that is until you move homes!
Title Insurance is key part of an effective, safe home buying process and we would love to answer questions about this or any other type of home buying or selling process questions! Contact us to book your first time buyer orientation with Kim!
This article contains general legal information and does not contain legal advice. We are not a law firm or a substitute for a lawyer or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.