A title insurance policy is a policy of indemnity that insures against loss or damage arising from title defects or other covered risks which may include survey issues, encroachments, title fraud and the legal use of the property. It has become the customary method of assuring good and marketable title to owners and lenders in Ontario.
Prior to the arrival of title insurance in Ontario, lawyers provided opinions to purchasers and lenders as to the validity and marketability of title and certain off-title matters like legal use and tax arrears referred to in this article as the Solicitor’s Opinion. A Solicitor’s Opinion is based on the lawyer obtaining and reviewing various searches and reports including a full search of the title, writ/execution searches, a survey if available, municipal building and zoning searches, municipal agreement compliance searches, tax, water and utility searches and other searches depending on the location, nature and use of the property. Following a review of the various searches and reports, the lawyer provides a Solicitor’s Opinion for the purchaser and/or lender.
With title insurance, a lawyer remains involved in the real estate purchase and mortgage financing transaction. The lawyer is necessary for the placement of the title insurance policy as the Ontario Insurance Act requires that a lawyer review the title and report to the insurer before a policy may be issued. The title is still reviewed by the lawyer but the results are reported to the title insurer who insures the purchaser and their lender. The title insurer provides coverage for the matters set out in the policy. The coverage provided by title insurance typically mirrors the assurances provided in a Solicitor’s Opinion with additional coverage for certain matters such as defects that would have been revealed by an up to date survey and many forms of title fraud. Not all of the searches typically conducted by lawyers providing a Solicitor’s Opinion are required by title insurers. If issues covered under the policy are discovered following closing, a claim can be made under the policy.
When buying real estate, a purchaser will have to decide whether to request a Solicitor’s Opinion or purchase title insurance through the lawyer. Some considerations in deciding whether to purchase title insurance are that many off-title searches such as taxes, building and zoning are not required by title insurers. Also, the cost of off-title searches required for a Solictor’s Opinion is generally higher than the cost of a title insurance policy and can take several weeks to obtain. The discovery of an issue prior to closing such as a zoning violation which becomes known through an inquiry to the municipal zoning department will likely mean that coverage under the title insurance for that issue will be limited or not covered by the title insurance company. Finally, most title insurance policies include protection for many forms of title fraud which is not included in a Solicitor’s Opinion. There may be instances where a purchaser does require building and zoning searches to be conducted such as when the purchaser intends to renovate or change the use of the property and wishes to verify that future changes of use will be permitted.
If you have questions about title insurance as part of your real estate transaction, please contact us.
This article is current as of July 21, 2023 and is intended for general information purposes only and is not intended to provide legal advice. Readers with concerns about how this affects particular situations or transactions should obtain the independent review and advice of legal counsel.