Title Insurance - Part 1 of 3 #321

By Gerry Neely
B.A. LL.B

We in British Columbia take pride in our Land Title registration system because we can satisfy ourselves as to the state of title with a 60 second online search, instead of waiting a week or so for a title search, as in the State of Washington. However, our system does have shortcomings. These shortcomings, combined with globalization, international law and accounting firms and the recognition by United States title insurance companies that there is a large untapped market for their products in Canada, have brought title insurance to British Columbia.

Initially, title insurance only covered the loss or damage of a defect in the title stated in the policy, which is discovered subsequent to the issuance of a policy of insurance. Coverage has since been broadened significantly to include loss or damages resulting from encroachments, violations of zoning bylaws, and, in lender’s policies, lack of a valid building permit.

As a result of this added coverage, there will be circumstances in which title insurance may be useful to a buyer of a residential property, or where it may be required by a lender as a condition of approving a mortgage loan secured by residential property. In commercial transactions, title insurance may become part of the usual security taken by a lender.

There are four types of policies, residential owner's/buyer's, residential lender's, commercial owner's/buyer's and commercial lender's policies. Each policy covers specific named risks and insures against losses arising because of defects or events occurring prior to the date the policy was issued. The amount of the insurance is the purchase price of the property or the amount of the mortgage.

The commercial buyer’s policy insures against four basic risks: the title to the interest may be different than stated in the policy; there are defects in the title, including charges, liens or encumbrances; the title is unmarketable; there is no right of access to the land.

In addition to the basic coverage of a residential buyer's policy, an additional 14 different risks are covered. These risks include: a document improperly signed, sealed or delivered, or created through forgery, fraud, duress, incompetence or impersonation; forgery of an instrument after the policy date; defective registration of a document; a restrictive covenant that limits the use of the land; an inability to use the land as a single family residence because it violates a restriction or zoning bylaw; builders liens for materials provided prior to the policy date; and other defects, liens, charges or encumbrances.

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