October 11, 2011 – Title insurance is supposed to provide comprehensive insurance coverage for title-related risks associated with buying a home – risks such as zoning issues, claims of mental incapacity, lack of up-to-date survey and the legal services provided by your lawyer (like title certification). It insures the homebuyer against such defects in title, which may occur from conflicting ownership claims, liens, un-discharged mortgages, consents and the like. It will cover compliance and access issues, such as work orders, permit violations, fences, boundaries, tenancies, rights of way, certain easements, etc. It is supposed to be in force so long as the purchaser or his/her heirs own the property. Title insurance will outlive the certification of your lawyer, whose insurance stops if he or she dies, or stops practicing law.
Okay, what if something is wrong and a prospective purchaser will not accept a new title insurance policy at no cost? The insurer will pay out in accordance with the policy, or will, if possible, repair the defect. Title insurance protects form vendors that won’t re-adjust. In addition, lawyers’ insurance is time-of-incidence related, which means in simple English, that if your lawyer is dead, retired or stops practice and you make a claim after that, you are not covered.
Title insurance saves you money. Disbursements, money paid to third parties for stuff like building compliance letters, subdivision compliance letters, deed registration, etc., are lower. We estimate $200 to $300 on a deal after the cost of the policy.
Just so everyone understands, almost all of Ontario is now on an electronic registry system. Title insurance has become the norm and many of the transactions are done by computer-to-computer communication. Make sure the lawyer you select has taken the title insurance courses, has gone to the seminars on Terranet, the electronic registry system and can properly advise you. The Law Society passed a rule that every lawyer on a residential real-estate deal must advise the client of title insurance, the different companies, and how it works. Remember, a lawyer survives by repeat business and referrals and a lawyer’s mandate from the Law Society is that the client’s best interests must come first.
We have all read and heard about mortgage and title fraud, where bad guys put fake mortgages on property or sell houses they do not own. Title insurance indemnifies you against these occurrences.
To summarize, title insurance does four things better than lawyers’ insurance through Law Pro (the Law Society’s insurance arm):
1. Gives better coverage as to the quality of your ownership than a lawyer’s insurance.
2. Lasts forever when lawyers don’t.
3. Saves $300 to $400 in disbursements.
4. Protects form mortgage and title fraud.
In conclusion, every lawyer has an obligation to make you aware of your title insurance options so you can choose which way you want to go. Think through your options carefully and choose wisely.
Happy home hunting!
Jayson Schwarz is a Toronto real estate lawyer with Schwarz Law LLP. Email him at schwarz@schwarzlaw.ca, call 416.486.2040, or visit the website at schwarzlaw.ca