Residential Title Insurance
How do I buy a residential title insurance policy?
In most provinces, when you purchase a new home your lawyer or notary can facilitate the purchase of a title insurance policy on your behalf. If you are an existing homeowner and you are interested in purchasing title insurance particularly to protect you against title fraud, you may be able to purchase your policy in some provinces through an insurance broker or directly from the title insurers’ website.
How much does a residential title insurance policy cost?
Title insurance is a fixed price based on the value of the property; there is no negotiation on price. While rates may vary between title insurance companies, the cost of a title insurance policy on a house valued at less than $500,000, will range between $250-$350.
Homeowners will pay a one-time premium when they first purchase their policy. There are no annual or monthly premiums. For a one-time premium, title insurance stays in effect for as long as the insured retains an interest in the property. Furthermore there is no deductible payable in the no-fault claims process.
How does title insurance help my real estate transaction close on time?
Often a title problem surfaces just before the scheduled closing date for a real estate transaction. Usually a solution is available, but may require more time than remains before the closing date. Common results, in the absence of title insurance, is that either the transaction fails to proceed because the problem cannot be resolved in time, often leading to acrimonious litigation between the parties, or the purchaser is forced to accept title subject to the title defect, or the vendor must take an abatement of the purchase price and the title defect remains. Title insurers provide insurance for the defect, which allows the transaction to close on schedule, while either the vendor’s or purchaser’s lawyer or notary sees to the correction of the defect after closing.
In the past another problem preventing a real estate transaction from closing on time was the delay in waiting for the results of a number of searches. Title insurance insures over a number of these searches allowing the transaction to proceed.
Won’t my lawyers/notaries errors and omissions E&O insurance coverage provide sufficient protection?
A lawyer or notary’s E&O insurance is coverage for the lawyer directly and not the consumer. Whereas title insurance provides direct coverage for the consumer. A lawyer’s or notary’s E&O provides limited protection for homeowners. Residential title insurance provides superior protection and superior claims processing. In particular, title insurance provides additional protections for both homeowners and lenders which fall outside a lawyer’s normal due diligence on a residential real estate conveyance and for which lenders and homeowners have no protection in the absence of title insurance. As follows:
- coverage for losses relating to improvements added without building permits,
- work orders against a property;
- non-compliance with agreements on title;
- real estate fraud;
- condominium special assessments;
- liens from unpaid taxes;
- outstanding property taxes;
- zoning defects; and
- errors in the public record.
Title insurance provides protection for some risks that occur after the closing of the purchase or mortgage transaction. Most notably, it provides coverage for title fraud that can occur at any time during the ownership of a property.
In the case of an error or omission by your legal advisor, a homeowner would have to prove their lawyer or notary negligent in court in order to make a successful claim against their errors and omissions insurer. This is not required under a residential title insurance policy as it is “no fault.” With title insurance there are added advantages of a duty to defend by the title insurer and a no-fault claims process.
Finally if your legal advisor has participated in the fraud, their errors and omissions insurer will not cover the claim. Instead legal societies have set up compensation funds in cases of fraudulent activities or wilful misconduct by its members. These “defalcation” funds are voluntary and many have limits on the value of compensation per claim.
Residential Title Fraud
How does title insurance protect me from title fraud?
Title insurance provides a no-fault, no deductible protection against title fraud for new and existing homeowners to protect them from fraudsters who steal title to their home, and to lenders who are duped into advancing money. The expertise of the title insurer can be invaluable in steering the insured through the process of reclaiming their title.
Who is most susceptible to title fraud?
While everyone who owns a house is susceptible to title fraud, fraudsters often target homes with the following characteristics:
- The mortgage has been paid off;
- The home is rented;
- The homeowner(s)travel frequently or spend a length of time out of the country;
- The home is unoccupied;
- The homeowner is a victim of identity theft;
- The homeowner(s) are involved in transactions related to the matrimonial home in a divorce; and,
- The home has recently been purchased, transferred, mortgaged or re-mortgaged.
Will my provincial land title assurance fund protect me from title fraud?
