If you are thinking of buying your own home, you will hear the words title insurance somewhere along the process. Many consumers are not exactly sure what this is.

For the most part, title insurance is almost always required by the lender. This insurance is used to protect the lender against loss resulting from legal claims by others against your new home. In some states, lawyers will offer title insurance as a portion of their services in examining the home’s title and providing a title opinion as to whether it is clear or not. The attorney’s fee may include the title insurance premium or in some cases it may not. In other states, a title insurance company or title agent directly provides the title insurance.

It is important for consumers to understand that the lender’s title insurance policy does not protect the consumer. The same is true with the prior owner’s policy; it does not protect you. When you need to protect yourself against claims by others against your new home, you will need what it is called an owner’s policy. The truth is should a claim occur, it can be financially devastating to the homeowner who is uninsured.

It is good to keep in mind that if you buy an owner’s policy, it is much less expensive if you buy it at the same time and with the same insurer as the lender’s policy.

Consumers should also know that the home seller may not require, as a condition of the sale, for you to purchase title insurance from any particular title company. The mortgage lender will, however, require that the title insurance is from a company that is acceptable and reliable. As the homebuyer, you can choose a company that meets the lender’s standards.

Generally speaking, a few weeks before the closing of the escrow, the title insurance company will issue what is called a “Commitment to Insure” or preliminary report or “binder” containing a summary of any defects in the title which have been identified during the title search. There may also be listed any exceptions from the title insurance policy’s coverage. The commitment to insure is sent to the mortgage lender for use until the title insurance policy is issued at or after the closing.

If you wish, you may have a copy sent to you or to your lawyer, so that you can examine it and object if need be to the contents.

Consumers should compare rates between different title insurance companies. This can result in big savings. Make sure you ask about the services and limitations under each policy so that you can decide whether coverage purchased at a higher rate may be better for your needs.

In many states, title insurance premium rates are dictated by the state and those rates may not be negotiable. If you are buying a home which has changed hands within the last several years, ask your title company about a “reissue rate.” This can be much less expensive.

When purchasing a brand new home, make sure that your title insurance covers claims by contractors. These claims are known as “mechanics’ liens”.

Mortgage lenders or title insurance companies will very often want a survey done in order to mark the boundaries of the property. A survey is simply a drawing of the property that details the perimeter boundaries and marks the location of the home and any other improvements that might be on the land.

You might be able to save some money if a past survey is available and no changes have been made to the property in the interim. You should check with your lender or title insurance company on whether an updated survey will be acceptable.

The buyer pays the premium at the time of closing. Title insurance protects against loss arising from problems connected to the title to your property. Before you purchased the house it may have gone through several ownership changes, and the land on which it stands might have gone through many more. There may be a weak link at any point in that chain that could pop up to cause trouble. For example, someone along the way may have forged a signature in transferring title. Or there may be unpaid real estate taxes or other liens. Title insurance covers the insured party for any claims and legal fees that arise out of such problems.

Title insurance protects against losses arising from events that occurred prior to the date of the policy. Coverage ends on the day the policy is issued and extends backward in time for an indefinite period. (This is in stark contrast to property or life insurance, which protect against losses resulting from events that occur after the policy is issued, for a specified period into the future.)

The title insurance required protects the lender up to the amount of the mortgage, but it doesnâ??t protect your equity in the property. For that you need an ownerâ??s title policy for the full value of the home. In many areas, sellers pay for owner policies as part of their obligation to deliver good title to the buyer. In other areas, borrowers must buy it as an add-on to the lender policy. I recommend doing this because the additional cost, above the cost of the lender policy you have to get, is relatively small.

Protection under an ownerâ??s policy lasts as long as the owner or any heirs have an interest in or any obligation with regard to the property. When they sell, however, the lender will require the purchaser to obtain a new policy. That protects the lender against any liens or other claims against the property that may have arisen since the date of the previous policy â?? in other words, against something you may have done.

For example, if the contractor you failed to pay for remodeling your kitchen places a lien on your home, you are not protected by your title policy: the lien was placed after the date of the policy. You will probably be required to get the lien removed before you can sell the property. But in the event the lien hasnâ??t been removed and a search has failed to uncover it, the new lender will be protected by a new policy.

