The current socio-economic context does not leave anyone indifferent. With a persisting housing crisis, an increase in bank and financial fraud and an alarming rise in homelessness, the challenges both complex and numerous. These issues are also having an impact on the property sector. Access to property is more difficult because of increased prices and interest rates. But even once these obstacles have been overcome, homeowners and their mortgage lenders remain preoccupied by other considerations. This includes tangible or potential irregularities that some may have been forced to accept due to a lack of options, as well as an increasing risk of property fraud.
Given these concerns, title insurance offers a reassuring solution for property owners and their creditors.
Understanding Title Insurance
You might be wondering,
“what exactly is title insurance?”.
It's a policy you can take out as part of a property transaction, or even when you already own the property. Its main benefit is to protect you against legal problems, known or unknown, but existing when you become a homeowner.
It offers peace of mind by allowing you to save time, meet certain pre-conditions from your lender, avoid hassle and potential financial loss while you own a property.
"And how does it work in practice?”
It acts as a shield against potential problems. In the event of a defect, dispute or any other unforeseen situation, your title insurance will step in to rectify the situation. In fact, its role is precisely to guarantee the validity of your right of ownership and to ensure that your building is free of hidden defects. If such a problem should arise, your title insurer will cover the cost of remedying the situation and the associated costs.
It's important to note that title insurance is available not only to buyers or existing owners of a property, but also to mortgage lenders. This cover is often used to guarantee compliance with their pre-conditions as part of your financing, even in the presence of known risks relating to the property.
The ABC’s of Risks Covered by Title Insurance
Title insurance covers two main types of problems :
- Issues relating to title to the property itself and
- Non-title issues
On The One Hand, Title Defects…
A title may be compromised in part by :
- the absence of the required consents from a previous transfer of ownership
- the presence of an encumbrance, such as a mortgage, builders' lien or property or school tax arrears;
- failure to transfer a share of ownership in the chain of transactions.
These situations can give third parties rights or claims over your property, thereby calling your ownership rights into question. Rectifying these problems is unfortunately often a long and complex process, frequently leading to delays in the acquisition of the property and its subsequent transfer.
On The Other Hand, Other Irregularities…
This may include:
- violations of laws, regulations and zoning;
- encroachments on neighbouring lots;
- loss of market value of the immovable caused by an irregularity that could have been discovered in an up-to-date certificate of location;
- unauthorized and non-compliant work carried out by previous owners.
These irregularities could lead to a request for correction from an authority or a neighbour, resulting in unforeseen costs.
This type of problem also includes the absence or obsolescence of a certificate of location, either because it is more than 10 years old or because the seller has made alterations to the property.
In this case, the buyer can insure himself, at the seller's expense, against risks of which he is unaware, but which would be revealed in a new certificate of location. What's more, most mortgage lenders agree to rely on this cover rather than requiring an up-to-date certificate of location. As such, taking out a title insurance policy means that transactions can be completed more quickly, as well as avoiding the cost of a new certificate of location.
Additional cover against fraud
Title insurance also protects against a major current risk: title, mortgage and real estate fraud, as well as forgery and identity theft. Here is an example:
- Someone targets you, without your knowledge, and impersonates you by falsifying documentation in order to be able to pass themselves off as you.
- This person takes out a mortgage on your property or sells it to an innocent buyer, with the aim of making an undue profit.
- This unfortunate situation could deprive you of your property, since it would have been sold to a third party or leave you with a new debt in your name, for which your building has been given as security!
- As well as putting you personally at risk, this would prejudice your own mortgage creditor by exposing them to the loss of their property guarantee.
In such situations, your title insurer will defend your property rights, as well as those of your mortgage lender, by also covering the costs involved.
A homeowner's policy will cover all damage arising from usurpation, falsification of identity or legal documents and the resulting fraud. You can take out title insurance when you already own your property, in particular to protect yourself against fraud. In this case, the effective date of your policy will be retroactive to the date of your acquisition of the property, thereby covering damage occurring throughout your ownership of the building.
The policy for the mortgage lender will cover the reduction in the creditor's rank, or the impossibility of enforcing its recourse. It will also cover losses arising from any commitment, correction or cancellation that may be registered without the lender's consent, thereby obstructing the lender's rights.
Protect your property, shape our society!
Given the current economic landscape and the increase in cases of fraud, it is strongly recommended that players in the property market take out a title insurance policy. By "players in the property market", we mean:
- New residential, commercial or industrial buyers;
- Existing homeowners;
- The mortgage creditors of these players.
As well as protecting you against the many risks listed above, taking out title insurance could also act as a catalyst for positive societal change:
- Title insurance ensures that you won't have to worry about the risks associated with real estate fraud, the validity of your title, or any potential use of your property. Your title insurer will take full responsibility for resolving these situations.
- This decrease in risk boosts investor confidence and contributes to market stability.
- An investment-friendly environment, where risks are minimised and potential disputes limited, inevitably encourages an increase in property transactions.
- A positive property market boosts economic activity as a whole, improving economic conditions for everyone.