Should a Buyer accept Title Insurance instead of a Real Property Report?

Posted on 25. Apr, 2009 by Rosellina Giardino in Real Estate

Read my article “What is Title Insurance?” before you read this article.

Most Real Estate Purchase and Sale Agreements contain a clause requiring the Seller to provide the Buyer with a Real Property Report with compliance.

Only a Real Property Reports that reflect the current state of the Property and that is marked with compliance by the municipality will satisfy the requirement of the Purchase and Sale Agreement.

Sometimes, the Seller does not have a current Real Property Report with compliance.  In that case, the Seller may offer to purchase a Title Insurance Policy for the Buyer in lieu of providing the Buyer with a Real Property Report with compliance.  The Seller may do this because it is cheaper to pay for the title insurance,  they are aware of a problem with the property (this may prevent title insurance coverage), or there is not enough time to have a Real Property Report prepared.

Should a Buyer accept Title Insurance instead of a Real Property Report with Compliance?

Of course, this depends on each transaction.  In most situations, I recommend the Buyer insist that the Seller provide them with a Real Property Report with compliance for these reasons:

1.       If you receive a Real Property Report with compliance at the time of purchase you will know what you are getting.  You will know if your fence encroaches on your new neighbour’s property, you will know if your garage is too close to the property line, you will know if a permit has been issued for your deck.

2.       If problems are revealed by the Real Property Report during the transaction, it will be the Seller’s responsibility to fix them.  For example, the Seller will get a permit for their deck, or enter into an encroachment agreement with the municipality or the neighbour.

3.       If you get title insurance instead and problems with the property are revealed at a later date they are now the buyer’s responsibility.  The Buyer may find out that there is an issue with their property and it is now their responsibility to fix. The Buyer can go to their title insurer but the title insurance policy may not cover the Buyer’s loss.

4.       It is very important to read the contents of your title insurance policy and be aware that you are making a claim on an insurance policy and your insurer may decide not to cover your loss.

5.       If the Seller or the Buyer is aware of a deficiency and decided to get title insurance instead of a real property report with compliance, the Buyer may not receive coverage under the title insurance policy.  The title insurer and the Buyer can take legal action against the Seller if there evidence that the Seller was aware of problems with the property.

6.       When it is time to sell the property, the new seller will have to provide the new buyer with a real property report with compliance or pay for the new buyer’s title insurance.

You may also want to read the following articles:

“What is Title Insurance?”

“What is a Real Property Report?”


© Giardino Law. All rights reserved.  The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting Giardino Law (or their own legal counsel) regarding any specific legal issues.  Giardino Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site.  The articles and posts published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.

What is Title Insurance?

Posted on 17. Apr, 2009 by Rosellina Giardino in Real Estate

What is Title Insurance?

Title Insurance is an insurance policy that protects a residential or commercial property owner and their lenders against losses related to the property’s title.

For a one time fee, title insurance may provide protection from such losses as:

1.       Unknown title defects (title issues that prevent you from having clear ownership of the property);

2.       Existing liens against the property’s title (e.g. the previous owner has unpaid debts from utilities, mortgages, property taxes, or condominium charges against the property);

3.       Encroachment issues (e.g. a structure on your property  needs to be removed because it is on your neighbour’s property);

4.       Title fraud;

5.       Errors in surveys and public records;

6.       Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future.

Your title insurance policy may protect you as long as you own your property, and may cover losses up to the maximum coverage set out in the policy.  It may also cover some legal expenses related to restoring your property’s title.

It is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of possible exclusions, which may include:

1.       Known title defects (that were revealed to you before you purchased the property);

2.       Environments hazards (e.g. soil contamination);

3.       Native land claims;

4.       Problems that would be only be  discovered by a new survey or inspection of your property (e.g. property is smaller than originally thought);

5.       Matters that are not listed in public records;

6.       Zoning bylaw violations from changes, renovations or additions to your property or land that you are responsible for creating.

Title insurance does not provide compensation for non-title related issues.  It is not a home warranty or home insurance policy, and will not provide compensation for:

1.       Damages  due to flooding, fire, or sewer backup;

2.       General wear and tear of your home (e.g. replacing old windows, a leaky rof, or an old furnace);

3.       Theft (e.g. a burglar breaks into your home and steals your television); and

4.       Other losses or damages due to non-title related issues.

You must carefully review your title insurance policy, as it may include additional exclusions and exceptions that are specific to your property.

There are two types of title insurance policies:

Owner’s policy – protects the property owner from various title-related losses that are listed in the insurance policy, for as long as the property is owned.  On owner’s policy sets a maximum amount of coverage.

Lender’s policy – Protects the lender from losses in the event that the property’s mortgage is invalid or enforceable.  A lender’s policy usually provides coverage for the amount of the property’s mortgage.

You can purchase title insurance for both residential and commercial properties.  Types of residential title insurance include:

1.       Types of residential title insurance include:

a.       Policies for new homeowners;

b.      Policies for existing homeowners;

c.       Policies for lenders in a residential mortgage.

2.       Types of commercial title insurance include:

a.       Policies for individual purchasing commercial properties

b.      Policies for lenders in a commercial mortgage

Please contact a title insurance provider for further information regarding Title Insurance.


© Giardino Law. All rights reserved.  The content on this web site is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this web site are advised to seek specific legal advice by contacting Giardino Law (or their own legal counsel) regarding any specific legal issues.  Giardino Law does not warrant or guarantee the quality, accuracy or completeness of any information on this web site.  The articles and posts published on this web site are current as of their original date of publication, but should not be relied upon as accurate, timely or fit for any particular purpose.