You can shop around for title insurance. Unlike mortgage insurance, where the carrier is always selected by the lender, borrowers can select the title insurance carrier. Few do, however. Most leave it up to one of the professionals with whom theyâ??re dealing: the real estate agent, the lender, or their attorney. This means that competition among title insurers is largely directed toward these professionals who can direct business rather than toward borrowers.

And it can pay to shop around. Itâ??s difficult to generalize because market conditions vary state by state, and sometimes within states. I would certainly shop in states that do not regulate title insurance rates: Alabama, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Oklahoma, and West Virginia.

You would be wasting your time shopping in Texas and New Mexico, because these state set the prices for all carriers. Florida also sets title insurance premiums but not other title-related charges, which can vary.

In the remaining states it may or may not pay to shop. Insurance premiums are the same for all carriers in â??rating bureau statesâ?: Pennsylvania, New York, New Jersey, Ohio, and Delaware. These states authorize title insurers to file for approval of a single rate schedule for all carriers through a cooperative entity. Yet in some there may be flexibility in title-related charges. More promising are â??file and useâ? states â?? all those not mentioned above â?? that permit premiums to vary between insurers.

Itâ??s a good idea to ask an informed but disinterested person whether it pays to shop in the area where the property is located. Just keep in mind that those likely to be the best informed are also likely to have an interest in directing your business in the direction thatâ??s to their advantage.

Title insurance protects against losses that might occur due to another party claiming ownership of the property.

Title insurance covers:

* Issues missed by the title examiner

* Issues missed when a deed or other public document is determined to be invalid or forged

* Liens from unpaid taxes or from a former owner.

Title insurance will pay your legal fees if you have to go to court to defend the deed, and if you lose the property, the title insurance will cover your loss up to the amount of the policy.

Keep in mind that if youâ??ve owned the property for a few years and it has risen in value, the title insurance policy you purchased at closing will only reimburse you for the original amount, not for the new value of the property.

You may be thinking, â??Wait a minuteâ?¦ if I pay an attorney to perform a title search, why do I need title insurance? Isnâ??t it his or her job to make sure the title is clear?â? Yes, it isâ?¦ but unexpected problems can pop up â?? title insurance is a cheap way to avoid the cost of major problems that could pop up.

If you are interested in joining the ranks of successful women in real estate, it is important that you come to a complete understanding of the fundamental elements associated with real estate investing. Yes, few people find the intricacies of title insurance exciting and many feel it’s down right boring. However, if professional women have learned anything over the course of the past few decades, it is that knowledge is power. In this regard, one of the most important elements of the real estate investment process is to understand how title insurance works.

So, read on and learn.

Title insurance is exactly as it sounds. It insures you in case that at some later date, a recorded or unrecorded document surfaces that can affect the title of the property you purchased. Putting it simply, a title insurance policy insures the ownership of the property, and protects you as the owner.

Before providing a title insurance policy, the title company examines, summarizes and classifies every document affecting the property and its previous owners. Highly skilled title searches assemble this material and forward the results to a title officer. The title officer or examiner then writes an opinion on the title. The opinion will initially take the form of a preliminary title report and ultimately become a policy of title insurance.

Although title insurance is designed to protect a purchaser of real estate against title defects that are discovered after that individual takes title to a piece of property, the real work of a title insurance company is actually undertaken in advance of the closing on the sale itself. After a real estate sales contract is executed between a seller and purchaser, a preliminary title search is performed and then a policy of title insurance is obtained.

This means that the title insurance officer physically evaluates the deed to the property, and then reviews all of the liens and encumbrances that have been filed against that deed over time. This effort by the title insurance company is designed to ascertain that any liens or other encumbrances that may have been placed against the property in the past have been released.

Any liens or encumbrances remaining on the deed or title to the real estate subject to sale will prevent the buyer to obtain “clear” title because every questionable item recorded on title is classified as a defect or “cloud” on title. One of the essential clauses in real estate sales contracts requires the buyer to deliver “clear” title of the property to the purchaser by a certain date. Therefore, the title insurance company will take all necessary steps to clear up any “clouds” on title within the time frame mandated by the contract for the sale of the property.

