How Does Title Insurance Protect You?

By: Thomas Cook

How Does Title Insurance Protect You?

The word “title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system.
 
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership.
 
Normally, when you purchase a home, your lawyer would investigate title to see if there are any liens against the property.  Your lawyer’s opinion however, is only going to be as good as his/her research.  So, if your lawyer makes an error, Title Insurance will cover you.
 
It also covers you in the event errors or mis-information was provided by the previous property owner.
 
As an example, let’s say that there are two neighbors, and one has a garage that is actually 2 feet on the other person’s property.  Both parties are aware of it, but because they have a great relationship, there is no problem.
 
Now – the person with the garage sells their house to you, and you move in.  For one reason or another you don’t get along with the neighbor… maybe you had a big loud house-warming party and keep him up all night.  Suddenly, he is angry that your garage is 2 feet on his property, and you have a problem.
 
In this case, since you didn’t know about the problem before hand, the Title Insurance company will either defend your right to leave your garage there, if it has been there for a long, long time… OR they will compensate the neighbor for the 2 feet of property they have lost by paying them to buy that strip of land… OR in the worse case scenario, they will actually pay to have the garage moved so that it no longer encroaches on your neighbor’s property.
 
Title Insurance can also protect you from fraud.   There are instances where the owner has been living in their home for 3 or 4 years, and they found out that someone has gone down to the registry office and fraudulently transferred the deed to their home over to themselves.  Then, this person fraudulently discharges your mortgage on the home, so now it appears that not only do they own your home, but the house has no mortgage!
 
They then go to another bank and say “Here is a copy of my deed, I own this home, I have no mortgage, and I would like to borrow some money to do some renovations”.  So…they pocket several hundreds of thousands of dollars and probably go off on an extended vacation, while you…the rightful owner, are at home and are getting notices of non-payment from that new lender and they are threatening power of sale!
 
Without title insurance, you would be stuck paying a ton of legal bills (about $20-30,000 minimum) to sort this mess out, but when you have the Title Insurance, you will be protected from something like this.
 
Title Insurance can also eliminate many costs.  For instance, generally the Law Society of Upper Canada requires that you pay a $50 fee in case your lawyer makes an error.  However, title Insurance covers this, so you do not have to pay this fee.  Also, Enbridge Gas, and Toronto Hydro usually both require that you pay a $50 fee to conduct a search to get utility clearances for your new home….but with Title Insurance this is covered and those costs are eliminated.
 
Title Insurance also eliminates the cost of a survey.  A survey is a piece of paper, which shows the dimensions of your lot, and the dimensions of your house, and where the house sits on the lot.  Often, the seller will provide a survey, but, if one doesn’t exist or it’s out of date, the banks will accept Title insurance instead of you paying for a new up-to-date survey which could cost over $1,200.
 
Finally, the cost of Title Insurance is about $450 to $600 for a house, and $250 to $350 for a condo.  It is a one-time payment and must be purchased on the day you get your keys.  It is a very minimal expense when you add up all of the costs you save and the peace of mind you get when you buy it.
 
To arrange it, you just need to ask your lawyer when you’re first speaking with him or her.
 
The Financial Services Commission Of Ontario has created a brochure outlining Title Insurance in detail.  You can download it here.
 
Thomas Cook
Thomas@LivingInToronto.com
647-962-1650


Keep Up To Date With Toronto's Real Estate Market
 
Every month we communicate with our readers to give them accurate insights and statistics about what's happening in the Toronto and GTA real estate markets.
 
Subscribe to our free monthly FYI Newsletter HERE.


 

Here are 5 proven ways to move safely and smartly towards your real estate buying goal...

  1. Download a free copy of my Ultimate Home Buyer’s Guide book
Find out everything you need to know about buying a Toronto house or condominium. Instead of randomly searching all over the internet, jump start your home buying experience and get a wealth of expertise and experience in one place.

Download your Guide here
 
  1. Get a custom listings search set up for you and receive targeted listings daily
If this list is not specific enough for you, we can put together a custom list of homes.  Maybe you want only 2-bedroom condos in specific neighbourhoods, or only semi-detached houses, or even a certain school zone. 
 
We can set up your HOMEWatch search for any area you choose (not just downtown Toronto), and you'll get immediate access to homes within minutes of them being listed.  Just leave some search criteria here
 
  1. Set up a step-by-step plan with the best ways to get to your home buying goal
At the beginning of the home buying journey, often the picture of what the end result might look like is a little ‘fuzzy’.
 
Our first-time and move-up buyers have told us that being able to meet with us on a casual basis as early in the process as possible, even if their purchase date was 6-12 months away, really worked the best for them.

To arrange your no-obligation Starbucks Strategy Session, click here.
 
  1. Join us for a Market Experience Tour - pick your favourite neighbourhoods and price range
Start getting educated about what your condo likes and dislikes are. 
 
The Market Experience Tour is a great way for you to figure out which neighbourhoods and condo buildings are right for you, and you’ll also get a good sense of what’s available in your price range.
 
Pick the date and time you like to go on your Tour.
 
  1. Don’t start your home buying experience on the wrong foot - Meet for a Buyer Consultation first!!
Home buyers have come to us after trying to work with another agent saying “I don’t think he even knows exactly what I’m looking for and I’ve got questions he doesn’t have the answers to”.
 
Don’t make the same mistake.  Let’s set a time to meet and go over how the complete home buying process works, find out what your likes and dislikes are and what pitfalls you’ll want to avoid, before you seriously start looking for a house or condominium.
 
This is the best 90 minutes of time you’ll ever spend - set up your private Buyer Consultation.