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Purchasing real estate property in Ontario is often considered an investment of a lifetime, given its high stakes and hefty price tag. Consequently, I frequently field inquiries about the necessity and benefits of title insurance in such transactions. In essence, title insurance serves as a vital shield against financial repercussions stemming from defects in property titles, encompassing a spectrum of potential issues ranging from errors in deeds to identity theft. This indispensable coverage extends to both homeowners and lenders, offering peace of mind and security.

Through this post, we aim to explain how title insurance serves as necessary protection in real estate transactions. Title insurance provides coverage against financial loss resulting from defects in title to real property, encompassing errors or omissions in deeds, forgery, fraud, identity theft, liens, encroachments, and other issues that may arise during the transfer of property ownership. Below, we outline the benefits and situations where title insurance proves invaluable:

1. Unknown Defects Protection: The purchaser, through the policy, is protected against unknown title defects that impact the ownership of the property. For example, an undisclosed lien on the property, including but not limited to the owner’s unpaid debts, utility bills (e.g., water heater, water purification plant), condominium charges, survey errors, encroachments, or taxes that come to attention after the purchase. Without title insurance, the purchaser may incur substantial financial losses in resolving such issues for which the current owner becomes responsible after acquiring the property. Title insurance serves to indemnify the purchaser against these unforeseen circumstances, mitigating potential financial liabilities.
2. Identity Theft: Title insurance policies often include provisions for identity theft protection, offering assistance and reimbursement for expenses incurred in restoring the owner’s identity and reputation. For instance, the usage of Power of Attorney presents its own challenges in conceiving title theft. In today’s world of cybercrimes, a homeowner’s personal and banking information can easily be hacked, subsequently allowing forged signatures or identity theft to transfer ownership of the property to an imposter. Without title insurance, the rightful homeowner could face significant legal and financial challenges to reclaim ownership of their property.
3. Legal Cost Coverage: If there is a legal challenge, title insurance typically covers legal expenses incurred in defending the title. This can include attorney fees, court costs, and other expenses associated with resolving the issue otherwise these legal costs could be significant and burdensome for the purchaser. Title insurance provides that peace of mind to the purchaser, knowing that any potential title defects are assured through the policy, especially considering the substantial investment involved in purchasing a home.
4. Lender Protection: Lender is also protected through the title insurance policy that is often mandatory to secure their interests in the property. It not only strength’s the lender’s mortgage and provides the safeguard form unwarranted risks protecting their financial stake in the mortgage investment but also secures the title on the property.

Latent or hidden defects are not covered by title insurance, these could involve defects that render properties unfit for their intended use such as use of prohibited materials or substances. It’s imperative to understand that while title insurance offers valuable protection, it does not serve as a substitute for a thorough title search and examination, purchasers must still conduct due diligence before finalizing the purchase.

For questions about this post or if you need proper legal advice tailored to your specific situation, don’t hesitate to get in touch with us at (905) 270-6660 or by email at info@kormans.ca.

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M. W. Faizan is an Associate Lawyer at Kormans LLP. You can reach M. W. Faizan here: mwfaizan@kormans.ca.

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