As mentioned, if for some reason there is a defect on title – a lien or encumbrance not discovered before the new deed is recorded – the title insurance company is responsible for any loss sustained by the real estate purchaser because of that title defect. In most instances, the loss sustained amounts to legal fees and court costs associated with taking action to clear the defect.

If the purchaser or real estate investor does not have adequate title insurance, she is the one who sustains the loss. This is why it is vital to forgo standard title insurance and invest in extended coverage policies with every one of your transactions.

Top SEVEN ways your property can be put at risk:

Your property can be put at risk in a variety of ways. If your property does not have clear title, any questionable recorded or unrecorded documents may have been executed many years before, yet surfaced much later. In this case, know that you are protected by title insurance. Below are seven common items that can put your property risk.

1. Forged deeds, mortgages, satisfactions or releases

2. Deed by person who is insane or mentally incompetent

3. Deed by a minor

4. Deed from a corporation, unauthorized under corporate bylaw

5. Deed by partnership, unauthorized under partnership agreement

6. Deed given under fraud or duress

7. Deed executed under falsified power of attorney

Top SEVEN things to look for:

If any of the following items appear on the preliminary title report, you must take immediate action. The first step is to contact your title company. Failure to investigate any of the following may cause a significant delay in closing of escrow and/or decrease your profit.

1. Tax Liens

2. Mechanics Liens

3. Notice of Action/Judgments (including back child support)

4. Bankruptcies

5. Uninsured Deeds

6. Legal Access to and from the subject property

7. Typos in the legal description and/or parties’ names

Two Separate Policies

Nearly every sale of a residential property involves the purchase of two separate policies of title insurance. One policy names the buyer as the interested party and the second names the lender as the insured party. It is customary for the seller to provide and pay for a title insurance policy on behalf of the buyer. This is done so that the buyer can be assured that the property does indeed belong to the seller and that there are no unexpected liens or encumbrances against it. If the buyer borrows money to purchase the house, it is normally a requirement of the loan that the buyer purchase title insurance on the lender’s behalf for the amount of the loan and sometimes for the amount of the entire sales price.

One-time Investment

The purchase of a tile insurance policy is single purchase transaction. You pay one premium, and the policy stays in force until you sell or refinance your property. There are no recurring fees. Premiums for the title insurance policy are usually based on the amount of risk assumed by the insurer. The liability is based on the sales price of the property, or, in the event of a lenders policy, on the amount of the loan.

In conclusion

It would be to your benefit as a woman investing in real estate, to have a working relationship with a helpful and motivated title representative whose sole purpose is to sell title policies on behalf of his or her employing title insurance company. Find out what he or she is willing to do in order to earn your business.

- Will the company allow you access to their public record database?

- Can you request and receive copies of recorded documents?

- Will the company create property profiles for your hot deals?

- Can the company set up a farm (territory) to help you generate leads?

Ask ahead of time. A good working relationship with a title insurance company enables you to conduct business efficiently. In simple terms, everyone investing in real estate must know the specifics and the complexities of title insurance and the benefits of building a solid relationship with a good title representative.

Just like in any other jurisdiction around the world, there is also a procedure for the registering of title. Ahead of doing this, there will be a call for certain documents such a deed of conveyance or any other document that has something to do with the transfer of property from one person to another. This will be forwarded to the local administration for review. The problem here is that the administration sometimes does not make reference to these documents for the purposes of authentication. Therefore, complications may arise because there was no valid title to the property or even that there is no validation of title. Although some states have updated their laws to make registration of land simple so as to avoid conflicting interests by individuals on the same portion of land, this still poses great monetary difficulties to those who go without title insurance.

What then is title insurance? The barest meaning of title insurance means security to a purchaser, that he or she is taking an absolutely free and new interest in property. This can be better understood by bringing in some aspect about man to authenticate ownership of property. For ages, man has developed all means of asserting his interest and ownership in property. Keep in mind that property has been and will always be at the centre of the life of man. Man has always been in need of property for shelter, for feeding and for the provision of so many other basic necessities. This has brought up the notion of acquiring a title on land and people have found out that this is what will be needed if they have to assert full rights on land or if they will have to exclude others from the land that they possess.

