Title Insurance Ontario: A Complete Guide

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Title insurance is a way to safeguard your property and your peace of mind.

In this comprehensive guide, we'll cover everything you need to know about title insurance in Ontario, from its importance in real estate transactions to choosing the right provider and beyond.

What is Title Insurance?

Title insurance is an insurance policy that protects property owners and lenders from potential losses tied to property ownership. Unlike home insurance, title insurance specifically protects the "title" or "legal ownership" related to the property, not physical damages.

In Ontario, title insurance is a key component of real estate transactions. It shields buyers and lenders from potential defects, liens or encumbrances that could affect the property’s title. This coverage helps secure the ownership of the property and reduces the risk of financial loss due to undetected or unknown title issues.

Title insurance is not required in Ontario, however, most mortgage lenders require you to have a title insurance policy as a condition of their loan. This means that if you are using a mortgage to complete your real estate transaction, title insurance is likely required.

Types of Title Insurance Policies

There are two types of title insurance policies in Ontario: residential and commercial.

When you purchase residential title insurance, the policy typically cover title defects, liens, errors, and fraud. They also provide protection against losses due to real estate fraud and survey issues.

Commercial title insurance, on the other hand, offers coverage tailored to commercial properties. It's crucial to review the policy documents to understand the exact coverage and exclusions for each type of property, particularly when dealing with a commercial transaction.

The Role of Title Insurance in Real Estate Transactions

Securing clear title in a real estate transaction means ensuring that the property is free of liens and allows the buyer to confirm ownership.

Title insurance serves as a protective shield for property purchasers and mortgage lenders, providing financial coverage for any losses that may arise from potential defects in legal ownership during a real estate transaction. It offers security against monetary losses related to the property’s previous ownership or title.

Title insurance provides the following benefits:

• Guarantees a clear, marketable title to the buyer and lender, bolstering their confidence and safeguarding their investment.
• Reimburses the property owner for any financial losses incurred due to title fraud.
• Offers protection and financial security to property owners in the event of fraudulent activities related to the title of the property.

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What Does Title Insurance Cover?

Title insurance policies typically cover a range of known and unknown risks:

• outstanding debts
• liens
• encroachments
• zoning violations
• title fraud

For example, title insurance in Ontario provides coverage for title fraud by reimbursing the property owner for any financial losses incurred due to the fraud. This helps safeguard property owners from the financial and legal repercussions of title fraud.

Title insurance also addresses legal ownership issues by covering defects that may arise after the property purchase. In the case of encroachments, title insurance can provide coverage for the insured if they are faced with a situation where they must remove an existing structure that encroaches onto adjoining land. This also applies to adverse possession. The insurance policy will cover the associated costs of rectifying these matters.

Whether you are purchasing a residential or commercial property, it's crucial to understand your coverage options for known title defects and unknown title defects, especially for commercial property owners.

Protection from Known and Unknown Risks

Title insurance policies offer a shield against both anticipated and unforeseen risks like liens, encumbrances, and title defects. However, it is essential to discuss specific coverage with your insurer, as some companies may invoke a “knowledge defense” to deny coverage if the policyholder was aware of any existing defect at the time of policy purchase.

The policyholder should explore having the title insurance policy insure over the risk for an agreed cost. Alternately, they should ensure the sellers resolve the risk before taking title.

Extended title insurance is an additional option that offers further safeguards, including protection from identity theft, title defects, and title related losses. To gain an understanding of the coverage and exclusions in a title insurance policy, it is recommended that you refer to the policy itself and seek professional advice if any queries or clarifications are required.

Addressing Legal Ownership Issues

Title insurance significantly contributes to resolving legal ownership issues in Ontario by offering a safety net against defects, discrepancies, and unexpected claims tied to the property’s title.

It provides peace of mind for property owners and mortgage lenders by indemnifying them against loss or damage arising from title defects or other covered risks. Though title insurance is not mandatory in Ontario, it is highly recommended for all homebuyers to mitigate potential legal ownership issues.

