> TITLE INSURANCE ?
Title insurance is a concept born in the United States of America
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.
