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Do Canadians Appreciate Title Insurance?

Written by Posted On Tuesday, 07 August 2001 00:00

Title insurance, a "new" real estate product that has been available in Canada for over 30 years and in the United States for more than a century, is still an unknown entity to many Canadians.

Title insurance can reduce transaction costs by replacing the need for an up-to-date survey and decreasing the amount of investigation required by the lawyer involved. This insurance is financial protection against losses resulting from errors in existing surveys, fraud, forgery and title defects that affect the lawful ownership of that property.

Title insurance can also be considered "peace of mind" insurance because it's more extensive than a lawyer's opinion and remains in force as long as the insurer owns the property, holds the mortgage or is bound by a covenant or legally-binding promise regarding the property. The policy may also cover anyone who inherits the property.

"Title" is the legal right to possession or ownership of a property. Traditionally in Canada, the buyer's lawyer in a purchase or the lender's in a mortgage situation, searches title for the property in question giving a professional opinion as to whether there is clear and uncontested title and verifying the validity of the mortgage claim. If the lawyer makes a mistake or overlooks something, the buyer or the lender must turn to the lawyer to correct the problem.

Without title insurance, the homeowner might have to negotiate with the lawyer or even sue to be compensated. If the lawsuit is successful, the lawyer will be liable for damages, usually paid by the lawyer's professional errors and omission insurance. If the problem arose because of fraud or the negligence of another party, the lawyer who searched title may not be considered at fault and would not be liable for damages. However, with title insurance all losses and costs would be covered regardless of how the problem arose.

In addition, a lawyer's opinion cannot include items that can only be verified by surveying, but title insurance can. Most lenders will accept title insurance in lieu of an up-to-date survey which may cost hundreds of dollars, since they are completely protected whatever turns up later. Title insurance has helped speed up the home-buying process. The widespread acceptance of title insurance by mortgage lenders has meant that delays for new surveys are eliminated.

Title insurance, may be purchased by any one of the parties to a transaction to financially protect ownership or lender's rights and interests. For instance, if someone appears, even decades later, with a claim against the property -- anything from a building that extends over the property line to an improperly discharged mortgage -- the title insurance company will identify the options, undertake the solution chosen by the policy holder, pay all costs and all legal fees and not charge a cent more regardless of the time and money involved. Usually all it takes is a phone call. No law suit is necessary.

Money-saving Tip:

Don't look on the one-time premium of about $250 as an added expense. Usually, you will save more in legal fees, survey costs and other transaction costs than you'll spend on this insurance.

Here are the firms which make title insurance available to those buying or refinancing Canadian homes:

  • First American Title Insurance Co. , the California-based title insurer that championed this product in Canada

  • The Canadian branch of Texas-based Stewart Title

  • TitlePLUS , a "made-in-Canada" product of Lawyers Professional Indemnity Company, an arm of the Law Society of Upper Canada, which includes legal representation.

    The Canadian title insurance marketplace continues to grow and diversify, offering consumers new opportunities to protect their real estate investments. TitlePLUS recently expanded its title insurance product line to cover the purchase or re-financing of farms valued at up to $1 million, whether or not there is any form of commercial activity taking place on the property.

    Next time you're arranging a mortgage or buying a cottage, investigate the savings and peace of mind offered by title insurance.

    For more articles by P.J. Wade, please press here .

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    PJ Wade

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