Title Insurance is an insurance policy that protects property owners and lenders from financial losses related to the property’s title and ownership.
Albertans, when purchasing or selling residential real estate, have increasingly relied on title insurance to complete the real estate transactions. However, while title insurance can prove helpful in certain circumstances, parties should be aware of its drawbacks and limitations.
Title insurance helps guarantee that improvements, such as buildings, fences, decks, or sheds, on the land in question comply with applicable zoning bylaws and do not encroach on unauthorized areas, such as neighbouring lands. In the event issues arise with an improvement, the title insurer will pay the costs of fixing the issues
Title insurance should not be confused with a Real Property Report (“RPR”). The latter is a legal document prepared by an Alberta Land Surveyor that provides information about property compliance upfront. The RPR clearly illustrates the boundaries of the property and the location of improvements, such as buildings, decks, garages, sheds and fences, relative to property boundaries. RPRs can uncover problems associated with a property before a transaction is set to close. Uncovering these problems early can help avoid issues with the municipality down the road.
While the standard residential purchase contract in Alberta requires the seller’s lawyer to deliver normal closing documents, including an RPR, to the purchaser, the parties can waive this requirement and rely solely on title insurance. This can be done in circumstances where parties do not wish to uncover costly deficiencies or to deal with a short closing date. However, it is important that purchasers understand the extent and impact of title insurance coverage and the fact that it does not apply when they sell the property. By simply insisting that any new buyer obtain title insurance rather than relying on an RPR, purchasers may continue to defer any issues. If the purchaser decides to sell the property down the road, this may cause problems if a prospective new purchaser insists on obtaining an RPR.
If you have any questions about title insurance, or whether you should buy or sell a home without it, we welcome you to contact our office at 780-469-0494 or email us directly at email@example.com.