Posted on
June 21, 2011
by
Leong & Roozendaal (Re/Max Camosun)
Historically, real estate has been transferred by the physical transfer of deeds. The lawyer acting for the buyer reviews the deeds to establish a “good root of title”. The lawyer checks that each transfer of the property was valid and that there have been no defects in the chain of transfers. This process is problematic, both because it is time consuming and because the lawyer’s opinion is only as good as the deeds placed in front of him. As an alternative, a host of companies began selling title insurance policies which, subject to certain limitations, insure against most problems that may arise with deeds of title.
In BC we have a unique land title system, the Torrens system. Under our Land Title Act, our land title registries identify each property by its unique Parcel Identifier or PID. By searching for that PID in a land title registry, a person is supposed to be able to identify both the boundaries of the property and every interest in the property that exists. Generally, this precludes a role for title insurance policies in BC; however, in limited circumstances title insurance can still play a major role in our land title system.
Survey Defects
Historically, most mortgage lenders have required that a survey certificate be prepared by a certified land surveyor, to identify the boundaries of the property and the location of the buildings relative to those boundaries. These survey certificates can be expensive ($300-$500), and can, on occasion, incorrectly outline the property’s boundaries or fail to note that a building crosses over on to neighbouring property. Title insurance is now generally accepted by most mortgage lenders as an alternative to a survey certificate; as such policies can protect both purchasers and lenders against any costs involved in remedying problems with the boundaries or the location of buildings on the property.
Unregistered Interests in the Property
There are a few instances in which valid interests in property are not registered against title. These include liens, family law matters, work orders, issues pertaining to violations of zoning bylaws, and a few other matters. Title insurance can protect purchasers in the event that they purchase a property unaware of the existence of these interests. This is invaluable because in these instances virtually no amount of due diligence on the part of the Realtor, the buyer, or the lawyer can uncover these problems.
Fraudulent Transactions
The spectre of fraud permeates all things real estate. Two major court decisions in 2009 highlighted the role that title insurance can play in protecting both owners and lenders against the costs of real estate fraud. In both cases a fraudster impersonated the owner of a home and signed a transfer of that home to an accomplice. The accomplice approached a mortgage lender and granted a mortgage against title. The mortgage money was advanced from the lender to the fraudster, and by the time the bank realized what had happened, the fraudsters had skipped town.
The court decided that justice could only be done if the actual home owner was entitled to the return of title to the property, and the cost involved in the fraudulent mortgage remained with the bank (or the fraudster). As a result, many banks now require that a lender’s title insurance policy be obtained, usually at the buyer’s expense, as a condition of loaning the mortgage money.
Caveat
In BC there is a number of title insurance companies selling an array of polices. These policies provide insurance for some specific concerns while they exclude coverage for others. Not every potential problem with the property or defect in title is insured by every policy. Buyers need to ensure that they are acquiring the right policy to protect their specific interests.
This discussion of title insurance is intended only as an introduction to the matter, and is not intended as legal advice. Should you have any questions or concerns with respect to this or any other aspect of real estate law, please contact Brendan Piovesan of Mullin DeMeo at Brendan@mdlawcorp.com or (250) 477-3327.
Thank you for your time,
Brendan Piovesan
