Title insurance: a primer for homeowners

Title insurance beats out solicitors’ opinions for budget-conscious home buyers, Toronto real estate lawyer Lisa Laredo tells AdvocateDaily.com.

In fact, Laredo, principal of Laredo Law says in the hundreds of real estate deals she’s worked on, she has never been asked to give a solicitor’s opinion on the title of a property.

“Title insurance is going to cost a few hundred dollars, but if I have to go through the entire history of the property at the land registry office — searching for mortgages, tax certificates, utility certificates — that’s going to add up,” she says.

Like most forms of insurance, Laredo says it offers buyers a level of protection against challenges to the ownership of the home or losses from problems related to the title.

“It could be back taxes owing on the property, arrears of public utility payments, court judgments against the previous owner and the like. It protects the owners and lasts for the entire time you own your home, so even if the lawyer dies, you’re still insured,” she says.

In general, title insurance is not intended to insure against risks that aren’t “readily discoverable on the property,” but Laredo says a Supreme Court of Canada decision last year challenges that thinking.

In that case, The SCC upheld an Ontario Court of Appeal decision that found a title insurer was liable for repairs and more than $50,000 in costs after homeowners discovered that a load-bearing wall had been removed during renovations done by a previous owner.

Central to the court’s ruling was that the hidden defect had rendered the title unmarketable, and that the insurance policy covered the owners, reports the Toronto Star.

Though the outcome was a boon for homeowners, the decision flies in the face of hundreds of years of common law around the marketability of title, prompting some insurers to immediately amend their policies, the article notes.

Physical defects have always been regarded as a buyer-beware type of situation that can’t be insured against, Laredo says.

“Traditionally the homeowner assumes responsibility for those kinds of deficiencies. Most if not all title insurers refuse to provide coverage for hidden defects and with the outcome of this case, they will all be calling their lawyers to ensure it’s excluded from their policies,” she says.