Generally speaking, the role of a solicitor retained by a purchaser of a residential home is to ensure that the client receives a good and marketable title to the real estate in fee simple.

The exact details of the retainer may be qualified by the terms of the contractual agreement entered into between the vendor and the purchaser. The details of the retainer may also be qualified by the terms of any written retainer entered into between the solicitor and the client.

The standard form Agreement of Purchase and Sale used in Ontario and prepared by the Ontario Real Estate Association (OREA) deals with title matters in s. 10. Essentially, title matters are matters capable of registration in the provincial land registration system such as transfers, mortgages, restrictions that run with the land, municipal or utility agreements, and easements of any kind.

A careful reading of s. 10 of the OREA agreement will show that there are certain items recognized as non-title items but are treated as if they were title items, namely: work orders, deficiency notices and the ability to obtain fire insurance for the subject property.

The existence of a title matter not permitted by the Agreement of Purchase and Sale, a work order or deficiency notice, or the inability to obtain fire insurance which cannot be rectified or insured against by title insurance will entitle a purchaser to withdraw from the purchase agreement.

Title matters have been understood as matters you can see by conducting a search of the provincial land registration system. However, the Ontario Court of Appeal in the matter of MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842 (CanLII) effectively expanded the concept of title to a matter for which a prudent solicitor cannot search.

For the purpose of this article, the significant finding of the Appeal Court was that the absence of a building permit for prior structural repairs to a dwelling constitutes a title defect entitling a prospective purchaser to withdraw from an agreement of purchase and sale.

A search of municipal records will not reveal the fact of the work or the absence of a building permit because the municipality does not know of the work. A search of title records will be of no help either.

A solicitor giving a title opinion should qualify his or her opinion by excepting from that opinion the absence of a building permit for any and all prior work performed on the dwelling. In any event the solicitor’s retainer should be qualified to note that no inquiry can be made about prior work performed without a building permit where the matter has not come to the attention of the municipality.

While MacDonald does create problems for a solicitor, in certifying title, it also illustrates why a solicitor should always encourage the client to purchase title insurance. The policy will insure against the cost of remedying the condition created by work done without a building permit.

The case used somewhat convoluted language to establish coverage. The current version of most title policies have a specific section dealing with the situation being discussed, where the municipality has issued an order for the remedying or removal of the structure — provided the condition existed at the policy date, even if unknown to anyone.

The concept of ‘title’ is much broader in a policy of title insurance than it is in the ordinary solicitor’s practice of conveyancing. As illustrated above, a solicitor cannot guarantee his or her client against certain problems affecting the client’s property. Neither can a prudent solicitor always protect a client against financial loss caused by fraudulent documents in the prior chain of title. In both cases, title insurance will provide a purchaser with protection against financial loss; protection that a solicitor’s opinion cannot give.

While title insurance may be almost universally used in the practice of real estate conveyancing, there are many clients who still question the need for such coverage. The Law Society of Upper Canada still requires that a purchaser be given the option to accept a solicitor’s opinion of title or a policy of title insurance. I would argue that there is no justification for a purchase transaction to close without title insurance.