Should I buy Title Insurance?

In many instances, banks and financial institutions require the borrowers to obtain a title insurance.  However, this policy only protects the bank’s interest and insures against financial loss in the event of a defects in title to the property.

In British Columbia, title defects rarely happen.  When a land title is transferred, the new owner can be assured that his/her title is “indefeasible” (meaning the title transfer cannot be defeated, revoked, or made void) under the Torrens system, as long as the owner acquires the interest in good faith and for value consideration.

However, there are other risks that the owner could face, and these risks can be reduced by purchasing a “owner” title insurance policy.  For example, a homeowner’s policy can protect against loss due to the following:

• Title fraud such as the registration of a fraudulent mortgage on title
• Unmarketability of the insured land due to adverse matters that would be revealed by an up-to-date survey
• Tax arrears
  
• Forced removal by a governmental authority of a structure built without a required building permit
  
• Zoning and setback noncompliance

Here’s a more relatable example, the Vancouver Empty Homes Tax (Vacancy Tax).  The City of Vancouver’s new Empty Homes Tax means that purchasers of residential property could be responsible for the vendor’s tax liability. Subject to certain search requirements, a residential owner’s policy provides coverage for losses arising from a variety of liens affecting the title to insured land, including the Empty Homes Tax.

Here’s another example.  There are more and more strata properties (condos and townhomes) in the lower mainland.  A owner’s policy can protect against losses due to matters unknown to the insured prior to closing, such as:

• Strata fee arrears
• Special levies assessed prior to closing and that should have been disclosed in the Form B obtained for the closing, but were not disclosed in the Form B received by the insured
• The failure to obtain legal ownership of parking, storage, and locker units listed as unit(s) to be conveyed to the purchaser in the agreement of purchase and sale
• Noncompliance of the strata complex as a whole with building and zoning bylaws in effect as at the policy date

BC Notaries are trained professionals and can help make the conveyance process smoother and more accurate.  At the same time, we rely on information provided to us by other parties.  However, if the other parties do not provide accurate information, intentionally or inadvertently, obtaining a owner’s title insurance policy will be a good option instead of going to court for settlement.