When it comes to mortgages some issues other than down payment or employment verification could play a role in making a seemingly slam dunk transaction into a little more of an investigation. I am talking about title insurance that your lawyer arranges for you. In older parts of Ottawa, there could be instances where there are discrepancies in the encroachment agreement due to when the last survey was taken and if some of the verandas or porches do not exist anymore. Sometimes a new survey could be needed. These are case by case issues and no two properties are the same but if you are purchasing a home in an older area, it is recommended to start your mortgage transaction sooner rather than later in case the issues arise and a new lender needs to potentially be found.
I had Michael Abrams, a leading real estate lawyer in Ottawa with Kelly Santini LLP, help out with a guest blog post to get you caught up on the basics of title insurance. If you do have further questions, feel free to contact him at anytime.
TITLE INSURANCE: THE BASICS
Title insurance is an insurance policy issued by an insurance company, which insures or indemnifies the home buyer and mortgage lender (where mortgage financing is provided) against loss or damage sustained as a result of covered title risks and defects, read this low cost homeowners insurance policies for more information. It further insures against various problems which would have been disclosed by an up-to-date survey of the property and against the property’s failure to comply with municipal or other applicable regulatory authority requirements. In essence, it transfers the risks connected with the property’s title from the home buyer and mortgage lender to the title insurance company. While coverage varies depending on the insurer, below is a general overview of title insurance policies.
WHAT DOES TITLE INSURANCE COVER?
Typically, title insurance will cover:
- Unknown title defects (issues that prevent you from having clear ownership of the property);
- Liens and encumbrances against the property (ex. when the previous owner had unpaid debts from utilities, mortgages, property taxes secured against the property);
- Rights of way or easements over the property;
- Someone else having an interest in the lands, such as adverse possession rights;
- Issues that would have been discovered by an up-to-date survey;
- Irregularities in the title documents;
- Pedestrian and vehicular access to the property;
- Zoning infractions;
- Outstanding building permits or work orders;
- Issues related to septic systems and wells;
- Non-compliance with restrictions or agreements registered on title
- Loss or damages suffered as a result of fraud/forgery (ex. identity theft);
- Lawyer negligence
REMEDIES AVAILABLE
If the insured individual suffers a loss that is covered by title insurance, a claim will be made under the policy. The title insurer would then have the obligation to satisfy the claim according to the rights and obligations as set forth in the policy.
TITLE INSURANCE: WHAT IS NOT COVERED
- Known title defects (if purchaser or mortgagee was made aware of a title defect before the property was purchased, title insurance will not cover that defect);
- Environmental hazards (ex. soil contamination);
- Native land claims;
- Septic systems (functionality);
- Problems that would only be discovered by a new survey or inspection (such as a smaller lot size than originally anticipated);
- Personal Property Security Act (PPSA) – title insurance does not cover chattels, it only covers title to land;
- Matters not listed in public records, such as unrecorded liens;
- Zoning bylaw violations caused by changes, renovations or additions performed by the policy owner;
- Certain government rights in the land (such as the right of expropriation);
- Problems the buyer agreed to assume but failed to inform the title insurer or lawyer about;
- The buyer’s ability to change the use of the land or undertake renovations, construction or expansion.
HOW LONG DOES THE COVERAGE LAST FOR?
For the homebuyer, title insurance lasts for as long as the homebuyer continues to hold title to the land. Some policies also protect those who received title as a result of the purchaser’s death, or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.
For lenders, title insurance lasts for as long as the mortgage remains on title. A lender covered under a title insurance policy is insured in the event the lender realizes on its security and suffers actual loss or damage with respect to a risk covered under the policy. Lenders are usually covered up to the principal amount of the mortgage.
PREMIUMS
Premiums are paid only once when the policy is issued.
