Incidents of real estate fraud are increasing in Canada and homeowners and lenders are proving to be irresistible targets for fraud artists.
Homeowners and lenders can protect themselves by obtaining a title insurance policy. The coverage provided in residential title insurance policies helps protect both innocent homeowners and lenders who might otherwise face huge financial losses resulting from title fraud.
What is Title Insurance?
The purchase of a home is for most people the most important financial transaction of their life. With an increasing number of fraud claims, more and more homeowners are protecting themselves with Title Insurance.
House Insurance protects homeowners from the physical damage or loss resulting from a fire or break in. Life insurance protects homeowners in the event of a death. Title Insurance protects the owner against losses incurred as a result of undetected or unknown title defects.
What does Title Insurance cover?
A title defect arises in a number of ways, but the defect that causes the most concern is real estate fraud. British Columbia has perhaps the most efficient land title system in the world (a “Torrens” system) but there are an increasing number of situations where fraud is committed. This can happen in a variety of ways.
With identity theft on the rise, it is not difficult for a fraudster to obtain legitimate identification claiming to be the true owner. The fraudster then deals with realtors and lawyers as if they were the owner, and proceeds to sell the property. Since the fraudster has legitimate identification, the realtor and lawyer are unaware of the fraud. Alternatively, the fraudster may work with a lender or mortgage broker, again with identification, to place a new mortgage on the property. In either situation, the true owner is unaware of the fraud and the fraudster absconds with the sale or mortgage funds.
Other typical examples include spousal impersonation and lawyer fraud.
In most cases the Assurance Fund of the Land Title Office may reimburse the true owner, but this may take several months and thousands of dollars in legal fees. Title Insurance may be quicker and less expensive.
In addition to protecting against title fraud, Title Insurance may cover violations of municipal by-laws, encroachments onto an adjoining property, realty tax arrears, existing work orders, lack of legal access to the property and unpaid strata assessments.
How much does Title Insurance Cost?
For policies under $500,000.00, the cost is $250.00. For evey $1,000.00 in value over $500,000.00, the price increases by $.90.
Unlike life or house insurance, this is a one time cost at the time of ordering the title insurance policy. There is no annual premium.
How do I order Title Insurance?
The easiest way to order title insurance is to ask your lawyer to order it as part of buying or refinancing the property. There is usually no extra fee to order the policy.
If you are already an owner of property and wish to order title insurance, you can call Stewart Title at 1-888-667-5151. If you are a past client of the Spagnuolo Group (including Quiring Jellis and Bassett and Co.) give us a call. We will be happy to order a title insurance policy on your behalf.
Why Stewart Title?
There are other title insurance providers as well and these can be found on the Internet. The Spagnuolo Group chooses to work with Stewart Title as they are the only title insurance company designed to work with lawyers.
Is Title Insurance mandatory?
Absolutely not! Much like most insurance policies, it is optional and only for those who are concerned with identity theft and real estate fraud. It may also be useful to those who are purchasing homes with a known encroachment or unauthorized improvements to the home. Clients should speak to their lawyer about the benefits, and costs, of title insurance.
What is the Land Title Office Notification System and can this be used to guard against title fraud?
For a small fee, homeowners can register with the Land Title Office and receive notification of a change in title to their home. If a fraudster registers a transfer or mortgage against the home, the true homeowner receives an email alerting them.
While a useful service, the problem with the Notification System is that it alerts the homeowners after registration. Unless the homeowner receives their email instantly, the email may sit in an “inbox” for a few hours or days. This will give the fraudster enough time to receive the funds and go into hiding.
We hope this is of help to those concerned about title fraud and title insurance. For further information or answers to any questions on Title Insurance, please call Tony Spagnuolo at 310-HOME (4663) or email Tony at tonyspag(at)bcrealestatelawyers.com.
Please remember that while we try to keep our website up to date as much as possible, please do not rely upon the information without talking to one of our lawyers.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult a lawyer for individual advice regarding your own situation.
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