What is Title Insurance and Do I Need It?

Title insurance is an insurance policy that protects homeowners and mortgage lenders against financial losses related to the property’s title or ownership. Although title insurance is meant to provide a backstop against claims arising from issues not discovered at closing, at Lak Law, we still conduct title search of the property, examining registered documents that affect the quality of title being transferred by the seller. Where title insurance is obtained, there are a number of municipal searches which we are no longer required to conduct pursuant to the title insurance policy. Some of which are zoning and building compliance, where we have to write to municipalities and wait for their responses, which are typically qualified to exclude errors and omissions and therefore may not have been very reliable in any event.

What is title?

It is a legal term that refer to having legal ownership of property. You obtain title to a property when the property owner signs and transfers the deed over to you.

Is title insurance mandated by law?

While title insurance is not mandatory in Ontario, most mortgage lenders require it and typically home buyers cover the costs for lender’s title insurance as they are the ones who is taking a loan from the mortgage lender. It is strongly recommended for purchasers to also obtain a homeowner policy as it will provide homeowners protection from losses resulting from:

  • Another party claiming an ownership interest
  • Title fraud, forgery
  • Liens against the property’s title, such as unpaid debts secured against the property by a previous owner, including utility bills, mortgages, property taxes and condominium charges.
    • While real estate lawyers will still perform title search on a property, these will only reveal registered disputes or claims. There can be instances where valid claims exist without registration and shown on title. For example, the Construction Act allows contractors to place liens for unpaid work on the property, and these liens are not required to be registered for a certain period of time.
  • Erroneous statement of account
  • Incorrect legal description
  • Encroachment issues
  • Notice of violation of a zoning by-law
  • Errors in surveys and public records
  • Unknown title defects that impact your ownership of the property and other title-related issues that may affect your ability to sell, mortgage, or lease your property in the future.

Life of a Title Insurance Policy

The title insurance policy comes into force starting from the date of execution by all parties of the documents and instruments creating the interest insured by the policy, and will remain in effect as long as the owner has a right in the insured property for the homeowner, and as long as the debt secured by the mortgage has not been fully reimbursed for the mortgage lender. The policy is transferable to the insured’s heirs, spouse or children.

How do I buy title insurance?

Typically your real estate lawyer will order title insurance for you after receiving your approval. The cost of residential title insurance varies based on the use and value of your property; however, it is a one-time fee, called a premium, and protects you and your title for as long as you own the property.

Contact us at any time if you have any questions.