“Title Insurance” is now widely used in Alberta. Before you agree to accept “Title Insurance”, you should know what you are getting.
What it is not
As found in the United States of America, Title Insurance is an insurance policy guaranteeing that you have good indefeasible title to a certain piece of land. In Alberta this type of title insurance is provided by the Land Titles Office which certifies and guarantees that the registered owner has good title. Any other insurance as to “Title” may therefore superfluous and unnecessary.
What it is
“Title Insurance” in Alberta is a guarantee of the “quality” of a title or more specifically, it is insurance that the improvements upon the land comply with applicable zoning bylaws and that there are no encroachments upon the lands or onto adjoining lands. In the event that there is zoning non-compliance or an encroachment which needs to be removed, then the “Title Insurance” company agrees to pay the cost of such compliance or removal of such encroachment.
For a usual premium of some $200 – $250, the title insurance company will issue its policy to a Purchaser and to the mortgage lender. In the event that the property is sold, the new Purchaser is not covered unless a new insurance premium is paid.
The “Standard” Purchase Contract
Some real estate purchase contracts provide that the Vendor can either provide to the Purchaser proof of zoning compliance or in the alternative a Title Insurance Policy. Because the cost of an insurance policy may be some $50 to $100 less than the cost of a new real property report, the Vendor will normally elect to provide an insurance policy, especially if there is non-compliance or an encroachment.
But, buyer beware! If the buyer accepts the property on the basis of “Title Insurance”, when it is time to sell the property, there will have to be provided to the new purchaser either a new insurance policy or a new real property report and evidence of compliance, at the cost of the Vendor. Such cost could be saved if, when purchasing the property, the Purchaser insists upon the Vendor providing a real property report and zoning compliance certificate which the owner then keeps in his possession to be delivered to a new purchaser upon resale.
While “Title Insurance” will meet the requirements of a Purchaser and mortgage lender as to the “quality” of title and will provide insurance to such Purchaser or lender with respect to any action by the municipality or any neighbour with respect to non-compliance or encroachments, such policy does not guarantee to the owner that the property can be resold without the necessity of obtaining a real property report and zoning compliance certificate (or a new insurance policy) at that time.