I am purchasing a new home. I heard from my real estate agent that I would have to get title insurance. Is this necessary?
Title insurance has been around for the last 15 years and is used in almost all residential real estate purchases, especially those involving mortgages.
What is title insurance and how much does it cost?
Title insurance is an insurance policy covering a variety of risks involving the purchase and ownership of real estate. The policy coverage lasts for the entire period of ownership and is, in general, a cheaper option than having a real estate lawyer perform full title and off-title searches so as to provide a legal opinion on title. Mortgage providers insist on either a lawyer providing them with an opinion on title (and the searches that go with it) or to have the transaction title insured. An average one-time premium for title insurance ranges from $300 to $400 for a policy insuring
a new owner and the mortgage provider.
What does it cover?
Title insurance covers a variety of issues associated with purchasing a home, such as conflicting ownership claims, spousal claims, title defects, encroachments and subsequent removal of structures, unpaid property taxes and utilities, by-law infringements, such as renovations without a building permit, and many other issues. Some title insurance companies also cover errors made by a real estate lawyer representing a purchaser.
The most common exclusions (i.e. not covered) by title insurance are environmental issues and soil contamination, title issues known to the purchaser or their lawyer prior to closing and aboriginal claims. Title insurance only covers issues that crystalized prior to closing but were discovered following the closing. For example, renovations made to your home without a work permit after you have moved in would be excluded.
Home buyers in Ontario purchase their new homes without any obligation on the seller to disclose issues with the property. Title insurance is a very efficient way to protect your investment and deal with any surprises that may come up after your purchase.
EDITOR’S NOTE: This publication is the 37th installment of our firm’s Legal Matters series, which answers a reader’s question every week. If you have a general legal question that you would like to have addressed please send it via email to firstname.lastname@example.org