A property title is important, since it spells out who owns the property and the land. To protect against possible losses or claims against your ownership of the property, title insurance can be purchased to cover both the mortgage lender and the property owner. This page will take a look at what is title insurance, how it works, what it covers and protects you against, and why you should purchase title insurance.
A title is a term used to describe who has ownership and rights over a certain property. If you hold title to a property, that means that you are the registered owner of the property. In Canada, this registration is done provincially through your province’s land registry office. Land records can be viewed by the public, but only certain people, such as lawyers, can register land records. Titles are registered with the following land registration systems depending on your province or territory:Online Land Registry Access in Canada
|Province/Territory||Land Records Access|
|Alberta||Alberta Land Titles and Surveys Spatial Information System (SPIN2)|
|British Columbia||BC Land Title and Survey Authority (LTSA)|
|Newfoundland and Labrador||Companies and Deeds Online (CADO)|
|Northwest Territories||Northwest Territories Land Titles System (NTLS)|
|Nova Scotia||Property Online (POL)|
|Nunavut||Parcelized Online Registration (POLAR)|
|Ontario||Ontario Land Registry Access (OnLand)|
|Quebec||Quebec Land Registry Information System (SIRF)|
A title is not the same thing as a deed. A title is a term used to refer to the ownership of a property. A deed is a document that transfers the title to another person. If you’re purchasing a home, a property deed will transfer the title of the property from the seller to the buyer. That’s why land transfer tax is sometimes called a deed transfer tax, such as in Nova Scotia. A deed transfers the title, or ownership, of the property.
Claims can be made against your property, such as liens from lenders, that can threaten your ownership of the property and “clouds” the title. This is known as a defective title or a cloud on title. If you’re purchasing a home, there might be previous unresolved or open claims, liens, or disputes that have been filed against the previous owner, but remains due to the title being transferred to you. To protect yourself against title defects, home buyers can purchase title insurance to cover any potential damages or financial losses.
Title insurance protects you against a defective title that was defective when the title was transferred to you. It can also protect you from fraud that occurs once you have title of the property. In other words, title insurance protects against problems with the property’s title that occurred before you purchased the property, along with on-going protection against fraud.
Title insurance protects you against:
If the previous owner of the property had a debt that was secured against the property, and the owner didn't pay that debt, then there might be a lien on the property. The property was used as collateral, and since the previous owner didn’t pay, the current owner now needs to pay. For example, if the previous owner didn’t pay their mortgage or property taxes, a lien means that the lender or the government now has a claim on the property.
There could be errors in your title, such as if the title was improperly registered or there is an issue with the public records for the property. Examples could include a previous owner that hasn't been discharged from the title, or spelling mistakes that grant the title to someone else.
These are issues that can affect your ownership of the property that was not known beforehand at purchase. For example, there might be easements that were not documented, or boundary disputes with your neighbours that result in encroachment. Perhaps there are even issues with zoning by-laws that have been unaddressed by the previous owner that could affect your use of your property.
Title fraud can include someone impersonating as the owner of the property or there being forged documents. It also includes protection against someone stealing your title and then selling the home or getting a mortgage to receive money from it.
Standard title insurance does not cover title defects or liens that are known. For example, if you know that there is a lien on the home from an unpaid mortgage, title insurance will not cover the cost of the lien. Instead, you will have to pay the lien out of pocket, since you knew about it when purchasing the property. Title insurance also isn’t a replacement for home insurance or mortgage default insurance. However, you can purchase additional coverage to protect against things like known title defects or identity theft.
Title insurance can cover the property owner or the mortgage lender. Some mortgage lenders require borrowers to purchase title insurance to cover the mortgage lender. While a lender’s title insurance policy protects the lender, the borrower will need to pay for the insurance premium cost.
The borrower has the option to also purchase title insurance to cover themselves as well. You can purchase both an owner's policy and a lender’s policy for the same property. You can also purchase an owner’s policy as a new homeowner or as an existing homeowner. If you’re purchasing as an existing homeowner, your policy options might be limited.
There are different types of title insurance for different types of land. For example, residential title insurance can cover property such as homes, condos,rental property, and vacant land. Commercial title insurance can cover property such as office buildings, industrial buildings, and retail property.
If your title insurance policy specifically has legal services coverage, you may be able to make a malpractice claim if the error was from the negligence of your lawyer. TitlePLUS title insurance has legal service coverage. However, not all title insurance policies from other title insurance companies have legal service coverage. If your title insurance policy does not cover legal services, then you will need to sue the lawyer for damages.
The cost of title insurance depends on the value of your property. The higher the value of your property, the more title insurance will cost. Title insurance premium is not an annual cost. Instead, it’s paid as a one-time fee. Title insurance usually costs around $250 in Canada.
If you are in the process of buying a home, it’s generally a good idea to purchase title insurance at this time too. Having title insurance coverage right at closing gives you protection right from the start. While you can wait to purchase title insurance anytime afterwards as well, it may affect your available policies and coverage.
Title insurance is not a legal requirement in Canada. However, your mortgage lender may require you to purchase title insurance in order to obtain a mortgage with them. Title insurance also comes with a host of benefits, including:
Issues and defects might only be spotted years after you have already purchased the home. With title insurance, you won’t have to worry about the status of your ownership of your home, and you don’t need to worry about past debts from the previous owner coming back to haunt you.
With title insurance, you might not need to have a land survey conducted or provide your lender with a Real Property Report in the case of Alberta.
Your real estate lawyer won’t need to check the property’s title, since that is already done through your title insurance. This saves your lawyer time and saves you money.
You can purchase title insurance from a title insurance company, from an insurance broker, or through your lawyer.List of Title Insurance Companies in Canada
|Title Insurance Company|
|Chicago Title Canada|
|First Canadian Title (FCT)|
|Stewart Title Company|