Title insurance also offers protection against fraudulent property transfers, including real estate title fraud, by providing compensation to the property owner for any losses stemming from title fraud. Title fraud occurs when someone unlawfully transfers the ownership of a property without the owner’s knowledge or authorization.

Should a property owner have title insurance, they can submit a claim and be compensated for any losses incurred due to the fraudulent transfer.

What Does Title Insurance NOT Cover?

Title insurance does not cover problems arising from poor maintenance, property taxes, or any pre-existing issues with the house; it also excludes other non-title areas.

For example, title insurance in Ontario does not cover issues such as fences or damages, or issues related to poor construction or techniques used by the construction contractor. It is important to note that title insurance should not be viewed as a substitute for thorough boundary research.

Title insurance coverage is also not transferable, meaning it does not extend to new owners when the property is sold. It is specific to the owner of the property at the time the policy was purchased, and the coverage can extend to heirs upon inheritance of the property. However, the new owner would need to purchase their own title insurance policy to ensure protection.

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Cost of a Title Insurance Policy

In Ontario, the price of a residential title insurance depends on a few different factors such as:

• The value of the property
• The type of title being insured
• The insurance company providing the coverage
• The location and size of the property

As a rule of thumb, a good estimate is approximately $1 per $1000 of property value.

For example, if a property is worth $500,000 than the policy will be approximately $500. This figure is less if the property is a condo.

For a more accurate quote, most major providers have a quote module on their website. Alternatively, you can contact your real estate lawyer.

How Long Does Title Insurance Last?

As long as you own the property, your title insurance coverage remains effective. A one-time premium payment ensures protection throughout your ownership period. This means that the coverage can extend to heirs upon inheritance of the property. However, when a property is sold, the title insurance policy does not transfer to the new owner, as it is specific to the owner of the property at the time the policy was purchased.

Since title insurance is not transferable in Ontario, the new owner would need to purchase their own title insurance policy to ensure protection. This highlights the importance of purchasing title insurance for both residential and commercial properties, as it provides long-lasting protection against potential title-related issues.

Choosing a Title Insurance Company

To select the right title insurance company, research major providers in Ontario and compare their policies to identify the one that best suits your needs.

Factors to consider when choosing a title insurance company in Ontario include reputation, experience, financial stability, claims handling, and professional affiliations. To ascertain if a title insurance company is licensed in Ontario, you may refer to the list provided by the Financial Services Regulatory Authority of Ontario (FSRAO).

By investigating major title insurance providers in Ontario, you can identify the most suitable option for your property. A thorough comparison of policies and providers will help ensure that you receive the best possible protection for your property investment.

Major Providers in Ontario

The four major title insurance companies in Ontario are:

• First Canadian Title (FCT)
• Stewart Title
• TitlePLUS
• Chicago Title

By familiarizing yourself with these major providers and their offerings, you can make a more informed decision when choosing a title insurance company that best meets your needs and preferences.

Tips for Comparing and Evaluating Policies

When you're looking to purchase title insurance, it's important to consider aspects such as coverage, cost, and customer service. Be sure to understand the coverage and exclusions in a title insurance policy by referring to the policy itself and seeking professional advice if needed. Consult with your lawyer or insurer to gain an understanding of the options available to you, including extended coverage options.

Additionally, take note of the company’s reputation and track record in handling title insurance claims. Look for reviews or testimonials from previous clients to gauge their success rate and level of client satisfaction. By carefully comparing policies and providers, you can find the best title insurance policy that aligns with your needs and provides adequate protection for your property.

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Summary

Title insurance is an essential product that protects property owners and lenders from potential losses related to property ownership in Ontario. Understanding the types of title insurance policies, their coverage and exclusions, and the factors affecting the cost is crucial when purchasing a policy that best suits your needs.

By understanding the offerings of major providers and comparing policies, you can ensure that your property investment is secure and well-protected. Remember, purchasing title insurance not only provides peace of mind but also safeguards your valuable investment in the long run.

Ensure that you speak to an experienced real estate lawyer to guide you through the title insurance process.

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