In its simplest form, title insurance protects the lender and homeowner against a number of risks related to the property’s title or ownership.
What started years ago as a replacement for a survey certificate has now become standard on real estate purchase or refinance transactions. If you are buying or refinancing your home, expect title insurance to be a requirement of your lender.
What does Title Insurance cover?
From the point of view of most lenders, the main coverage is fraud, which can occur in a variety of ways.
With identity theft on the rise, it is not difficult for a fraudster to obtain legitimate identification claiming to be the true owner. The fraudster then deals with realtors and lawyers as if they were the owner, and proceeds to sell the property. Alternatively, the fraudster may work with a lender or mortgage broker, again with identification, to place a new mortgage on the property. In either situation, the true owner is unaware of the fraud and the fraudster absconds with the sale or mortgage funds.
Other typical examples include spousal impersonation and lawyer fraud.
In most cases the Assurance Fund of the Land Title Office may reimburse the true owner, but this may take several months and thousands of dollars in legal fees. Title Insurance is usually quicker and less expensive.
In addition to protecting against title fraud, title Insurance can cover:
- violations of municipal by-laws;
- encroachments onto an adjoining property;
- property tax arrears;
- existing work orders;
- lack of legal access to the property;
- unpaid strata assessments;
- zoning and setback non compliance;
- forced removal by a governmental authority of a structure built without a required building permit;
- legal status of any septic system;
- gap coverage.
How much does Title Insurance Cost?
For properties with a purchase price under $1,000,000.00, the cost of title insurance is generally $225.00, with $175.00 to the Lender Policy, and $50.00 to the Owner Policy. For every additional $1,000.00 over a purchase price of $1,000,000 the price increases by $0.90.
Unlike life or house insurance, purchasing title insurance is a one time cost, with no annual premium.
How Do I order Title Insurance?
The easiest way to order title insurance is to ask your lawyer to order it as part of buying or refinancing the property. There is no extra fee to order the policy.
If you are an existing property owner and wish to order title insurance, you can call Stewart Title at 1-888-667-5151. Past clients of Spagnuolo and Company can simply call us and we will be happy to order a title insurance policy on your behalf.
Why Stewart Title?
There are other title insurance providers as well and these can be found on the Internet. The Spagnuolo Group chooses to work with Stewart Title because of their close relationship with the Canadian legal community and proven track record in dealing with a wide variety of title related claims.
Is Title Insurance mandatory?
Absolutely not, unless mandated by the lender, which is on most files. Much like most insurance policies, it is optional and only for those who are concerned with the issues above. It may also be useful to those who are purchasing homes with a known encroachment or unauthorized improvements to the home. Clients should speak to their lawyer about the benefits, and costs, of title insurance.
What is the Land Title Office Notification System and can this be used to guard against title fraud?
or a small fee, homeowners can register with the Land Title Office and receive notification of a change in title to their home. If a fraudster registers a transfer or mortgage against the home, the true homeowner receives an email alerting them.
While a useful service, the problem with the Notification System is that it alerts the homeowners after registration. Unless the homeowner receives their email instantly, the email may sit in an “inbox” for a few hours or days. This will give the fraudster enough time to receive the funds and go into hiding.