Title Insurance

Protecting A Deal From Collapsing

As a realtor, you’re typically not involved with ordering title insurance on behalf of your clients. This is usually done by us a few days prior to closing, usually at the request of the lender. You typically have no involvement with this matter.

What you need to be aware of is that situations may arise where title insurance may allow your buyer to remove subjects, allowing the deal to close so your clients achieve their goal of buying or selling their home. Let us illustrate by a file that came across our desk a few years ago.

Our client had a home in Burnaby with a driveway running up the side of his property from the front to the back. At the back of the property were two garages, each fitting two cars, one on the east side and the other on the west. These were two non-attached structures. The home on the property and the garages were fairly new and all permits were obtained by our client, the Seller. After the final building permit was issued Burnaby requested an easement from our client over a portion of the back of his property. Our client agreed and allowed the easement to be registered against his title (before he was our client). Immediately upon execution and registration, one of the garages became non-conforming and encroached over the easement.

Our client decided to list the property for sale, and an offer was received from a prospective Buyer. During the Buyer’s due diligence, the Buyer became aware of this encroachment and was not willing to remove subjects. We suggested to the realtor that he consider using title insurance to protect the Buyer in the event Burnaby requested the garage to be moved or demolished. To make a long story short title insurance was obtained and insured the Buyer. In the event Burnaby ever asked the Buyer to remove or relocate the encroaching garage, the title insurance company would insure the Buyer for the cost of doing so. If the garage had to be removed, title insurance would insure the Buyer for any reduction in market value of the property.

This is a great example of how a title insurance policy can be used to protect a closing from collapsing before subject removal, much before lawyers are involved. Keep this in mind for any future deals you come across that have an encroachment issue. Title insurance may be utilized to allow the transaction to close.