Real Estate Fraud: Why Title Insurance Is So Important

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:

• Known title defects (that were revealed to you before you purchased your property);

• Environmental hazards (e.g. soil contamination);

• Native land claims;

• Problems that would only be discovered by a new survey or inspection

  of your property (e.g. the property is smaller than originally thought);

• Matters that are not listed in public records (e.g. unrecorded liens and

  encroachments); and

• Zoning bylaw violations from changes, renovations or additions to

  your property or land that you are responsible for creating.

  You need to carefully review your title insurance policy, as it may include additional exclusions and exceptions that are specific to your property. 

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:

• Damages due to flooding, fire or sewer backup;

• General wear and tear of your home (e.g. replacing old windows, a

  leaky roof, or an old furnace);

• Theft (e.g. a burglar breaks into your home and steals your television); and Other losses or damages due to non­-title related issues.

• Refer to your title insurance policy for a full list of exclusions, restrictions, and terms and conditions.

Do I Need Extended Title Insurance Coverage?

• For an additional fee, some title insurance companies may also offer you protection from additional risks that are not covered by a standard title insurance policy, such as identity theft and certain known title defects. Speak to your lawyer, title insurance company, or insurance agent/broker to determine if you require extended or additional title insurance coverage. They can compare several different title insurance products and recommend the product that would best meet your needs.

   

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
■ Policies for existing homeowners
■ Policies for lenders in a residential mortgage

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:

■ houses
■ condominiums
■ cottages
■ rental units
■ vacant land

■ cooperatives
■ leased properties

■ rural properties

Commercial title insurance policies can insure:

■ office buildings
■ industrial buildings
■ shopping centres
■ apartment buildings
■ rental units
■ warehouses
■ vacant commercial land
■ leased commercial properties

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.