Posted by: Daryl & Wendy Ashby | November 28, 2010

Title Insurance

Occasionally there are complaints from buyers which might not have been made had the buyers purchased title insurance.

Title insurance is an insurance policy provided by an independent company that protects residential and commercial property owners and / or their lenders against losses related to a property’s title or ownership.

Some coverage includes: coverage for unknown title defects; survey errors and errors in public records; losses related to improvements made without the requisite building permits (unless made by you); existing liens against the property’s title for unpaid debts by the previous owner (utilities, taxes, mortgages or condominium charges registered against the property); real estate fraud and forgery; invalidity of mortgages; and encroachment and unregistered easement issues.

Title insurance will generally not cover known title defects’, environmental hazards, native land claims, matters created, allowed or agreed to by the insured, or matters known to the insured but not disclosed to the title insurer prior to closing (e.g. matters identified in a building inspection).

Title insurance is usually purchased by the buyer at the time of purchase, although it may be purchased anytime after. The insurance cost, generally a one time fee or premium, is usually determined by the property’s value and depends upon the chosen provider.

Consider this scenario: an elderly seller owns a piece of property in a rural area for many years. After obtaining a variance from the governing authority, the seller constructs outbuildings which encroach upon the adjacent property. No record is kept of the variance by the approving authority.

The buyer discovers the encroachment after purchasing the property and incurs a loss in rectifying the issue. A buyer with title insurance would likely be indemnified by the title insurer for any proven loss associated with the violation.

Consider these actual claims:

A buyer received notice from the City that the basement apartment was built without obtaining required development or building permits. A permit was required to remove or to legalize the apartment. Cost of claim: $239,958.

A buyer had municipality conduct a site inspection of the property after experiencing plumbing problems. The inspector found numerous problems with the dwelling, as well as illegal gas and plumbing lines, and an unpermitted addition to the garage. The municipality issued an Order to Comply. Cost of claim: $270,797.

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