Title Insurance. The Fraud Protection You Need For Your Property

Title insurance, often overlooked by many Canadians as unimportant, plays a crucial role in safeguarding your ownership of a property. When you’re buying a home, you may prioritize tasks like finding movers, sorting out closing costs, arranging home insurance, and planning renovations, but the significance of protecting the property’s title shouldn’t be understated.

Your lawyer and mortgage lender will strongly suggest that you attain this insurance because overlooking this aspect can lead to unforeseen complications though it is not mandatory in Ontario. Title insurance offers protection against various actions and issues that may arise during real estate transactions. It also protects against title fraud, a crime that is becoming more common today. In Ontario, this policy is essential for ensuring peace of mind and security in property ownership.

What is Title Insurance?

Title insurance acts as a protective shield for your property ownership. In the event of a legal issue with your property’s ownership, your title insurer steps in to cover financial losses stemming from covered risks and related legal expenses. Typically, both an owner’s policy and a lender’s policy are obtained to ensure protection for both you and your lender against any potential title complications. While not obligatory in Ontario, your lender often mandates either a title insurance policy or a solicitor’s opinion on title.

Title insurance doesn’t just shield homeowners from unexpected property ownership issues; it can also be a lifeline in cases of title fraud. It safeguards homeowners from fraudulent claims on their property and covers any legal expenses incurred in reclaiming rightful ownership. It’s like having a legal guardian for your property rights. If a buyer unwittingly buys a home that’s been fraudulently listed, the insurance should also protect them. In cases like that, the true owner will often get their home back and the buyer will have their money returned. 

Available for a one-time premium, title insurance secures your ownership interest in the property for as long as you or your heirs possess it. The insurance amount typically matches the property’s purchase price, scaling up as the property’s value increases, capped at a maximum of 200%.

What is Title Fraud?

Title fraud happens when someone uses a fake ID or forged documents to steal a homeowner’s identity and claim ownership of their property. Once they have the property’s title, they can remortgage it, sell it to someone else, or get money from it in some other way and take off with the proceeds.

Homeowners often only find out about this fraud when they get notices of missed payments or it’s made clear that someone is trying to sell their property. Victims lose the ability to mortgage their home, use the equity, or sell until they sort out their title rights in court. It’s imperative to contact an experienced real estate lawyer if you suspect title fraud because dealing with this can be tough, costly, and time-consuming. Seniors and people who rent out their homes are especially at risk and need to be extra cautious.

What is Covered By Title Insurance?

Title insurance is crucial for safeguarding your property ownership, covering various issues such as unpaid utilities or property taxes from prior owners, someone else claiming interest in your property, title fraud, encroachments from adjoining properties, existing liens against the title, lack of legal access to the property, violations in municipal regulations, and deficiencies on title. 

However, it’s important to note that coverage typically extends only to risks existing before the policy date, excluding certain matters like compliance with municipal regulations or structural concerns. Additionally, exclusions may apply to issues such as wandering fences, environmental concerns, or known problems pre-closing. For specific concerns beyond the scope of title insurance, consulting with a lawyer for additional due diligence is recommended. Remember, the coverage provided by title insurance policies can vary, so reviewing your policy thoroughly is essential to understanding the extent of protection it offers.

Is There An Alternative To Title Insurance?

Instead of opting for title insurance, some homeowners choose to obtain a solicitor’s opinion on title, which involves conducting various “off-title” searches. These searches, although costly, are essential for confirming building and zoning compliance, property tax status, and water/sewer account arrears, among other factors. Additionally, an up-to-date survey of the property is required, with costs typically starting at $1,500 and increase based on the property’s size and complexity. However, these searches and surveys can be time-consuming, taking weeks or even months to complete, and usually result in expenses totaling several thousand dollars.

Why Title Insurance Is The Best Option

In the majority of residential property purchases, title insurance emerges as the preferred choice due to its cost-effectiveness compared to ordering off-title searches and obtaining a survey. The expense of title insurance correlates with the purchase price, such that for a $500,000 home, you’d typically invest $400 to $500 in a title insurance policy.

The expense, additional legal fees, and time involved in obtaining search responses when pursuing an opinion on title often sway clients towards title insurance. Plus, the added safeguard against title fraud makes title insurance even more appealing. Essentially, title insurance offers coverage for issues that would typically arise from conducting off-title searches.

However, one drawback of title insurance is the absence of off-title searches, meaning any existing issues cannot be identified or rectified before closing. Instead, coverage is provided for potential financial implications if a covered risk materializes. Your lawyer can provide guidance on which option aligns best with your specific circumstances.

When It Comes To Title Insurance, Listen To Your Lawyer

When you are buying a property, title insurance is a small price to pay to ensure that you have covered all legal probabilities with the possession of that property. And, it continues to cover you for title fraud, a crime that happens more today in a world where stolen identities are all too common. Making sure to consult your lawyer about title insurance and the coverage it brings, is a smart move. 

If you’re buying a property, make sure to get proper legal advice. At Hukam Law, we have extensive knowledge of real estate transactions and title fraud. We’re experts in the Barrie, Brampton, and Simcoe County areas and we can do the due diligence to make sure that the title to your property is transferred with no legal issues. Call us today📞 at 705-915-0884, or send us an email at info@hukamlaw.ca for a full legal review of your title..

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.