Are you getting ready to buy a house? Errors in property titles or in the certificate of location, or even developments that do not comply with municipal regulations could cost you dearly. This is where title insurance comes into play. However, few Quebecers subscribe to this protection. Is it really useful?
Sylvie and Jean wanted to settle in the region. They found the house of their dreams in Beauce. By examining the certificate of location, the notary noted the presence of a swimming pool encroaching on the neighboring land. This problem could potentially cost the couple several thousand dollars; enough to discourage Sylvie and Jean from signing! To limit the costs associated with this risk and allow them to acquire the desired property, the couple took out title insurance. If the pool one day gets on the neighbor’s nerves, the costs incurred to move it will be covered by the insurer.
Popular in other Canadian provinces, title insurance remains little known to Quebecers: only 4% of owners have one in Quebec, according to data provided by the brokerage firm ABRI to La Presse . By comparison, in Ontario, this protection occurs in more than 90% of real estate transactions.
It must be said that Quebec has a more reliable and efficient land register than that of its neighbors, which makes title insurance superfluous in most cases, according to real estate professionals. However, the Professional Association of Notaries of Quebec (APNQ) indicates that this insurance can allow you to accelerate the signing of the deed of sale if an irregularity is discovered in the property titles and it is impossible to correct it. quickly.
What is title insurance?
Title insurance works a bit like home insurance, but instead of protecting you against damage caused by fire or flood, it insures you against the possible consequences of problems with the title deeds and certificate of location, as well as only in the event of fraud or identity theft.
Title insurance offers protection “in situations that may affect the owner’s right of use and occupancy,” summarizes Sylvie Patenaude, lawyer specializing in real estate law.
Although not mandatory, this insurance is recommended by many notaries before the client signs the deed of sale. It comes into play at several stages: “Before signing the deed of sale, when the notary discovers a problem in the property titles [deed of sale, donation, exchange, declarations of transmission, etc.] or after signing of the sale, to protect you against fraud,” specifies Kevin Houle, president of the APNQ.
You can ask the seller to take out title insurance, because they have an obligation to guarantee you the right to ownership. In this case, he will pay the premium and you will be the beneficiary of the insurance. If the seller refuses to pay the cost of insurance, you can choose to take it out and bear the costs. Note that some banks require it in mortgage financing or refinancing applications.
What does that cover?
A terrace built without a permit, a shed that encroaches on a neighboring property , unknown easements, errors in a certificate of location… All of this is covered by title insurance. You will also be protected from errors related to the search and examination of property titles, debts secured by the building contracted by a previous owner, real estate taxes and unpaid co-ownership fees.
“Title insurance ensures that a non-compliant element is brought up to standard. However, it does not guarantee enjoyment,” explains Mr. Kevin Houle. In other words, the insurance purchased by Sylvie and Jean will pay for the demolition of their swimming pool, but not its reconstruction in the right place.
As notary Isabelle Couturier points out, title insurance can also be used to quickly resolve a problem before signing the deed of sale, for example avoiding having to wait many months before obtaining a minor exemption for a heat pump. installed by the seller in a location not permitted by the Municipality. The insurance will protect the buyer in the event of a possible claim.
Are you a victim of fraud? Title insurance can come into play if a scammer steals your identity and takes advantage of it to sell your property without your knowledge. It will then reimburse you for the legal costs incurred to restore your property rights.
Exclusions
On the other hand, title insurance does not protect you against construction defects and hidden defects in the property. It also does not include well and septic tank problems or certain damages covered by home insurance, such as theft, fire, vandalism or water damage.
Assuming you discover that the ground beneath your home was contaminated by an accidental oil spill that occurred before you purchased the property, you will not be insured either. Same thing if you carry out work that violates zoning regulations or if you install a fence that encroaches on neighboring property.
Get insurance, but at what cost?
Lawyer Sylvie Patenaude emphasizes that title insurance represents a moderate cost compared to the significant fees that you may have to pay to resolve certain situations. For example, one of his clients avoided an expense of $24,000 for unpaid taxes by the previous owner (the seller) by purchasing insurance of approximately $600. This premium is paid in a single payment at the time of purchase and the protection remains valid for as long as you maintain an interest in the property.
The cost of the premium is determined based on the market value of the property at purchase, the desired coverage and the assessed risk. It varies from around $375 for properties under $500,000 to more than $500 for buildings worth one million dollars, according to Julie Lévesque, Quebec vice-president for Stewart Title Canada. You have the option of adding a clause to cover the increase in the value of your property over time.
How to subscribe?
You can contact an insurance company specializing in this type of product – including Stewart Title, First Canadian Title and Chicago Title – or an insurance brokerage. Only representatives authorized to sell damage insurance can offer title insurance, according to explanations from the Financial Markets Authority (AMF).
You also have the option of asking a lawyer or your notary to take the steps for you with an authorized insurer in order to choose the policy that best suits your situation. The notary will provide the insurer with information about the property which will be used to establish the insurance protections as well as the amount of the premium.
Before opting for title insurance, do not hesitate to seek advice from a lawyer to assess whether it meets your needs. Also take care to read the insurance contract carefully to check which securities are covered, as recommended by the AMF. If you are not satisfied, you can contact the Chambre des notaires du Québec or file a complaint with the AMF .
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