What is Title Insurance?
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.