Across the globe, the issue of acquisition of land has been under serious considerations. Many nations have taken possession of land and have had title over such lands on hidden pretexts. Most of such practices were common in the olden days. But today, they have become the foundations of the creation of so many countries. Examples of this are countries such as the United States, Australia, the Caribbean and a lot more others. Most of these lands were gotten either through subjugation or through seizure. In other cases, if intruders found out that the land was not occupied by any indigenous people, the land was simply declared “terra nullius”, which is a Latin maxim for “no man’s land”. In such a case, an intruder will simply declare his right to settle on and own that piece of land.

In other countries like Orkney and the Shetland Islands, the indigenes have proclaimed their land to be of ‘alloidal title’. This means that they do not recognise any superior authority over their land. They believe that their land is without any external control and that they are the rightful heirs by virtue of their natural right. In countries such as England, there is no piece of land which is not owned on behalf of the Crown acquiring a reversionary ownership on it. However, if we look back to the issue of succession of ownership upon the death of the owner or the fact that the owner is free to transfer land to another person, we will still trace ownership of land as originally belonging to the Crown.

To assert ownership will mean the production of documents which may relate to so many years back. This is the more reason why most jurisdictions have come up with ways to help people better have valid interest and title on land. Remember that people must use these in their daily affairs.

People have used land and are still using it to act as guarantee for loans. If this security is absent, the real estate market will also fall. That is why the issue of title insurance must come in. The main objective of this is to protect the interest of the buyer from unforeseen claims that may come from third parties.

Therefore, title insurance can simply be understood that at the same time as the interest of the owner and that of the buyer may be present, there should be security to make sure that the interest of both parties are taken care of.

The Coming Together Of Wits

A policy of title insurance is an agreement entered into by two contracting parties and which each party to the contract can sue and be sued. Given the condition that each of the contracting parties has come to a consensus and both have fulfilled their various obligations to the agreement, a binding contract in law has come into existence between both parties. If all the essentials of a binding contract are present; and with the assumption that there is nothing to cancel any feature in the contract, the terms of the contract can be set by the parties to it. It should however be noted that the insurer will have more knowledge on what both parties are getting into than the insured, whereas, both parties are supposed to operate at par with each other. Thus, the services of an attorney will be needed by the insured.

There are cases in which an agreement may be declared invalid because the terms to that agreement were vague. It is therefore necessary to be sure that the terms of the contract do not breach any legal provision. It should be kept in mind that there is a legal provision of the law not enforcing any illegal contract. This will also include contracts that are void because of vagueness.

This will also apply in cases of title insurance and the law will come in to redress any provision of the insurance contract which is detrimental to the landowner’s title to land. A flaw that can also affect the title insurance contract is any flaw declared by the courts. For example if the terms of the contract are ambiguous or there is presently a court action to determine insolvency of the former owner of that piece of land. Remember that if such issues are undecided, the burden of redeeming them may be transferred to the new owner of that piece of land.

A Matter of Variation among Insurers

Among all the active participants in the title insurance industry, not everything will sound the same. It is true that the procedure may be the same. But insurers may have varying policies towards the insured and this may be because of their dislike for the type of hazard which they are insuring against. For this reason, a parameter may be set but the type of hazard may compel the insurer to take more care in determining the rate of premium and this may be higher than what the insured will normally expect.

Given that the insured has a legal right to decide or opt for an insurer of his or her choice, he or she has the duty of care to examine the policies presented by the insurers. It is necessary to carry out comparison shopping ahead of deciding on what is considered best.

As soon as coverage is instigated in security of title insurance, title information will be made available and the option of an exact coverage will also be made available. This is when the future owner has to be very intelligent because he or she has to be very conscious of the choices and also employ a plan to take care of the risk. Remember that he or she has to seriously pay particular attention to those areas where he finds himself open to risk.

Title Insurance for a Landlord

What is protected in the title insurance policy of a landlord is what is on the title document and this is to the effect that the landlord has a valid title to that land. If you want to convey land to another in the United States, a deed of conveyance with the appropriate signature must be conveyed and registered with the appropriate authorities. This deed means that both contracting parties to it have publicly declared the seriousness of their interest on the property. Appending a seal to a deed is not something new. In fact, this practice was done in ancient times, but the difference is that today, only signatures are needed on the deed. Without this, the agreement may be declared invalid. For example, there might be a simple mistake by both parties to the contract. Once a deed is signed and sealed, any party to it can sue or be sued. The deed is therefore a legal authority which binds both parties to the agreement.

