Everyone who has purchased a home knows how quickly closing costs can add up. Land transfer taxes, home inspection fees, legal fees, moving companies… the last thing a buyer wants to hear is "and here’s some additional insurance you should buy". However, in the case of title insurance, it’s a suggestion you should certainly consider very seriously. Purchasing this insurance now could save you a lot of money and stress in the future.
Allow me to provide a little background. What does "title" mean as it relates to real property? Title is the evidence of your legal ownership of property – in this case, your new home. The previous owner signs the deed for the property over to you upon closing, and your title over the property is then registered with the provincial government.
During the pre-closing process, your lawyer will conduct a title search to find out if there are any issues that need to be resolved before closing can go ahead. Title insurance covers you if any future issues arise that are not discovered during the title search process. These issues can include:
- Encroachments – when any structure, such as a fence or shed, is fully or partially built on your neighbour’s property rather than your own;
- Liens against the property – these usually occur when the previous owner failed to pay utility bills or property taxes;
- Errors in the property’s survey or the public record;
- Defects with your title that can prevent you from having clear ownership of the property;
- Title fraud – when someone uses forged or stolen information to have your property title transferred to them, and may then take out a mortgage on your home and disappear.
If any of these problems arise, your title insurance will cover costs related to any losses you incur due to the issue, as well as most legal expenses you incur in the defense of your title. The insurance policy may also act as an alternative to a survey or property report, which a mortgage lender may request.
There are some things that title insurance does not cover, including any problems with title that are made known to the buyer prior to closing. It also does not cover native land claims, liens and encroachments that are not a matter of public record, environmental issues such as soil contamination, or any issue that could only be discovered by doing a new survey or inspection of your property.
Title insurance usually costs around $300, and must be purchased in addition to your general home insurance coverage. It is generally purchased at the time you buy your home, but existing homeowners can also purchase title insurance (the policy and premium differ slightly). There are several companies in Ontario that offer title insurance; your REALTOR® or lawyer can provide you with more information or a recommendation. The great thing about title insurance is that it covers you for as long as you own the property; the fee you pay is a one-time premium and there is no expiry date or renewal fee. It’s a small price to pay for the knowledge that you’re covered for problems with your title that may arise, even years down the road.
The President’s Pen column was prepared by the Ottawa Real Estate Board and first appeared in the October 30 issue of the EMC community newspapers. (Reprinted by permission.)
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