Imagine this: A purchaser has been found for a property that was listed, advertised and shown to prospective buyers for several weeks. Financing has been arranged and the transaction is nearing completion. The purchaser’s lawyer is in the process of conducting the searches necessary to issue an opinion on title to the purchaser and lender -- and then it happens. In the course of his/her searches, the lawyer discovers a “problem”. The lawyer raises the issue with the vendor’s lawyer, who balks at the idea of fixing the problem. The lender, who is notified of the issue by the purchaser’s lawyer, states that funding will only be provided if the matter is resolved. What was a sure deal, now seems on the brink of collapse.
Traditionally in Canada, there have only been two remedies for this all-too-common scenario: allow the deal to terminate or attempt to fix the problem to the satisfaction of the purchaser -- and more importantly, the lender -- often at great expense. Usually, neither solution was fully satisfactory. But since 1991, a third option has been increasing in popularity in Canada
In many real estate transactions, defects in title (“title” is most easily defined as “the right of ownership in real property”) are brought to light. Title insurance, which introduces a risk-taker to real estate transactions, can often reduce the amount of aggravation and stress these problems cause by insuring over them. It can also eliminate costs that would otherwise be incurred to correct title problems, save the time required to rectify these problems and often even save entire transactions.
Problems regularly covered by title insurance include missing or unclear permits, survey irregularities, undischarged mortgages of prior owners, improper descriptions, power of sale issues and any number of other title and off-title problems (or problems relating to matters not registered in the land registry office). Title insurance companies quickly underwrite each known title defect individually to assess the problem and determine the level of risk involved. And while they do not assume all risks presented to them, title insurance companies do take on many of the risks (many of which are quite considerable) that others traditionally have not been able, or willing, to accept.
Title insurance is a viable means of solving title-related problems that arise during real estate negotiations. The money, time and stress – as well as entire transactions – that it can save make it worthy of consideration the next time you need to ensure a transaction will be completed.
John Rider is the Director, National Commercial Title Insurance Services for First Canadian Title, Canada’s leading provider of title insurance and other real estate related products and services. He can be reached by telephone at
(800) 307-0370, or by e-mail at jrider@firstam.com.
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