The legal term “title” refers the ownership of a property. Prior to closing, the purchaser’s lawyer performs a records search to determine the previous ownership of the property, as well as prior dealings related to it. The search might discover existing mortgages that have not been properly removed or liens against the property due to unpaid taxes for example. Purchasers expect these outstanding issues to be resolved by the lawyer on closing.
However, once in a while these problems are not discovered before closing, or are not remedied before closing which can affect the property adversely. Title insurance is a policy that covers residential or commercial property owners (and their lenders) against losses related to the property’s title such as: unknown title defects; existing liens against the property’s title; encroachment issues; title fraud; errors in surveys and public records; plus other title-related issues that can affect your ability to sell your property. Title insurance will also cover most legal expenses related to restoring your property’s title.
Title insurance is not mandatory in Ontario. However, you should speak to a lawyer, title insurance company, or insurance agent/broker, to be sure you fully understand what type of protection it can provide—and to determine if other options exist. Once you get all the facts, you can make an informed decision based on your specific situation and needs. It’s important to keep in mind that title insurance does not replace legal advice when purchasing property.
When buying title insurance through your lawyer or title insurance broker please remember to a) check that your home is insured for its full value or the amount you paid for it and b) the policy’s effective date is the same as your home’s closing date if you are buying a new home. Always review your policy to ensusre that it correctly describes all of the property you are purchasing and know what title-related losses your policy will and will not cover.