Legal Advice: Title Insurance — What is it and what does it cover?

Jonathan R. Huza is a Wills and Estates lawyer at Gatien & Huza Law Office in Cornwall, Ont. (Supplied via Newswatch Group)

Special to Cornwall Newswatch

Most residential property owners will normally, on the recommendation of their lawyer, obtain title insurance before the purchase of their property. However, most people aren’t entirely clear on what the term “title” means, what title insurance is and what it covers and doesn’t cover.

What does “title” mean?

Title means you have legal ownership of your property. When you purchase a home or commercial property you want to ensure that the ownership you are obtaining in your new home or commercial property is good and clear of any issues or defects.

Without good “title” other parties may have a claim, lien or mortgage against your property which thereby affects your ability to have clear ownership to your property.

This will also have an impact on your ability to sell your home, or obtain a mortgage if there are title issues or defects affecting your clear ownership of the land. A buyer or mortgage lender will require that these outstanding title issues be rectified before a sale or mortgage transaction can be completed.

What is Title Insurance?

Title insurance is an insurance policy that protects you against losses that can arise due to issues or defects in the ownership of your property.

After you have purchased your property and you discover, for example, that a third party holds a lien or easement against your home you can make a claim under your title insurance policy.

Your title insurance policy will cover you against the losses you incur as a result of title-related problems. Most policies will also cover the legal costs you incur in resolving the issue.

What does Title Insurance Cover?

For a one-time fee, paid at the time you purchase or mortgage your property, a title insurance policy can protect you from the following losses:

  • Someone else owns an interest in your property;
  • Liens registered against your property (i.e. outstanding mortgage, lien from unpaid property taxes, utility liens, or construction liens)
  • If you do not have legal road access to your property;
  • If a building you own is encroaching on your neighbour’s land; and
  • Title fraud (i.e. someone else claims to have an interest in your property due to forgery, duress, impersonation or fraud).

What does Title Insurance not Cover?

Title insurance is not a home insurance policy and will not cover you in the event you incur a loss to your home or property due to a fire, flood, natural disaster or if you discover your home was improperly built. The following are other possible exclusions:

  • Environmental concerns, or matters of any kind;
  • Native or aboriginal claims affecting the property;
  • Known title defects which you were made aware before you purchased the property (i.e. easements, liens, mortgages or restrictions/restrictive covenants);
  • Matters which were not disclosed in public records such as a mortgage or lien; and
  • Government expropriation rights to take your land.

It is important to bear in mind that insurance, any insurance, is subject to the terms of a contract. There are exclusions in insurance policies as there will be in your title insurance policy. Insurance is not open ended.

Title insurance is a relatively inexpensive insurance policy and it covers you during your entire period of ownership. When buying a new home or commercial property speak to a knowledgeable real estate lawyer who can help you understand the benefits of obtaining a title insurance policy to protect your ownership interest in your property.

If you have any questions with respect to obtaining a title insurance policy or making a claim under such a policy please do not hesitate to contact Jonathan R. Huza from Gatien & Huza Law Office at 613-936-2100 extension 204 or jhuza@lawcornwall.com.

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