Title Insurance: What is it?
When you purchase a property in Ontario, your real estate agent or lawyer will recommend that you buy title insurance as part of your closing costs. And while it may be tempting to pass it up because you’re trying to keep those costs to a minimum, there are very good reasons to say yes to it: Title insurance isn’t that expensive; it protects you for the entire time you own the property; and it can save you a lot of money, time, and hassle if you ever need to make a claim.
What does title mean in reference to property?
The word "title" is a legal term and paperwork that designates the registered owner of real property (a home, building, or land). When you purchase a property, your lawyer will register you as the new title holder with the land registry office in your area, transferring title from the previous owner.
What does title insurance cover?
Title insurance is designed to protect you, the property owner, from any financial losses related to problems with title after your purchase is complete. These can include:
You may have heard about recent instances where a homeowner has discovered that their property has been illegally sold by an individual who used false documents to transfer title of a home to themselves without the owner’s knowledge. Title insurance protects you from fraudulent claims on your property and may cover legal expenses to re-establish your right to title.
These can include unpaid debts incurred by previous owners, such as mortgages, utility bills, property taxes, condo fees, or contractor fees, against which your property has been secured as collateral. Title insurance prevents you from being responsible for paying off these debts.
These can include unknown encroachments or boundary disputes with neighbours, problems with zoning bylaws that the previous owner didn’t address, and undocumented easements where the municipality or a utility provider asserts the right to access or use some of your land.
Errors in title or survey
Perhaps there was an error in the public records related to your property boundaries, the title was not registered properly in your name at the time of transfer, or a previous owner was never removed from the title. Your title insurance policy limits your liability in these situations and affirms you as the true owner of the property.
The bottom line
Buying title insurance is optional, but as it’s a one-time expense and not a very large one, I always recommend that buyers purchase it. Not only can it make the closing process easier, but it remains valid and protective of you for as long as you own the property. For the peace of mind that title insurance offers homeowners, I believe it’s money very well spent.
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