In the unfortunate event that you are the victim of title fraud, provincial land title offices have assurance funds that may provide for compensation of the defrauded homeowner. To access these funds, an applicant must prove either through a hearing process or through the court system that they are victims of fraud. This process involves considerable resources and expenses for the title fraud victim. In contrast when a title insurance policy holder is the victim of fraud, the title insurer has a duty to defend them. The insured is protected by this common law duty to defend by the title insurer. The insured also incurs no additional costs as title insurance provides a no-fault, no deductible claims process. And the insured receives the benefit of the title insurer’s expertise about the processes of reclaiming title to your home.
Regulation of Mortgage and Title Insurers
Who regulates title insurers?
Title insurers, being insurance companies in the nature of property and casualty insurance companies, are carefully regulated in every Canadian jurisdiction.
A federally licensed title insurance company is subject to regulatory supervision by the federal Office of the Superintendent of Financial Institutions (“OSFI”), as well as the financial institution regulator in each province. MTIIAC members are subject to the federal Insurance Companies Act and its regulations, the Insurance Acts in each province with their regulations, and the various statutes in each jurisdictions setting out restrictions on agency and brokerage arrangements, consumer protection and privacy.
Where can I find financial information about a mortgage or title insurance company?
All federally regulated title insurance companies are required to submit quarterly filings on premiums and claims paid. This information is publicly available from OSFI.
Is MTIIAC part of the Insurance Bureau of Canada?
No. No title insurer is a member of the Insurance Bureau of Canada (IBC). There is no classification of membership for title insurers in the Insurance Bureau of Canada.
What processes are in place to handle complaints by a member of the public about a mortgage or title insurance product or process?
Member companies have Complaints Handling Procedures posted on their websites.
As well member companies are members of the General Insurance OmbudService (“GIO”)
General Insurance OmbudService
All federally licensed insurers are also required to be members of a third-party complaint resolution system. Most federally licensed insurers and several provincially incorporated insurers are members of General Insurance OmbudService (GIO), an independent, regionally based, consumer dispute resolution system for the insurance industry.
If your matter is not resolved with your insurer’s complaint liaison officer, ask for a final position letter and call GIO. GIO helps you and your insurance company to resolve your differences in a fair, independent and impartial environment. GIO works to resolve disputes on claims-related matters and interpretation of policy coverage.
There are some areas in which GIO does not become involved. These include:
- insurance product pricing and business decisions;
- settlement procedures established by legislation; and
- matters that have been, or are, before the courts.
For more information about GIO and how to access its services, visit www.giocanada.org.
What is the impact of title insurance on the land title registry in Canada?
Title insurers have been actively operating in every province and territory across Canada for more than a decade and there has been no negative impact on the public land registry system, mortgage lending or land conveyancing systems. Title insurers have issued millions of policies to date and there has been no detrimental effect to the public land registry systems in Canada.
One of the purposes of title insurance is to provide coverage for risks in title and survey defects. Title insurers rely on the integrity of the system in order to underwrite risk. Title insurers have a fundamental interest in ensuring that the systems that they rely upon are accurate and reliable, otherwise they will be responsible for paying claims. In a number of provinces, title insurers are the largest user of the public land registry system, so it is a business imperative to maintain the integrity of registries so that claims will not increase
Is the title insurance industry in Canada similar to the United States?
The situation in the United States is distinctly different than in Canada. Title insurance has been a standard product in many states since the turn of the last century. Title records are kept by the local county courthouse where title is “recorded” and not “registered.”
Generally, conveyancing practices developed differently west of the Mississippi River from the eastern states. In the states west of the Mississippi, a title company performs a significant component of the real estate conveyance, activities that are traditionally performed by the lawyer or notary in Canada. The fees for these conveyancing services performed by American title companies are often included in the bill with fees for the title insurance policy. Title insurers developed their own data source for title information to reduce the duplicative searches and paperwork at the county courthouses. These databases are often referred to as “title plants.”
States east of the Mississippi have generally relied on lawyers to conduct their title searches and conveyances. With the advent of securitization of mortgages and their reselling in the investment market by government-sanctioned entities, like Freddie-Mac and Fannie Mae, title insurance arrived east of the Mississippi in the 1970s. Lawyers play a very active role in distribution of title insurance and rely on title insurers for accurate up-to-date title search information. In a number of states, like Connecticut only lawyers can sell title insurance policies by law.
As such there are significant differences between states in conveyancing practices and in the parties involved in a real estate purchase transaction.