Buying a house is one of the biggest investments you will make in life. Whether it’s your first home purchase or your fifth, there are numerous responsibilities that come with a newly bought home.
While it may feel overwhelming – as well as exciting – it’s important to ensure that you and your new home are well protected. Although most of us know about fire insurance and homeowner’s insurance to protect our home’s physical structure and personal contents, it’s important not to forget about insurance coverage for our property’s title, which is just as important but more easily overlooked. One of the ways this is done is through title insurance.
What Is Title Insurance?
First, it’s necessary to understand what title insurance is. “Title” refers to the property’s ownership, while “title insurance” is a form of insurance that protects against risks to your title.
Title insurance can oftentimes protect both lenders and homebuyers against loss or damage occurring from illegal liens, encumbrances, or defects in a property’s title. Common claims filed against a title are tax liens, builder’s liens, certificates of pending litigation, and encumbrances such as mortgage loans, and home equity lines of credit (HELOC).
It’s essential to learn as much as you can before making such a substantial purchase. When in doubt, don’t hesitate to consult an experienced real estate lawyer about your specific situation. To get you started, here are some of the most significant benefits of title insurance.
Benefits of Title Insurance for the Homeowner
Title insurance can protect you for as long as you own the property. It protects against a number of risks. These risks may include:
Encroachments that would be disclosed by a new survey
For example, title insurance protects you if a neighbour’s deck is being partly situated on your land. Title insurance also covers encroachment issues such as if your backyard shed is actually on your neighbor’s property and must be removed. If the encroachment cannot be removed for safety reasons (such as a retaining wall), then you may need to compensate your neighbour for the encroachment, and title insurance may provide coverage for such costs.
Not having a survey
Although having a survey is advisable, title insurance can offer legal protection in lieu of a survey by transferring any risks that may have been disclosed by a survey, to the title insurer with respect to defects in title and other defects such as encroachments.
Someone other than the homeowner having interest
For example, a previous owner of the property not being properly discharged from title or a previous owner claiming a beneficial interest or unregistered title to the Property.
Liens from contractors, taxing entities or previous lenders
Title insurance can protect homeowners from charges accrued by previous owners. For example, if the former owner failed to pay municipal or school taxes and the tax authorities file a tax lien on title, title insurance may protect the new owner from title defects and unpaid tax liens or assessments. If previous mortgages or charges by lenders of the previous owner remain on title, title insurance may cover the costs associated with discharging these liens from title.
Forgery or fraud
Title fraud, which occurs when a person uses false identification to impersonate you to obtain a mortgage or sell the home without you knowing, is one of the more common risks that can be addressed by title insurance. Such consequences can be devastating and recovery through the Courts or other means without title insurance can be time-consuming, stressful and costly.
Title Insurance vs. Homeowners’ Insurance
Some homeowners assume that title insurance is included within a home insurance policy. Because of this misunderstanding, an alarming number of Canadians today do not have title insurance.
While home insurance may protect homeowners from unexpected circumstances that occur on or against their property or its contents, such as fire or earthquakes, title insurance protects the homebuyer from unexpected circumstances that affect the title to the property, such as financial loss from title fraud or other issues. The title insurance’s coverage is often less tangible and inconspicuous compared with the physical damage that a fire may cause, but the financial consequences of title fraud or a fraudulent mortgage registered against your property may be even more severe.
Fortunately, unlike home insurance, title insurance is a one-time premium that is typically purchased at the same time as the property. However, title insurance can also be purchased by existing homeowners who already own their property.
Are You Looking For a Real Estate Lawyer?
Title insurance can only be purchased through legal professional. If you, or someone you know, is looking for a real estate lawyer or would like more information on ordering title insurance, contact Bernard Lau and Co. Our knowledgeable and experienced team can provide personalized advice on a case-by-case basis.