Always commit to memory that a situation may come up where more than one deed has been signed on one and the same piece of land. Yet still, there might be a deed validly signed, but which violates a certainty or the right and interest of another.

Investing In Land Should Be Seen As Your Greatest Investment in Life

To get title insurance for your home is something of great benefit. In fact, the benefits in it cannot be overemphasized. Keep in mind that a lot of people consider investment on land and in particular building a home as the only major investment in their lifetime and will want to insure that nothing disturbs their quiet enjoyment of their property. If we have to consider the consideration that you furnish for your home to the insurer against the real value of your home, it will be unwise for you not to get title insurance for your home. If your home is important to you, you must protect your interest from people you may not even know, who will bring worthless and fabulous claims that you will think they cannot even substantiate.

Today, the popularity of title insurance has grown to an extent that coverage under it is no more limited to faults which may arise as a result of title to the property. Coverage has expanded to include even aspects that may disturb the quiet enjoyment of the landlord on his or her piece of land. Another peculiarity about a landlord’s title insurance is that premium is paid on a once and for all basis. This means that the premium that is paid is to take care of any defect as to title that will relate to external claims that may be brought up to challenge the title of the landlord. This premium will be valid so long as there are imminent third party claims on the property.

A landlord’s title insurance therefore means that the burden of any hazard faced by the landlord on his or her land will be taken up by the insurer just for the consideration furnished by the landlord. At least 85% of property transfer cases in the United States will involve this type of insurance in their transaction.

Acting On Behalf Of Another

Just as the real estate agent acts on behalf of the vendor, if there is a proviso in the agreement that the vendor will make available title insurance for the advantage of the purchaser, this real estate agent will recommend that the insurer takes care of concluding and giving title insurance policies to both the lender and the holder of the title. But this is not an issue always favoured by a new buyer of a home. This new buyer will always prefer to opt for his own title insurer to issue the insurance policy.

When the money that is provided for the acquisition is presented, the lender will at once call for a “gap” support on the policy of the holder. Keep in mind that the title insurer will in turn undertake to indemnify the purchaser against any loss that may occur because of any fault in relation to the title once the property has been acquired by the purchaser.

If there is to be any insurance “gap” cover, it should be stated in the agreement that will be issued by the vendor. This is because the deed of conveyance is just an indication that interest and title in property will have to pass to the purchaser. This will therefore take care of any risks that may happen between this period and when the purchaser gets valid title. Remember that third party interests may come up.

Closing the Gap

If there is no insurance gap cover, the services of those who have been part of the agreement up till the moment which interest in property will move to the purchaser will be put into jeopardy. Remember that the seller may not be responsible for any dispute. There may be some hidden claims that will be made by outsiders to the agreement. This also means that the law will compel the new owner to take care of any unpaid bills. This is normally an exception because this ought to be taken care of by the vendor.

When the insurer agrees to indemnify the new owners, it is in effect saying that irrespective of any claims which may come from third parties, the new owner will be indemnified. This provision will usually be included expressly or implicitly in the agreement.

One essential thing is to take note of the function that the lender plays in getting this type of coverage. The lender is getting an interest in the land since as it is this same land that will be used as collateral. For this reason, he must make sure that his client gets a valid title in what will be used as collateral.

There are situations in which this gap coverage may be revoked by the insurer. An example of this occurs when the document indicating that settlement of property has been effected is not made available to the insurer within forty-eight hours as demanded by the insurer. The buyer also has to make known to the insurer, any third party interest that may be hanging over the property. Failure to reasonably make this known may lead to a cancellation of the insurance contract.

There Is Savings in Construction

It is always of supreme important to seek for title insurance when erecting any structure on land. This is very important because you will have to incur some expenditure while building or even claims from third parties as to your title to that land. Failure to insure against all these can be a huge loss.

There are so many ways in which you can experience loss. You may experience loss through some fault in title that may come about from failure to meet the regulations of the building specifications of the local administration. The authorities may place restrictions on a particular type of structure that you should set up. However, any law will be determined by the law which can either be judge-made law or law enacted by parliament. These laws are also subjected to change and may be repealed or modified at any time in the future.

