Long a feature in American real estate transactions, title insurance has only recently gained popularity in Ontario residential real estate transactions. Title insurance is essentially an insurance policy issued by an insurance company to provide compensation in the event that there are defects in title on your home.
In the usual transaction, your lawyer searches title to your property and also performs a number of other searches such as zoning, work orders and tax arrears to ensure that the property you are purchasing can be legally occupied and that there are no tax arrears or other liens against the property. This will include a review of the survey to ensure that there are no encroachments affecting the property and a search of executions against the vendors, and in some instances, predecessors in title. An execution is a writ of seizure and sale of property placed by a creditor who has obtained a court judgment against a property owner. Executions must be paid off in order to pass clear title to a purchaser.
In a title insured transaction, some of these searches can be skipped and instead a policy of insurance issued to the purchasers and their mortgage lender. Unlike a lawyer's searches, a title insurance policy does not ensure that clear title passes to the purchaser, but instead it provides for compensation to be paid in the event that a cloud on title is later discovered. For most transactions, a policy of title insurance can be purchased for $200-$250. This can save money for a purchaser in situations where the searches which can be avoided would have cost more than $200, or where an adequate survey is not available and the purchasers can use title insurance to avoid the cost of having a new survey prepared. In recent years, municipalities have substantially increased the costs of zoning, subdivision and tax searches making title insurance an increasingly competitive option in some transactions.
In recent years, the increased incidence of title fraud has also led to an increase in demand for title insurance. A policy of title insurance will protect you from the loss of your house due to title fraud for as long as you own the home.
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