Title Insurance in Ontario: What It Actually Covers, and What It Doesn't

What title means, and how it goes wrong

Title is the legal record of who owns a property and what claims are registered against it. In Ontario that record lives in the provincial land registration system, and it is entirely separate from anything you can see when you walk through the house.

That separation is the whole point. A house can be in excellent shape and still carry a problem in its ownership record. The usual suspects:

• a lien registered by a contractor a previous owner never paid
• a shed, fence or driveway that sits over the property line
• a deck, addition or basement unit built without a permit, where the municipality later issues an order
• a mortgage that was paid off years ago but never properly discharged
• a fraudulent transfer or a fraudulent mortgage registered against the property

None of those turn up in a home inspection, and most of them do not turn up in a walkthrough either.

What a policy usually covers

Ontario's insurance regulator, the Financial Services Regulatory Authority of Ontario, describes title insurance as a policy that protects property owners and their lenders against losses related to the property's title or ownership. The risks it lists include:

• unknown title defects that affect your ownership of the property
• existing liens against the property
• encroachment issues, where a structure sits over a boundary
• survey errors
• title fraud
• matters that would interfere with selling or mortgaging the property later

The wording is not identical between insurers. Several title insurers write policies in Ontario, including FCT and TitlePLUS, and the covered risks, limits and exclusions come from the policy your lawyer actually orders. If you want to know exactly what you have, ask for the policy rather than a summary of it.

What it does not cover

This is where most of the confusion sits. LAWPRO, which writes the TitlePLUS policy, tells lawyers that a steady stream of reported claims are really home insurance matters: leaky roofs, flooding basements, mould and shoddy work. Its guidance is blunt. Title insurance is not intended to cover physical problems with a property unless that problem also falls under one of the covered risks in the policy.

Four limits are worth knowing before you rely on a policy:

• Known problems. FSRA lists title defects you knew about before you bought as an exclusion. If something is disclosed and you close anyway, you have generally accepted it.
• Physical condition on its own. Coverage can be triggered when a physical problem produces a government order, such as an order to remove unpermitted work. The defect by itself is not the covered event.
• A seller withholding information. LAWPRO's position is that the issue still has to fall under a coverage clause. Non-disclosure by itself does not trigger a claim.
• Your future plans. The policy is aimed at title as it existed at the time of purchase, and generally will not cover a zoning or bylaw rule that blocks what you were hoping to build or run later.

FSRA also lists environmental hazards, native land claims, zoning violations, and problems that would only be found by a new survey or inspection among common exclusions.

Three protections, three different jobs

Title insurance, home insurance and a home inspection get mixed up constantly. They do not overlap.

You want all three doing their own job. If you are buying something older or rural, the insurance side has its own timing problem worth reading about separately: what insurers ask about older and rural homes.

An owner's policy and a lender's policy are not the same thing

FSRA separates the two clearly. An owner's policy protects you from title related losses. A lender's policy protects the lender in the event that the property's mortgage is invalid or unenforceable.

Lenders commonly require a lender's policy as a condition of funding. That policy does nothing for you. If you want protection for yourself, the owner's policy is the one that provides it. Ask your lawyer which policies are on your file and who each one protects.

What it costs, and who arranges it

FSRA states plainly that title insurance is not a requirement in Ontario. A lender can still require it as a condition of funding, which is a different thing from a legal requirement.

You can get it through your lawyer, directly from a title insurance company, or through an insurance agent or broker. In a normal resale purchase your lawyer orders it as part of closing.

On price, FSRA says the cost of residential title insurance varies based on the value of your property and the insurance company you choose, and that you pay a one time fee called a premium. FCT makes the same point about structure: title insurance uses a one time premium, not a monthly or annual premium like most other types of insurance. Rather than working from a range you read somewhere, ask your lawyer for the actual figure on your statement of adjustments. It sits alongside the rest of your closing costs and they can quote it before closing.

The Land Titles Assurance Fund is a different thing

Ontario also runs the Land Titles Assurance Fund, which the province describes as a fund established to compensate people for certain financial losses they incur due to real estate fraud or omissions and errors of the land registration system. It can cover the financial loss along with reasonable legal and other costs related to the claim, and an application has to be filed within six years of the loss.

It is a provincial backstop tied to the registration system, with its own eligibility rules and deadline. It is not a replacement for holding a policy of your own, and if it ever becomes relevant to you it is a lawyer's file, not a form you fill out on your own.

If you already own the home and never got a policy

You are not locked out. FCT, for one, sells an existing homeowner policy and says directly that if you did not close using title insurance, you can still purchase a policy later.

Worth a call to your lawyer if you bought some years ago, or if you simply are not certain whether you have a policy. Plenty of owners do not know either way.

What I would actually do, buying around here

If you are buying between Ottawa and Brockville, three things are worth doing while you still have conditions in place:

• Ask early whether there is a survey, and how old it is. Older and rural properties in this corridor often have fences, driveways and outbuildings that do not line up with the registered boundary.
• Ask the seller directly about permits for anything that looks added: decks, additions, basement units, detached garages, outbuildings.
• Ask your lawyer, before you waive, whether the title search has raised anything they want to talk through. Before, not after.

Title insurance is there for what nobody catches. Everything above is about catching what you can.