Even if you have succeeded in getting a valid title, you may still be forced to lose because you may have to destroy or even change the course of your project because you want it to meet the requirements of the law.

Profitability

This is an aspect of title insurance which is of essence to the sale of land. This is because as soon as it is declared that there are some limitations on the construction on land, this will ultimately affect the marketability of that land. This will especially weigh much on a land owner who has just acquired that land. This may also cause a fall in the value of that land to such an extent that the value may not be appraised. But if you have gotten title insurance over this property, you are sure to be indemnified in case of any unforeseen loss.

There is no need to stress the importance of having title insurance over any property you intend to put up construction on. Title insurance should be a must in the mind of every property owner. Remember that the benefits of having this type of insurance are far greater when compared to the hazards faced without title insurance. What usually happens is that a lot of property owners always see the necessity of having title insurance. But this attitude is always left aside as soon as they are compelled to use up their finance to meet up with other construction demands.

More often than not every seller or lender will pay for title insurance. But if we have to consider that the contract between the buyer and seller is such that both parties to the contract are free to set whatever terms they can, there is need to protect the buyer’s interest. Keep in mind that it is always said that equity does not aid the indolent. It is for this simple reason why title insurance must always be seen as a necessity. Remember that a buyer should not just be concerned with paying for property. But he should also be concerned that no right of any third part is hanging over the property.

Title Insurance

Title insurance is insurance that covers loss of an interest in a property due to legal defects and that is required if the property has a mortgage. This is basically an insurance which protects the buyer or lender against defects in the title deed of a property, which can cause the owner or lender financial loss. However strict the land laws are, there are still chances of unscrupulous agents and owners trying to pass of otherâ??s property as their own and then selling it to unsuspecting buyers. This has brought about the need for such title insurance. There are buyerâ??s title insurance which protects the buyer against defects in the title deed but most title insurances are lender’s title insurance, which is paid for by the borrower but protects only the lender. The legal definition of title insurance is â??A contractual arrangement entered into to indemnify loss or damage resulting from defects or problems relating to the ownership of real property, or from the enforcement of liens that exist against itâ?.

The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853. Title insurance is as important as life insurance as it protects the insurance holder and his lender in case of defects in the property title. A title insurance policy provides for the losses that result from defects in the title to the real estate property. It also covers the legal expenses required for defense in case of a claim against the real estate title. Of the different types of title insurance policies available in the market today, the two important types are the buyerâ??s policy and the lenderâ??s policy.

Title insurance policies for buyers are different from those for lenders. A normal ownerâ??s policy secures the buyer from the defects in the title to the property. It also tends to cover the losses to be borne in case the real estate property is unfit for sale as also the losses suffered if the purchased land has no access rights. In other cases, lenderâ??s policy, which is also known as a loan policy, is meant to be used by mortgage lenders. It not only covers the lenderâ??s loss but indirectly benefits the purchaser of the loan by covering his/her mortgaged possessions. Lenderâ??s policies also help the sale of mortgages in the secondary market. The third type of policy, which is not as commonly used as the other two, is called the construction loan policy. In this case, the policy covers the cost of construction of a new home as well as the cost of land purchased for the construction. The fact that the insured amount has to be increased due to the infusion of capital into the land for construction of a new house, is taken into consideration, which makes the premium also more expensive.

As the purchaser or lender in a real estate transaction, you need to ensure that your investment is secure. As a purchaser, you need to obtain good title to the property and be confident that the property is not subject to any liens, encumbrances or other defects. As a mortgage lender, you need to ensure that the borrower is credit worthy and they will be able to continue to make regular mortgage payments. Also, you will need to ensure that if the borrower defaults on his mortgage payments, you have sufficient security in the property to at least offset the majority of your lost investment. As a mortgage lender, an appraisal of the current value of the property is important. An environmental assessment is also vital to ensure that the property is not contaminated. A lender must also know that the borrower has good title to the property, and in the case of a foreclosure or power of sale that you will be able to have clear title free of any liens, encumbrances or title defects. Traditionally, purchasers and lenders have relied on their lawyer to provide an opinion on the state of title on which the purchaser or lender could rely on in order to close the transaction. The purchaser or lender could rely on their lawyer having conducted proper due diligence so as to be able to provide such an opinion.

