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Title Insurance

Title Insurance Provides Extra Protection
for Borrowers and Lenders

Title Insurance is gaining in popularity in the Canadian market. But what is Title Insurance and who does it protect?

Title Insurance is a contract under which a title insurer indemnifies a property owner, lender or borrower against actual loss or damage sustained from covered title defects, fraud or forgery. It is not a guarantee of title, but rather compensates an insured if title is not as set out in the policy.

Title Insurance was created in 1876 by a group of conveyancers in Philadelphia. Title Insurers have been licensed in Canada since the mid 1960's, but have only actively marketed the product since the 90's. There are currently four companies that offer Title Insurance to the Canadian market.

What does Title Insurance Cover?

Surveys:

Title Insurance is acceptable to most lenders in lieu of a survey. Title Insurance would cover any encroachments to a property that would have been known had an up-to-date survey been available.

Gap Coverage:

Title Insurance allows transactions to close before documents are fully registered at the Land Titles Office. By insuring against loss from other interests that may be registered against title before full registration occurs, Title Insurance provides smooth closings even for last minute transactions.

Known Title Defects:

Certain defects such as encroachments or prior undischarged mortgages registered against title may be covered by Title Insurance, allowing the transaction to close smoothly and on time.

An insured under a Title Insurance policy would be covered for any number of occurrences including: Fraud or forgery

Liens for unpaid taxes

Survey defects

Lack of marketability

Work orders and deficiency notices

Condominium and builder's liens

In addition to the above protection, a solicitor who closes a transaction using Title Insurance may be exempted from many of the usual costly clearances and searches. In the long run, this could result in additional cost savings to the consumer, that far exceed the cost of the insurance policy.

Is Title Insurance a panacea?

Definitely not. A Title Insurance Policy, in itself, does not solve the underlying problem…..it only insures over it. It allows real estate transactions to close quicker and cheaper than may have occurred without it. It is only when a claim is made against the policy that action may be taken (by the insurer) to correct the deficiencies (or the Title Insurance company may simply decide to keep insuring over the defect into the future).

To find out if Title Insurance is right for your transaction, contact your lawyer or one of the Title Insurance companies operating in Ontario.