Title Insurance

Title insurance is a type of insurance policy that protects the owner of real property (and their mortgage lender) against financial losses arising from defects in the title to the property — both defects that existed before the purchase and certain types of future losses.

Unlike most insurance policies, which cover future events, title insurance primarily covers pre-existing defects that were unknown at the time of purchase. This makes it fundamentally different from home insurance (which covers future damage to the structure).

In Ontario, title insurance policies for residential properties are issued by a handful of licensed insurers — the most common are FCT (First Canadian Title), Stewart Title, and Chicago Title. The insurer charges a one-time premium at the time of purchase — there are no ongoing annual premiums. The policy remains in force for as long as the insured owns the property (for owner's policies) or until the mortgage is discharged (for lender's policies).

The buyer's real estate lawyer arranges title insurance as part of the closing process. The premium is included in the statement of adjustments and paid at closing.

A standard Ontario residential title insurance policy (owner's policy) typically covers losses arising from:

Title fraud: One of the most significant risks in Ontario real estate. Title fraud occurs when someone fraudulently transfers title to your property — often through forged documents — and then mortgages or sells it. Title insurance covers losses from fraudulent transfers even after you have purchased the property.

Existing liens and encumbrances: Unpaid property taxes, hydro arrears, or other statutory liens that are registered or registerable against the property but were not discovered or discharged before closing.

Survey and boundary issues: Encroachments where a neighbouring structure (fence, shed, addition) straddles the property boundary; gaps in fences or driveways that are not on the insured property as described; and building setback violations discovered after closing.

Zoning non-compliance: Improvements or uses that do not comply with applicable zoning bylaws or building codes, including unpermitted additions or finished basements.

Easement and right-of-way disputes: Unregistered easements or rights of way that were not discovered during the title search but affect the use of the property.

Forced removal of structures: If a municipality or utility company requires removal of a structure that violates a by-law, easement, or utility line restriction, title insurance covers the cost.

Unmarketability of title: If title cannot be transferred to a future buyer due to a defect, title insurance covers the loss.

Legal fees and costs: Title insurance covers reasonable legal fees incurred in defending a covered title claim.

Title insurance has significant exclusions that buyers must understand:

Known defects: Title insurance does not cover defects that were known to the buyer at the time of purchasing the policy. If the buyer knew about an encroachment or a building permit issue before closing and did not disclose it to the insurer, the claim may be denied.

Native land claims: Claims by indigenous peoples based on inherent or treaty rights.

Environmental contamination: Title insurance typically does not cover environmental contamination (soil contamination, underground storage tanks). Buyers of properties with potential environmental concerns should obtain an environmental assessment.

Expropriation: Government expropriation of the property is not covered.

Physical condition: Title insurance does not cover physical defects in the property — structural issues, mechanical failures, or mould. These are covered by home insurance or a home inspection.

Post-policy improvements: Issues arising from the buyer's own improvements after closing are not covered.

Condo issues covered by status certificate: For condominiums, title insurance does not replace a review of the status certificate — it does not cover financial issues with the condominium corporation, special assessments, or common element deficiencies that would have been disclosed in a proper status certificate review.

Ontario real estate lawyers typically arrange two title insurance policies at closing:

Owner's policy: Protects the buyer/owner against covered title losses. The coverage amount is typically equal to the purchase price of the property and does not decrease over time (unlike a mortgage). The one-time premium for a residential property in Ontario is typically $200–$400 depending on the purchase price and insurer.

Lender's policy: Protects the mortgage lender (bank or credit union) against losses from title defects that affect the lender's security interest. It covers the outstanding mortgage balance. The lender almost always requires a title insurance policy as a condition of providing mortgage financing. The lender's policy premium is typically $100–$200.

Owner's and lender's policies are separate — having a lender's policy does not protect the owner. If a title claim is paid by the insurer to the lender (reducing the mortgage), the owner may still suffer a personal loss not covered by the lender's policy.

Buyers should always request an owner's title insurance policy — it is inexpensive relative to the coverage it provides and is one of the best value protections in a real estate transaction.

Before title insurance became standard in Ontario in the 1990s, buyers typically obtained an up-to-date survey of the property as a condition of the mortgage. The survey identified boundary lines, structures, and encroachments.

A full survey today costs $1,500–$5,000 depending on the property and the surveyor. Title insurance replaced the survey requirement for most residential transactions because: - Title insurance covers the same survey-related risks (encroachments, boundary disputes) at a fraction of the cost - Most lenders now accept title insurance in lieu of a survey - Surveys can only identify issues visible at the time of the survey — they do not identify legal encumbrances in the title register

However, title insurance is not a complete substitute for a survey in all cases: - For vacant land purchases, a survey is often recommended - For properties where boundary disputes are anticipated, a survey provides definitive legal evidence of the boundary - A survey identifies encroachments that you as the buyer may want to negotiate before closing — title insurance only pays after a loss occurs

For most Ontario residential closings, title insurance provides adequate protection at significantly lower cost than a full survey.

Alex purchased a house in Mississauga in 2021 for $950,000 and obtained an owner's title insurance policy as part of the closing. The one-time premium was $340.

In 2023, Alex attempted to refinance his mortgage and discovered that the property had been fraudulently transferred — a fraudster had used stolen identity to register forged discharge documents and a fraudulent transfer, then obtained a $600,000 mortgage from a private lender against the property.

Without title insurance, Alex would have had to retain a litigation lawyer, commence a court proceeding to set aside the fraudulent transfer, and potentially face claims from the private lender. The legal fees alone could exceed $50,000 and the process could take years.

With title insurance, Alex made a claim to his title insurer. The insurer retained its own lawyers to handle the court proceeding to set aside the fraudulent transfer and mortgage, and covered all legal costs. Alex's title was restored and his out-of-pocket cost was nil.

The $340 title insurance premium paid for protection that saved Alex from a complex, expensive legal battle over his most valuable asset.