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What's in a title?


Published: 06/26/2012


 Proximity to schools and work, pool for the kids, affordability, colour schemes, floor plans, number of bedrooms; decisions, decisions, decisions. The process of buying a home is wrought with considerations, excitement, anxiety, anticipation, and is ultimately rewarding when the boxes are unpacked and this 'house' becomes your 'home.' I suppose that is why hundreds of thousands of Canadians have been swept up in the whirlwind of the latest real estate boom.

For an unfortunate few, their perceived 'castle' can quickly spiral into a 'money pit,' as happened with one Toronto couple. Shortly after purchasing and moving into a recently remodeled, resale home, it became apparent that what appeared to be renovation turned into repair and structural reconstruction ... to the tune of $60,000, due to the previous removal of load-bearing walls and the replacement of improper support beams.

No building permits were obtained for the previous renovation and thus there was no quality control by municipal building inspectors.

Enter First Canadian Title, established in 1991 as a Canadian subsidiary of First American Title, a Fortune 500 company, which underwrites title insurance. This form of insurance is unlike other forms, in that it indemnifies the property owner against issues that pre-date the policy inception.

For a one-time fee (that in many cases works out to less than the annual premium for an average homeowners insurance policy) title insurance protects the purchaser against anything that may encumber clear possession of the property. This coverage exists as long as the purchaser holds title of the property for which it was purchased, and will pass on with the property to family members as in the case of an inheritance, for example.

It should also be noted that title insurance is purchased when title of the property is conveyed. It is most typically acquired through the lawyer handling the transfer of ownership, and actually eliminates the need for thorough title searches that would normally be performed by the lawyer.

The result is that the one-time policy premium usually works out to the same cost or less than the title searches it eliminates. It is also 'no-fault' insurance so that if something arises you simply make a claim, unlike the traditional process of having to prove negligence on the part of the lawyer conducting the searches.

So, what does it cover? As mentioned, it is intended to insure 'clear title' of a property. It would cover un-discharged liens or mortgages that may go back many years, or have been lost in the land registry system and could surface many years later. It will even cover fraudulent mortgages placed on a property unbeknownst to the property owner.

Situations of unpaid taxes or utilities levied against the property could be covered. Encroachments are a frequent issue where, for example, the past owner has built a shed, deck, pool or other addition on the property you are purchasing and it encroaches on a neighbouring property, or doesn't meet municipal bylaw or setback requirements.

It also provides for any changes to a property where appropriate permits are not obtained. Situations like these can cost considerable amounts of money to rectify even before the legal bills begin to pile up.

In the case of our afore mentioned homeowners, they were quite relieved when they learned that First Canadian Title covered the cost to restore the home they purchased, not specifically because of the poor workmanship, but because a building permit was never obtained by those who had completed the work.

A secondary benefit to the purchaser is that title insurance will make for an easier home purchase. All of the major financial institutions accept title insurance in lieu of a survey, which can cost anywhere from $600 to $1,000 and up, if one is not readily available. It provides 'gap coverage,' which came into play during the power failure of 2003. When conventional title searches and registrations were not possible, leaving many with packed moving trucks and nowhere to go, those who purchased title insurance were able to take possession of their homes knowing that any possible difficulties that may occur with title would be covered under their policy.

If you are thinking of making a move, you are well advised to discuss title insurance with your lawyer as the earliest possible opportunity. It's fast, it's cheap and it provides you with the peace-of-mind of knowing that your most valuable asset is protected.


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