A recent development in Ontario real estate has been the advent of title insurance. Title insurance has been in existence in the US real estate market (residential and commercial) for many years prior. Title insurance has only become a recent development in Ontario in the past ten years. Title insurance is a policy of insurance that protects consumers in the event of an unexpected title problem arising following closing. Certain off-title inquiries that would be normal for the purchaser’s solicitor and/or lender’s solicitor are not conducted and the title insurance company provides coverage if a problem arises post closing that would have been revealed by a standard search. In Ontario, various title insurance companies are now operating, including Stewart Title Guaranty Company, First Canadian Title, Chicago Title Insurance Company. The Law Society of Upper Canada also operates and runs a title insurance product called TitlePLUS.

Title insurance has become the norm in residential real estate transactions in Ontario. For commercial transactions, the value of the transactions is generally much greater and the purchasers and/or lenders often require confirmation prior to closing that they will be obtaining good title to the property or in the case of the lender, that they are getting a good and valid mortgage on the property. Title insurance premiums are based on the value of the particular purchase and/or the mortgage amount of the loan transaction and therefore, for higher value commercial transactions it often makes sense for the purchaser and/or lender to conduct a full search of title including all off-title inquiries. Title insurance provides protection against various title problems that are listed as insured risks under the particular policy. Title insurance is not a guarantee for purchasers or lenders but rather as with most insurance policies, it is an indemnity and the insured party must prove damages prior to any claim being approved and paid. Standard title problems that are covered under a title insurance policy include arrears of property taxes, zoning by-law violations, existing work orders and any encroachments that would be revealed by an up-to-date survey. One of the big advantages of title insurance is that it can often expedite the closing process. Standard searches that are required for a solicitor to provide an opinion often take a long time to be received from the various governmental authorities where as a title insurance policy can usually be issued in a matter of days. If the purchaser and/or lender is faced with tight time lines on closing, they can choose to rely on a title insurance policy to protect their interest in the property. Also, title insurance companies can reduce the cost to the purchaser and/or lender in that certain searches are not required to be conducted such as zoning compliance and tax certificates. Title insurance also provides limited coverage in the case of title fraud, which is of great value in the case of a residential transaction. Title insurance companies are also very good at tailoring their particular policies to the actual transaction being contemplated and insurance companies will often underwrite and provide particular insurance for purchasers and/or lenders for actual title problems revealed before closing. One of the negative features of title insurance is that the purchaser and/or lender is often closing the transaction without a complete understanding as to the current state of title on all title matters. They are taking a risk by not conducting certain searches prior to closing. An insured risk may become a problem at a later stage. The claims process is “no fault” based but it is such that the insured party must prove damages relating to an insured risk under the policy prior to the title insurance company providing compensation.

The decision that the purchaser and/or lender must make in whether to obtain a title insurance policy or not depends on the particular circumstances of each transaction. In the case of residential transactions the fraud coverage alone that is provided by all major title insurance companies is a good enough reason to pay the policy premium amount and obtain the policy. That is not to say however that certain off-title searches should not be conducted even if title insurance is obtained. For instance, in the case of a cottage transaction, it is always advisable to obtain an up-to-date survey given the unique circumstances facing cottage properties such as riparian rights and septic location issues. In the case of commercial transactions, title insurance again must be considered on a case to case basis. The cost of obtaining a complete title search along with all required off-title searches must be compared to the cost of the title insurance policy and the advantages and disadvantages weighed in each case. Many commercial lenders are now requiring a loan policy issued by a major title insurance company in their favour prior to closing. Often times these policies are required in addition to the solicitor’s opinion on title that the mortgage company is getting a good and valid first mortgage on the property.

I believe that title insurance companies will continue to work with real estate solicitors so that the clients are able to obtain the best coverage possible for each particular transaction. In each particular case, it is important for purchasers and lenders to discuss the options available with their lawyer. Your lawyer can advise you as to the appropriate path to proceed whether it be the traditional solicitor’s opinion on tile and/or a policy of title insurance.