Law Times

October 31, 2016

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Page 10 OctOber 31, 2016 • Law times Buyers choosing title insurance for property purchases BY MARG. BRUINEMAN For Law Times B uyers are embracing title insurance in a vast ma- jority of property pur- chases in Ontario, say lawyers. e option is to spend the money on insurance or other types of coverage or rely on a so- licitor's opinion on record. at could be a lengthy process and, in turn, also cost the client more money because it also requires the new homeowner to pay for a survey. "Historically, when you did a real estate transaction, you got the solicitor's opinion [on title]," explains Andrew Fortis, a partner at Vaughan-based Hummingbird Lawyers LLP. e lawyer's role is to make sure the title is clean, free of any- one making a claim on it, he says. e solicitor would write letters to check zoning, hydro ease- ments, the tax department and others. Title insurance reduces that work and helps move the transaction along more quickly. "e challenge with title in- surance is . . . it's only a Band-Aid. It is not the cure," adds Fortis. Fortis recommends title in- surance to his clients because it covers the fraud angle if false representations are made on the property and only discovered af- ter the sale. If the property own- ers are ever subject to a fraudulent transaction in situations where someone else impersonates the property owner or if a false mort- gage is placed on the property, insurance will cover that. at's in addition to a situation where a problem arises with the title or if outstanding property taxes are later discovered. Most of Fortis' real estate closings have included title in- surance and twice property owners were saved by the insur- ance because they had become the victims of fraud. e downside, adds Fortis, is in situations where money can't entirely rectify the situation. For instance, if relying on title insur- ance, the lawyer doesn't check zoning or work orders, and if the municipality says a deck on the property is too close to the fence line they can order it be cut back. If the deck was a part of the mo- tivation in the purchase, the or- der could diminish the owner's enjoyment of the property. "It's got a lot of pluses and some limitations. It is not the panacea to all title issues which is why . . . you have to have a conversation with your client," says Fortis, referring to what's important about the house or future changes the homeowner plans to do. He also points out that not all title insurance policies are the same. And there has been some argument about what is included in insurance coverage. Although, an Ontario Court of Appeal ruling late last year clari- fied what title insurance covers, favouring policy holders. In MacDonald v. Chicago Title Insurance Company of Canada, the court decided that a home- owner who sought coverage for a support wall that had been re- moved illegally by the previous owner was indeed covered, over- turning a lower court decision. e motion judge's determi- nation that the insurance doesn't apply because the work order wasn't registered on title caught the interest of legal insurance providers, Lawyers' Professional Indemnity Company, an inter- vener in the case. "In our view, that was incor- rect," says Lisa Weinstein, vice president of TitlePLUS, a product developed by LAWPRO. e appeal judge ultimately found in favour of the homeown- er that both on-title and off-title work covers any defect. Prior to MacDonald, the scope of what title insurance cov- ers had not been clearly defined. But the decision determines that illegal work that doesn't comply with the building code is covered by title insurance. Part of the complication in providing the solicitor's opinion on title is the need for a survey. At a cost of about $1,800, surveys are not used as much as they used to be, largely as a re- sult of the introduction of title insurance, which is substantially cheaper. From the survey, the law- yer can see where the property lines are and confirm where any other buildings might lie on the property. "If you don't have a survey, I can't even start to give you an opinion on the property," says Nepean, Ont. sole practitioner Tanya Carlton. LT FOCUS AVAILABLE RISK-FREE FOR 30 DAYS Order online at Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 New Edition Brand Management in Canadian Law, 4th Edition John S. McKeown Brand Management in Canadian Law, 4th Edition is the only publication in Canada that brings together the legal and business issues you need to understand when helping clients reach their business objectives through branding. 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