Title insurance saves couple over $100,000.00
We do a lot of real estate conveyance work. What does that mean? It means we help people acquire and transfer the title of their home when the buy and sell. It’s the legal work that’s done prior to, on, and shortly after possession date.
Before I get into the topic of title insurance, first, let me explain what lawyers actually do in real estate transactions. Most people are familiar with the offer to purchase. When you find a home you like (or someone likes your home), real estate agents prepare an offer to purchase. If you’ve ever bought or sold a home, you will be familiar with the form.
Once the vendor accepts the offer, and the buyer removes all conditions, the offer becomes a binding contract. This means that the parties have agreed to exchange the home for money on possession date. The contract itself is the promise to do these things. But the offer does not actually legally transfer the home.
Lawyers look at the offer to find out the terms the parties accepted. With that information, we prepare the legal documents necessary to actually transfer the title of the home from the buyer to the vendor.
What does that actually mean?
In Manitoba, s. 59(1) of the Real Property Act states:
59(1)Every certificate of title, is conclusive evidence at law and in equity, as against the Crown and all persons, that the owner is indefeasibly entitled to the land or the interest specified in the title or instrument.
In ordinary language, this means that the legal entity (person, persons, or corporation) registered on title of a property is the indefeasible owner of that land. This is the legal proof of ownership.
The title of your property is likely now an electronic entry in the information system managed at and by the Property Registry. If you like old westerns, you are probably more familiar with paper copies. A long time ago, owners of land would obtain the title itself and hold it in a safe place. Those days are long gone…
On title, you will also find the property’s legal description. Few people actually refer to the legal description of the land. It is NOT the civic address. The civic address is simply an easy way to find the property.
As lawyers, we are not qualified to tell you if the legal description on title corresponds with the land you think you are buying. So your lawyer can’t tell by the title if that title corresponds to the civic address.
Land surveyors are the only ones qualified to do so. Surveyors will take the legal description on title and, with the use of their expertise and instruments, find the actual piece of land. They can then prepare a certificate that shows where the lot is legally (and actually) situated. On the certificate, they include all the structures on the lot and show if any of those structures encroach on neighbouring properties or if the neighbouring structures encroach on the lot surveyed.
Are problems discovered often?
Not often, but it does happen. A few of examples include:
- The province paved a turning ramp from a secondary highway on to a provincial trunk highway over the corner of a private property
- A church, believing the cemetery extended further than it did, buried the dead on the neighbour’s land.
- Two homes in a new subdivision were built straddling their property lines and onto public reserve land.
If you want a surveyor to prepare a certificate, you should make those arrangements PRIOR to possession. You won’t have much use for a survey that shows problems after you take possession (Buyer beware – once you take possession, you have very little recourse against the previous owners).
However, if you find that hiring a surveyor costs too much money or if you don’t have time, you can order title insurance. Title insurance insures against problems that exist at possession, but are discovered after possession. So rather than finding out ahead of time if a church buried members of their congregation in your back yard, title insurance would pay to fix the problem afterwards (in the case of the cemetery, title insurance paid for an exchange of land with the neighbour).
Unlike a survey certificate that only deals with the outside of the structures on the land, title insurance also protects a new owner if the previous owner made illegal repairs or renovations (without permits). This happened recently in Winnipeg. In this case, the buyers took possession and discovered shortly after that the previous owner had performed significant renovations that did not meet current building codes. After a city inspector discovered this, he ordered repairs. Fortunately, the new owners obtained title insurance which paid for the costs which amounted to over $100,000.00.
Not a magic bullet
Is one better than the other? That’s a difficult question to answer. On the one hand, a survey certificate will alert you to any significant problem before you take possession. This would give you the opportunity to cancel the contract.
Whereas title insurance pays for problems only after they are discovered. This means that they are now your problems. Furthermore, if you are responsible for the discovery, title insurance may not pay. For example, if you call a city inspector after you take possession just to make sure everything is in order, title insurance will not cover you. The insurance company does not want policy holders actively searching for problems.
In the event of a catastrophic problem, whereby the property becomes unusable, title insurance may not cover all the costs involved. In this case, a Survey Certificate would clearly be a better option. Although this may apply to more remote locations. It is unlikely that any property in Winnipeg would suffer from this type of problem.
Either way, you should consider at least one of these options when buying a home. Both offer advantages and disadvantages. You will either be made aware of serious problems in the case of a survey or you will be covered if anything shows up at a later date.
Philippe Richer is President of TLR Law Group. TLR has been located in the St. Boniface neighbourhood, in Winnipeg, since 1996. The office serves the middle class and small business within the province. With a focus on estates, wills, real estate, and corporate law, he leads his team in providing accessible legal services. Philippe also authored the business law course for the Knowledge Bureau and instructed the français juridique class at the faculty of Law at the University of Manitoba.