In order to write this blog, I had the absolute pleasure of reading through a brochure; Understanding Title Insurance, written by the Financial Services Commission of Ontario.
I also found out that brochure doubles as a sleeping pill…
Any way, in between naps and boredom, I found the most important bits and pieces that you should be aware of with title insurance because, if you’re buying a house, you’ll have one form of title insurance or another.
What the Heck is Title Anyway?
If you were like me growing up in the 80s, you played Monopoly (did you have to go once around the board before you could buy properties?). Any time you bought a property you were given the deed to the property. Well, the title to a property is effectively just that.
The title will describe who the rightful owners are, your rights to the land and what you’re allowed to do on that land. It will also point out where utility providers have a right to run wires under or across your property. I’ve seen some real messes with Rogers and Bell cables.
If you’re like everyone (not a one percenter), you’re buying your home with a mortgage. Whoever is providing that mortgage to you, will require you to take out title insurance. D you know why? Not to make sure you’re covered in case anything goes wrong. It’s to make sure their mortgage is covered in case anything goes wrong! They post billions in quarterly profits and can’t flip the bill for $200 or so to cover their asset. Nice. That’s what happens when politicians and bankers are in bed together.
To make sure you’re covered as well, when you’re speaking with your lawyer about closing costs, ask them to make sure buyer’s title insurance is added. Sometimes, because title insurance has become almost mainstream, insurance providers only sell blanket policies that jointly cover the buyer and lender. BE SURE TO ASK AND GET BUYER TITLE INSURANCE IF IT ISN’T INCLUDED. It’s worth spending the extra $150 or so.
Reasons You Wish You Had Title Insurance
- Someone else claiming an interest in the property
- Forgery and fraud
- Typos and minor errors in the legal description of the property
- Liens on the property (a legal claim by someone else on the property)
- Construction liens (a lien placed on a property because of unpaid contractor bills)
- Easements (the right for someone else to use part of your property without owning it – for example, a shared driveway)
- Work orders
- Being forced to remove structures because they violate zoning
What happens if you were to move into your new house and you find out that the beautiful extension at the back of the house was built without permits and don’t comply with current building codes? There’s a nice little rider in your title insurance for Building Compliance coverage. Essentially, you’re covered for the entire cost to put the house right again. Aren’t you glad you spent the extra $150? Correcting some renovations can be $100,000 or more.
Another good feature to look for is “legal services coverage”, which protects you if your lawyer screws up during the buying process. With this coverage, your title insurer will rectify the error and reimburse you for any losses, thereby eliminating the hassle and cost of you suing your lawyer to recover any damages. Not sure I’d want to take a lawyer to court…
One other optional feature worth considering is identity theft protection. If someone were to try and steal your title, they would need your detailed personal information. Once they have it, the pain comes in bunches. They can open accounts in your name for credit cards and lines of credits. Your credit rating will get destroyed faster than you throwing out free home evaluation flyers. Thankfully, this rider covers you for the costs of defending and restoring your name, debt pursued against you by creditors and, in some instances, may even reimburse you for time lost from work to correct this process.
What Title Insurance Doesn’t Cover
I’ve never heard of an all encompassing insurance. Here’s a list of what is not covered by title insurance:
- Environmental hazards (contaminated soil, asbestos, etc.)
- Zoning bylaw violations – that you do yourself
- Building code violations – that you do yourself
- Native land claims
- Foundation cracks
- Leaking roof
- Fire or weather damage
Do You Still Need a Survey With Title Insurance?
When I’m working with buyers, any offer submitted always asks for a survey. Title insurance does not eliminate the need for a survey but, as the old saying goes, ignorance is bliss. Let me explain. If you knew about any title issues before buying a property, and if it can be proven that you did, you will lose your coverage for that defect. Be ignorant if you didn’t get a survey when you bought the house.
Compared to some of the major issues and repairs that could come out of your pocket, buying title insurance for $350 seems like something you shouldn’t give a second thought to. Levels of coverage will vary, so make sure you ask your lawyer to give you a description of what is covered and for what cost. If you already have title coverage, check in with your title insurer before paying with your own money to fix any issues.