With the added attention paid to title fraud media recently, I wanted to provide some information on what title insurance is, why you need it, and why you may want to review your policy.

In Ontario, title insurance was introduced in the 1990s. Its basic function is to protect residential and commercial property owners (and their lenders) against losses related to the property’s title or ownership. A one-time premium is usually paid upon purchase of your home and lasts until you no longer own it. Your lawyer usually arranges this with an insurance company (keep this on your checklist of issues to cross off when purchasing a property). Title insurance isn’t required by law but for most lenders (ie bank, credit unions) it is essential.

While not required by law, I would deem title insurance as essential. Why?

Here’s what title insurance protect you against: Existing liens against the property’s title (i.e., the previous owner’s unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property); encroachment issues (i.e., a structure on your property needs to be removed because it is on your neighbour’s property); errors in surveys and public records; other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future; and, title fraud.

“Title fraud” is probably the term that will pique most readers interest as it’s been in the news recently. This type of fraud usually involves a someone using stolen personal information, or forged documents to transfer a home’s title to themselves (or an accomplice), without your knowledge. The fraudster then gets a mortgage on your home and disappears with the money. 

Read all about it here, here and here.

What many articles don’t point out is possible gaps in your coverage that you should be aware of. First up, if you bought your home before 1990, you may not have title insurance. If you don't have title insurance, you should get it. The cost varies but it usually is in the hundreds of dollars.

Also, the title insurance you took out may not cover the full value of your home. Many title insurance policies cover only up to 200% of the value of your home when you bought it. How many of you bought houses that have doubled in price since you bought it? Exactly. Maybe it’s tripled!

Review your policy (it will likely be amongst your property closing documents) to find out what coverage you have.

I went back to the closing documents for a property purchased a few years ago and checked out the coverage I had. It was at the bottom of a very large stack of papers. I called the insurance company and they let me know that my title insurance is 200% of the valued amount at purchase. I’m comfortable with this amount. The property hasn’t doubled in value.

If you are not comfortable with your coverage, you can upgrade your present policy with an amendment or get a new policy. To increase your coverage, you can contact the real estate lawyer who initially set up your policy or another trusted real estate lawyer to get a quote. Then it’s up to you to weigh if it is worth it for you.

Title insurance only covers title-related issues, not things such as flood, fire damage or theft of contents.

Also, title insurance doesn’t cover: Title defects revealed to you before you purchased your property; environmental hazards such as soil contamination; Native land claims; problems that would only be discovered by a new survey or inspection of your property (i.e. the property is smaller than originally thought); matters not listed in public records (i.e. unrecorded liens and encroachments); and zoning bylaw violations from changes, renovations or additions to your property that you’re responsible for creating.

While you need to protect yourself with title insurance, a Realtor plays a major role in stopping title fraud. A real estate agent must confirm the identity of their client using government issued identification. Also, a real estate agent should ask questions about their client (especially if they are unfamiliar with them) and report anything out of the ordinary.  

It's also important that you protect your identity. Be careful about who you share your indentification and shred financial and other documents like tax bills. 

If you questions about title insurance or any other real estate issue, contact me or your real estate lawyer. Bosley Real Estate is a full-service brokerage with in-house counsel.

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Photo: Gus Ruballo on Unsplash

Additional links:

The Land Titles Assurance Fund 

Understanding Title Insurance

Canadian Anti-Fraud Centre