Although it has been around for over a decade, many clients still wonder what title insurance is and what exactly it covers. A title insurance policy may be purchased for new and existing home owners as well as lenders. Sometimes lenders require that a title insurance policy be obtained prior to releasing the mortgage funds.
The “Title” of a property refers to your legal ownership of it and it could be the case that your property may be subject to claims without you having knowledge of it. The ‘closing’ process of your transaction involves a search of public records to review current and prior ownership of the property as well as previous dealings related to it. These claims may be made by the local municipality, a former owner, and or companies seeking an interest in the property. Historically, lawyers used to provide an opinion on title by conducing thorough and often expensive search procedures. However, with the advent of title insurance, lawyers no longer provide such opinions as their clients are protected by title insurance which they purchase at a lower cost.
Since the buyer has an expectation to receive clear title, your lawyer will require the above issues be taken care of by the seller’s lawyer prior to closing. However, sometimes problems which are not apparent by standard searches or items which would be too expensive to conduct searches for. It is often prudent to purchase title insurance which may cover risks such as:
- existing liens against title;
- irregularities with surveys or public records;
- unregistered easements and right of ways;
- unknown title defects;
- encroachment issues (a structure sitting on a neighbour’s property).
Sometimes a survey is simply not available or may not be up to date and in these situations, it is commonplace to purchase a title insurance policy in order to provide coverage. Another important coverage is for homeowners who suffer losses against title to their property as a result of fraud or forgery.
It is important to note that the policy lasts for the duration of your home ownership and most title insurance companies are willing to extend the policy to those who inherit the property or to recipients of a gift.
Have more questions? Please feel free to contact our office for more information on title insurance and closing a real estate transaction.
Note: The above is general information and is not to be construed as legal advice. Please contact a real estate lawyer for more information.