TITLE INSURANCE ?
Title insurance is a concept born in the United States over 100 years ago. It was created to promote public reliance on abstracting companies which were involved in all real property transactions of the day. Over the years, title insurance policies ("TIPs") became the preferred method of securing title. Title insurance insures against loss sustained by an insured due to a defect in title that affects the marketability of that title. The beneficiaries of TIPs generally are private real estate buyers and mortgage lenders. A single, one-time premium provides the insured indemnification against loss or damage suffered through title defects or unknown encumbrances. Title insurance only provides compensation for actual loss or damages arising from a covered peril that affects marketability of title, and it does not purport to guarantee title.
A model American TIP1 insures against future unmarketability of title arising from, among other things, municipal zoning changes, by-law infractions, defects which could not be revealed by an up-to-date property survey, fraud, forgery, undisclosed or missing heirs, and errors or omissions made by a solicitor (or by a third party on which the solicitor relied for information with respect to the closing of the transaction). In the event of a challenge that calls into question the title to the property held by the insured, the title insurer is to provide legal defence for the insured and defend against all non-exempt claims and pay all valid claims or losses up to the policy limit. Coverage remains in effect until the property is sold or refinanced. An insured and his or her heirs should the property be transferred through a will, are covered as long as the property is not sold.
Most title insurance companies issue three types of policies: the loan policy, the plain language policy and the owner's policy. The loan policy is designed to protect a mortgage lender's interest; the plain language policy provides coverage for residential purchases and the owner's policy is designed to cover any other owner's interests (including fee simple and leasehold interests) on any other type of property, including industrial, commercial and multiple unit residential properties.
In its most basic form, title insurance protects the insured from losses as the result of claims against one's ownership of land.
> BENEFITS OF TITLE INSURANCE
What then are the benefits of purchasing title insurance? TIPs are generally designed to either cover risks or defects in the title to the property that are unknown after a detailed review of all documentation by a lawyer, or alternatively (or conjunctively), to cover risks or defects that are known. The advantage of title insurance is that it allows parties to complete transactions which otherwise may not have proceeded due to long-term liability exposure for the purchaser: the title insurer assumes the risk normally borne by the purchaser. Others argue that another advantage is the requirement for a detailed review of the documentation is no longer necessary as all a purchaser needs to do is obtain a TIP to cover off any unknown defect. This arguably eliminates some costs associated with the transaction, such as a lawyers opinion or the requirement of providing an RPR, and also may streamline and expedite the process. Whether these are in fact advantages is arguable.
A further advantage is that the insurer will handle and conduct all litigation over the title to the property. If there is a claim, no matter whom against, the title insurer is obligated to defend and, if unsuccessful, pay out any loss to the insured.
Compliments of Pat & Colin
Remax Chay Realty Inc.
705-722-7100
