by Paula Michelangeli, First Canadian Title
Title insurance, which protects an owner's right to "title" (otherwise defined as property ownership), was introduced to Canada in the early 1990s and is a viable alternative to the conventional way of purchasing commercial and residential real estate. Peace of mind and potential cost savings are just a couple of the unique benefits a title insurance policy offers. There are unlimited instances in which title insurance facilitates a speedy hassle-free purchase, sale or refinancing of commercial or residential properties. Title insurance companies have the ability to quickly underwrite title risks and in many cases insure over known defects. This results in broader coverage for all insured parties.
Lenders in most commercial and residential transactions insist upon an up-to-date survey or a title insurance policy. The absence of an up-to-date survey often results in a delay in the completion of the transaction and sometimes additional costs. Title insurance offers full coverage for a lender in lieu of a survey, thus enabling the transaction to close as scheduled and saving the purchaser both time and money. When an existing survey reveals encroachments or other problems, a title insurance company usually can underwrite the problems and provide full coverage to the lender. Title insurance companies also endeavor to provide the purchaser with the broadest coverage possible.
Title insurance works by assuming reasonable risk in the purchasing process. In the course of conducting a search of the title of the property being purchased, the solicitor may uncover a title "defect" or "cloud". In many instances, the revelation of this "defect" or "cloud" could potentially cause a delay in the closing or the complete collapse of the transaction. Title insurance companies often insure over these known defects and therefore provide time- and cost-savings to the purchaser.
There are many advantages to purchasing a title insurance policy -- for both the purchaser and lender. To benefit from the policy and save money, it is best if the lawyer (who orders title insurance on behalf of his or her clients) commits to a title insurance policy at the beginning of the transaction. A title insurance policy eliminates the need for many on and off title searches, resulting in cost savings for the purchaser as well as simplifying the process and enabling a quicker closing. In most instances, title insurance is less expensive than a survey. A title insurance policy guarantees the state of title to real property as of the date of closing. It also protects against losses that result from fraud and forgery related to title. Title insurance shifts the risk from the solicitor and the client to the title insurance company and provides the purchaser and lender with more comprehensive coverage than that of a solicitor's opinion on title. When all parties to the transaction are title insured, title insurance also eliminates the law society surcharge levy (an amount charged to the client as one of the closing costs).
It is becoming more and more evident to purchasers, owners and lenders of commercial property that the benefits of title insurance make it worthy of consideration. In the event that a covered problem should arise, the shift of liability from a solicitor to a title insurance company allows policy holders to look to title insurance for satisfaction and provides additional security in an uncertain world. Title insurance is available right across Canada.