If you’ve been involved in a real estate transaction in the last few years, you’ve likely heard mention of something called title insurance.
Title Insurance has become more and more common in the purchase and sale of residential property, most often in situations where a Real Property Report is unavailable, or where there is not time to register documents at Land Titles prior to closing. Despite this increase in use, many people still don’t know much about title insurance.
As indicated above, one of the most common uses of title insurance is as replacement for a Real Property Report. A Real Property Report is a survey of the property that is then sent to the city for confirmation of municipal compliance.
A Real Property Report with compliance assures the purchaser of a home that there is nothing “offside” as far as the city is concerned, such as an encroachment on a utility right of way, for example.
Often during the negotiation stage of a real estate transaction between buyer and seller, it is determined that there isn’t a Real Property Report available.
The cost of obtaining a Real Property Report is at least $500.00, and often more, whereas Title Insurance is on average less than half that amount. In addition to this, in a time sensitive real estate market such as ours, the time it takes to get a Real Property Report with compliance is often several weeks, which is too long in many instances. Title insurance can be ordered immediately, so there are no time issues. Title insurance provides protection for both the buyer and the bank for any losses relating to defects that would have been revealed at closing by a Real Property Report. It also provides protection to the buyer if previous owners failed to obtain building permits for additions or upgrades, or if they failed to comply with local zoning by-laws regarding use.
Even if a Real Property Report is available, purchasers may still wish to obtain title insurance given the following coverage:
• gap coverage for Land Titles registration delays;
• Real Property Report errors or illegibility;
• protection against previous fraud or errors in the Land Titles system that compromise the purchaser’s title;
• “post policy” protection in the event the neighbours build or renovate and their structure ends up encroaching onto the insured property; and
• protection against fraud and forgery in the event that the purchasers are the victims of real estate fraud at any time during their ownership of the property.
If there is a Real Property Report available, and it identifies a defect or other issue of non-compliance, it may be possible to obtain title insurance for limited, or even full coverage, depending on the defect. This type of coverage however, is decided on a case-by-case basis by the title insurance company.
Title insurance is a useful tools in many real estate transactions, and it is worth discussing with your realtor and/or lawyer the next time you’re looking to purchase or sell property.
Legally Speaking appears every second week in LIFE. It is intended for information purposes only. Readers with a specific legal problem should consult a lawyer. This week’s column was written by Danielle Elder, of the Red Deer law firm Duhamel Manning Feehan Warrender Glass. Elder can be reached at 343-0812 or at www.reddeeraltalaw.com.