What Is Title Insurance?

Title insurance is a form of protection for property owners and lenders that covers various risks associated with the ownership and registration of real estate. In Ontario, it is not mandatory, but it is highly recommended and commonly purchased during residential real estate transactions. Title insurance provides protection against issues that could affect the owner’s legal ownership or ability to sell, mortgage, or lease their property. These issues could be unknown at the time of purchase, including problems that may not be discovered even after a title search is conducted.

For homeowners, title insurance typically provides coverage against several common issues, such as errors or omissions in public records, undisclosed liens, encroachments that would have been revealed by a new survey, or title fraud. It offers peace of mind by addressing legal or financial problems that may arise due to these issues and that may not be easily resolved otherwise. Title insurance is a one-time premium paid at the time of the purchase closing and remains in effect as long as the owner retains an interest in the property.

Consider an example for an Ontario homeowner who discovers, after moving in, that a portion of their garage was unknowingly built on the neighbour’s lot. This encroachment could lead to a costly legal dispute or even a court-ordered removal of the structure. A title insurance policy may cover the legal costs to resolve the issue or even pay for the structure’s modification. In another example, a buyer learns post-closing that there is an unregistered lien against the property due to unpaid utility bills from a previous owner. Title insurance can step in to pay off the lien or cover the cost of defending against its enforcement.

There is also lender’s title insurance, which is often a preferred option to a Survey, other costly searches and a lawyer’s opinion on title when a mortgage or secured line of credit is involved. While an owner’s title insurance policy protects the buyer’s interests, lender’s title insurance protects the mortgage lender’s investment in the property. It ensures the lender holds a valid and enforceable interest in the property and provides coverage against defects or issues that could affect the lender’s priority or ability to recover their funds in the event of a power of sale. It’s important to note that lender’s title insurance does not protect the homeowner—only the lender—so it may be wise for a buyer to also secure their own owner’s policy at the time of purchase.

Another benefit of title insurance is that it can offer protection against title fraud, which has become a growing concern in Ontario over the past 5 years. In fraudulent title cases, someone may impersonate the owner to transfer title or obtain a mortgage, leaving the real owner with a significant legal and financial mess. With title insurance in place, homeowners have protection against these types of fraud, which are difficult to detect.

In summary, title insurance in Ontario is a valuable tool for both buyers and lenders. It can provide protection from unexpected legal and financial issues tied to a property’s ownership and use, many of which are difficult to anticipate or prevent. Though optional, it has become a standard part of most real estate transactions in the province. It can offer a layer of assurance and financial protection that can be critical in preserving the value and enjoyment of your home.

The content on this post is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship.