Real Estate Fraud: Why Title Insurance Is So Important
Tuesday Aug 04th, 2020
We don't normally think about fraud in relation to Real Estate but it does exist. Quite a few years ago, Title Insurance was introduced to help protect you against it. Purchasing Title Insurance is very important Here's what you need to know.
Your lawyer will provide you legal advice in order to help you make an informed decision about title insurance. Since title insurance policies contain a lot of legal terminology, make sure you ask questions about anything that you do not understand.
What is “Title”?
The word “title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system.
What is Title Insurance?
Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership.
Do I Really Need Title Insurance?
The decision on whether or not you should purchase title insurance should be discussed with your me and your lawyer to fully understand what type of protection title insurance provides. Once you get all the facts, you can make an informed decision. I always highly recommend that my Clients purchase title insurance when buying their home. And for Owners who haven't obtained it yet, please think strongly about buying it. There's a one time charge 'premium' and it's worth it's weight in gold!
What Does Title Insurance Cover?
For a onetime fee, called a premium, a title insurance policy may provide protection from such losses as:
Unknown title defects (title issues that prevent you from having clear ownership of the property);
Existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property);
Encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property);
Errors in surveys and public records; and
Other title related issues that can affect your ability to sell, mortgage or lease your property in the future.
Your title insurance policy will protect you as long as you own your property, and will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title.
What is “Title Fraud”?
Title fraud (or real estate title fraud) harms individual homeowners and their lenders. Title fraud typically involves a fraudster using stolen personal information, or forged documents to transfer your home’s title to him/herself, (or an accomplice), without your knowledge. The fraudster then gets a mortgage on your home and disappears with the money.
If you are a victim of title fraud, you may be able to receive compensation for your losses if you submit a claim through the government’s Land Titles Assurance Fund (LTAF). For more information on the Land Titles Assurance Fund visit www.gov.on.ca/LTAF/.
What Does Title Insurance Not Cover?
When purchasing title insurance, it is important to read the policy and ask questions so you know how you're covered. You also need to be aware of possible exclusions, which may include:
Title insurance does not provide compensation for non-title related issues. It is not a home warranty or home insurance policy, and will not provide compensation for:
Do I Need Extended Title Insurance Coverage?
What are the Different Types of Title Insurance?
There are two main types of title insurance policies:
• Owner’s policy – Protects the property owner from various titlerelated losses that are listed in the insurance policy, for as long as the property is owned. An owner’s policy sets a maximum amount of coverage.
• Lender’s policy – Protects the lender from losses in the event that the property’s mortgage is invalid or unenforceable. A lender’s policy usually provides coverage for the amount of the property’s mortgage.
You can purchase title insurance for both residential and commercial properties.
Types of residential title insurance include:
■ Policies for new homeowners
Types of commercial title insurance include:
■ Policies for individuals purchasing commercial properties ■ Policies for lenders in a commercial mortgage
What Types of Properties can be Insured?
Residential title insurance policies can insure:
■ rural properties
Commercial title insurance policies can insure:
■ office buildings
Residential Title Insurance
If you are planning to purchase a house or condominium, or even if you already own a home, you may want to consider purchasing residential title insurance.
What coverage does residential title insurance provide?
Residential title insurance can provide:
• Comprehensive coverage – It provides comprehensive insurance coverage against losses related to the property’s title. It may also provide coverage for your lawyer’s negligence or errors relating to title risks that are covered by your policy.
• Gap coverage – It insures you for the “gap” between the time your property purchase is finalized (home closing) and the time your title is registered in Ontario’s land registration system.
• Survey coverage – It may eliminate the need for a new uptodate survey of your property. It is acceptable to most lenders as an alternative to a survey or Real Property Report (RPR
• Legal coverage – The title insurance company will pay for most legal expenses* involved in defending your home’s title.
• Savings of time and money – It simplifies the closing process for your lawyer, thereby saving you time and money.
When is residential title insurance normally purchased?
Residential title insurance is usually purchased when you buy your home. However, you can also purchase residential title insurance anytime after you purchase your home.
Note Title insurance policies for existing homeowners are slightly different than policies that are obtained at the time a property is purchased.
How much does it cost?
The cost of residential title insurance varies based on the value of your property, and the insurance company you choose. You will need to pay a onetime fee, called a premium.
How long does the coverage last?
Residential title insurance coverage lasts as long as you own the property. Most residential title insurance policies extend coverage to your heirs through a will, to a spouse in the event of a divorce, or to children when the property is transferred from parents to children for nominal consideration.
Where can it be purchased?
You can purchase residential title insurance through your lawyer or title insurance company, or you can contact an insurance agent/broker.