Title insurance protects property owners against losses associated with title fraud, survey and title issues/defects, challenges against your ownership (title to the property) and other “off-title” issues. Each title insurer has its own rules, policies and restrictions, and each policy may offer different levels of coverage. The most common issues covered under a typical homeowner’s policy include protection for you, the homeowner, against title and off title defects.
Title Issues
Certain title claims may arise to dispute that you purchased good and marketable title. There may be a claim that an undisclosed party has an interest in the property, perhaps an allegation that a former transfer was obtained by fraud or by forged signature. There may be outstanding municipal utility charges that may form a lien on the property, or there may be existing work orders that weren’t revealed during the title search.
Municipal By-Law Issues
If renovations and improvements were made to your house before you purchased it (for example the basement had been finished, an addition built or a deck added) you could find out after closing that the required permits were not obtained. You may find that zoning by-laws or setback requirements were not complied with or realty tax arrears were not properly disclosed during the title search process. In these cases, the cost of remedying the problem may fall to you, and it would be up to you to pursue the party responsible, assuming all of the risks and costs associated with such an endeavor.
Encroachment issues
Sheds, lane ways, even homes and garages are sometimes built on neighboring properties and need to be moved. This could happen if a previous owner built without verifying where the lot lines were. Title insurance can protect you against actual losses arising from these types of encroachment issues.
Fraud and forgery
Real estate fraud is one of the fastest growing crimes in North America. If someone forged your signature and registered a mortgage on your home without your knowledge the onus is on you as the homeowner to prove you were victimized by fraud. It can be very expensive to resolve these issues on your own, but with a title insurance policy, you will be covered for legal expenses and costs incurred while proving fraud
had been committed.
What Does Title Insurance Not Cover?
Typically, the following issues will not be covered:
  • Known title defects (that were revealed to you before you purchased your property);
  • Environmental hazards (e.g. soil contamination), any concerns about soil or contamination or toxic pollutants on the property should be addressed by obtaining an environmental audit;
  • Native land claims;
  • Problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought);
  • Matters that are not listed in public records (e.g. unrecorded liens and encroachments);
  • Zoning bylaw violations from changes,renovations or additions to your property or land that you are responsible for creating.Damages due to flooding, fire or sewer backup;General wear and tear of your home (e.g.replacing old windows, a leaky roof, or an old furnace); Theft(e.g. a burglar breaks into your home and steals your television); and Other losses or damages due to non-­title related issues;
  • Residential Tenancies Act, 2006 (Ontario) –  Landlord liability for illegal rent increases or other claims arising from residential tenancy legislation are not matters covered by title insurance;
  • Fire Retrofit Issues – In the cases of tenanted and multi-unit properties, while title insurance does cover the usual work orders and zoning related matters, it does not cover fire retrofit issues such as the sufficiency of smoke alarms or fire barriers, unless they form work orders or are zoning deficiencies which would have been revealed by a regular building and zoning search conducted prior to closing;
  • Water Potability and Quantity where the property is serviced by a well, a water potability certificate (preferably more than one) and a well driller’s certificate (if available) should be obtained;
  • Title insurance covers land, not chattels. When significant chattels are included in a purchase or when a transaction involves the likes of a mobile home, consideration should be given to PPSA search and registration;
  • Underground Fuel Oil Tanks, the Technical Safety and Standards Association should be contacted to conduct an inspection; and
  • Perhaps most importantly: Use of the Property, and even more specifically Future Use, is not covered.

If you intend to change or alter the existing use of the property in any way, you must bring those intentions to your lawyer’s attention as soon as possible, to ensure that the correct searches are conducted. Your lawyer, and your Title Insurance Company, cannot provide you with protection against an issue that you have not explained to them.