Since the start of 2023, news coverage related to title fraud in Ontario has become hard to ignore. Some of the most worrisome headlines relate to incidents where fraudsters have been able to sell a property that they do not own without the true homeowners becoming aware of the sale until after it has occurred. With title fraud seemingly happening more often, it comes as no surprise that homeowners are looking for ways they can protect themselves from becoming victims.
Fortunately, many homeowners who purchased their property fairly recently are likely already protected from this type of fraud by title insurance. It is important to note that title insurance is separate from property insurance that protects your property from physical damage, such as fire or another casualty. In order to confirm that they have title fraud coverage, homeowners can reach out to the lawyer who acted on their purchase to confirm that they have a policy, and that the policy covers title fraud. For those homeowners who either purchased their property before the acquisition of title insurance was common or who did not obtain title insurance coverage for some reason when they purchased the property, title insurers have created existing homeowner policies that can usually be obtained at any time during the person’s ownership of the property.
Existing homeowner policies provide substantially the same coverage that the homeowner would have received if a standard policy had been ordered at the time that they purchased the property. In addition to title fraud, some examples of title issues that are typically covered include zoning by-law matters, setback violations, certain outstanding municipal utility charges, existing work orders, and lack of legal access to the property. Further, most existing homeowner policies provide coverage retroactively to the date that the property was transferred to the registered owner. It should be noted that title insurance policies have certain exceptions for title matters that are not covered. For example, some standard exceptions include Indigenous land claims, risks that are known to the insured (but not the title insurer) on the date that the policy is issued, and government rights of expropriation.
Once a covered claim has been submitted, the title insurer has an obligation to investigate the claim and take reasonable steps to remedy the issue. With respect to covered title fraud claims, the appropriate solution will depend on the type of fraud that has occurred. This may include paying monetary damages or, where applicable, bringing a court case on behalf of the owner. For example, where there has been an illegitimate title transfer, the title insurer’s obligations typically cover all costs, including legal fees, related to returning title into the true homeowner’s name by way of court proceeding.
If a homeowner is interested in obtaining title insurance coverage, they should contact a real estate lawyer as only lawyers can order these policies on behalf of homeowners. Once the lawyer has determined that the homeowner qualifies for a title insurance policy, a one-time premium is payable, the cost of which will be based on the fair market value of the property. The fair market value of the property will often be determined to be the greater of (a) the amount paid for the property at the time of transfer; and (b) the current fair market value for the property.
As many homeowners who are seeking an existing homeowner policy purchased their homes many years ago and considering the significant increase in home values over the past few years, the current fair market value of the property is often higher than what it cost at the time of purchase. As such, the homeowner will typically need to either obtain a current appraisal of the property or provide their real estate lawyer with the most recent valuation of the property by the Municipal Property Assessment Corporation.
Once the fair market value of the property has been established, the lawyer will order and review a title search of the property as part of their due diligence. Depending on what the lawyer’s title search reveals, there may be title matters that need to be resolved before a title insurance policy will be issued or the policy will contain certain coverage exemptions related to the results of the title search. Finally, once the title insurance policy is ordered, the homeowner simply needs to attend at their lawyer’s office to sign the relevant documents required by the title insurer and the law firm.
Even though there are some out-of-pocket costs associated with obtaining an existing homeowner title insurance policy, the peace of mind that comes from having coverage is priceless. The members of Soloway Wright’s Real Estate and Development Group are here to answer any real estate law or real estate development questions that you may have and to help you obtain the most appropriate title insurance coverage to protect your property.
Soloway Wright LLP is a community-based law firm with offices in Ottawa and Kingston. With over 75 years of experience, our team of over 35 specialty lawyers in Ottawa and Kingston offer a dynamic blend of knowledge and experience to clients requiring assistance with Business, Commercial Leasing, Commercial Litigation, Condominium Law, Construction Law, Corporate Finance & Securities, Employment, Labour & Public Law, Workplace Investigations, Environmental Law, Estate Planning & Administration, Insurance Law, Medical Malpractice, Personal Injury, Municipal, Land Development & Expropriation, Real Estate & Development, and Tax Practice law matters. Our goal is to bring your legal issue to an effective, affordable, and successful conclusion.
DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.