When it comes to property ownership in Ontario, many individuals overlook the importance of title insurance. While considerations like moving, closing costs, home insurance, and renovations take precedence, the significance of title insurance should not be underestimated. This blog aims to shed light on why title insurance is worth considering for property owners in Ontario.
Understanding Title Insurance
Title insurance is a specialized form of insurance that provides coverage against specific risks associated with property ownership. When you purchase a property, you obtain the legal proof of ownership, known as the title. This title is registered in the government’s land registration system. Residential title insurance can be obtained through a lawyer or a title insurance company, as not all home insurance companies offer this coverage.
The Benefits of Title Insurance
Title insurance protects both commercial and residential property owners and lenders from potential losses related to property ownership or title disputes. While it does not cover physical damages or issues related to the property’s condition, it provides coverage for various title-related concerns. For example:
- Outstanding Debts and Taxes: Title insurance covers unpaid utilities, mortgages, taxes, or condo maintenance fees left by previous owners.
- Legal Claims and Liens: It protects against legal claims made by others on the property, such as property liens or construction liens resulting from unpaid contractor bills.
- Title Defects and Encroachments: Title insurance can assist in removing existing structures that violate zoning laws and cover the costs of resolving encroachment issues with neighboring properties.
- Gap Coverage: In the period between finalizing the property purchase and officially registering it with the government, title insurance fills the potential gap in coverage.
Professional legal advice should be sought when purchasing title insurance to ensure a comprehensive understanding of the coverage provided and any exclusions.
Differentiating Title Insurance from Home Insurance
It is crucial to distinguish title insurance from home insurance. While home insurance primarily covers accidental damages to the property itself, title insurance focuses on protecting against title-related risks. Title insurance provides a one-time payment that lasts as long as you own the property, while home insurance requires yearly renewals.
What Title Insurance Covers
Title insurance offers coverage for a range of title-related issues that may affect your ability to mortgage, sell, or lease the property. Some examples of what title insurance covers include:
- Forgery, Fraud, and Errors: Protection against forgery, fraud, typos, and minor errors in the legal description of the property.
- Unpaid Debts and Taxes: Coverage for outstanding utility bills, mortgages, taxes, or condo maintenance fees left by previous owners.
- Legal Claims and Liens: Safeguarding against claims made by others on the property, such as property liens or construction liens resulting from unpaid contractor bills.
- Gap Coverage: Filling the gap between the property purchase and official registration with the government.
It is important to review the specific terms and conditions of the policy to understand the coverage provided.
What Title Insurance Does Not Cover
Title insurance does not protect against damages to the property itself or issues related to poor maintenance. Some examples of what title insurance does not cover include:
- New Surveys or Property Inspections: Title insurance does not cover issues related to new surveys or property inspections.
- Zoning Bylaw Violations: It does not protect against violations resulting from home renovations or additions for which the homeowner is responsible.
- Environmental Hazards: Title insurance does not cover environmental hazards, such as soil contamination.
- Known Title Defects: Issues that were known or revealed before purchasing the property are generally not covered.
The cost of fixing these excluded issues would typically fall under the responsibility of the property owner.
Types of Title Insurance
When selecting title insurance, you can choose between two main types:
- Owners Title Insurance: This type protects property owners from title-related losses specified in the policy for as long as they own the property. Policy limits apply.
- Lenders Title Insurance: Lenders often require this type of title insurance to protect their mortgage interests in the property. The coverage is usually limited to the property’s mortgage value.
Residential and Commercial Title Insurance
Title insurance is available for both residential and commercial properties. Residential title insurance covers various property types, including new and existing homes, condos, rental units, vacant land, rural properties, and cottages. Commercial title insurance offers coverage for commercial properties, such as shopping centers, industrial lots, office buildings, warehouses, and leased commercial properties.
The Cost of Title Insurance in Ontario
The cost of title insurance in Ontario typically ranges from $200 to $500. This one-time premium is paid upfront through your lawyer and provides coverage for as long as you own the insured property.
Where to Obtain Title Insurance
To ensure a clear title and ownership claim, it is recommended to work with companies specializing in title insurance. Some reputable providers in Canada include:
- Stewart Title Guaranty Company
- TitlePLUS
- Chicago Title Insurance Company
- FCT Insurance Company Ltd
Tips for Purchasing Title Insurance
Consider the following tips when purchasing title insurance:
- Home Value: Ensure that your home’s replacement cost and policy coverage align with the total value of your property.
- Closing Date: Confirm that the policy’s effective date corresponds to the closing date of your property.
- Coverage Inclusions: Review the policy documents carefully to understand what is included and excluded. Seek clarification and ask questions as needed.
- Property Details: Verify that the property description in the documents accurately represents the property you are purchasing.
Conclusion
Title insurance is a valuable safeguard for property owners in Ontario. It offers protection against various title-related risks and can provide peace of mind for both owners and lenders. While it is essential to understand the coverage provided, seeking professional legal advice is crucial for making informed decisions about title insurance. With the guidance of legal professionals, property owners can ensure their interests are protected and their investments secured for the long term.