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Title Insurance in Winnipeg Real Estate Transactions: Why You Need It and What It Covers

By Real Estate

When buying a home in Winnipeg, one of the key expenses you’ll encounter is *title insurance*. If you’re new to real estate or unfamiliar with the process, title insurance might sound like just another cost piled on to the already hefty bill of buying property. However, it plays a vital role in safeguarding your investment. In this blog post, we’ll delve into what title insurance is, why your bank requires it, and what it covers.

What is Title Insurance?

Title insurance is a form of protection for homeowners and lenders against issues related to the ownership of a property. It ensures that you, as a property owner, have a clear and legal title to your property. This type of insurance is particularly useful because it addresses legal risks that could affect your ownership, such as existing liens, encroachments, or defects in the title itself.

The best part? Unlike other forms of insurance, title insurance is a one-time premium paid at the time of closing, and its coverage lasts for as long as you own the property. It’s arranged by your lawyer so that you can be certain that it covers what your bank requires, and so you don’t need to go out and buy it on your own.

 

Why Does Your Bank Require Title Insurance?

Most Canadian banks and lenders mandate that borrowers purchase title insurance as a condition for financing. But why?

Lenders want to ensure that the property they are helping you finance has a clear title. If issues arise—such as an undisclosed lien, a prior claim on the property, or a boundary dispute—it could jeopardize your ability to repay the mortgage. In the worst-case scenario, these complications could result in the loss of ownership altogether.

For the bank, title insurance provides a layer of security. It protects the lender’s financial interest in the property should any title-related issues arise. Therefore, while title insurance is beneficial for you as a homeowner, it’s also a requirement imposed by lenders to mitigate their, and your, risk.

What Does Title Insurance Cover?

Title insurance in Canada covers a broad range of potential risks and legal issues and it’s important to read your specific policy to see what it does, and doesn’t, cover. Here’s a breakdown of some of the most important areas where title insurance may offer protection:

1. Fraud and Forgery:

Fraudulent claims or forged documents can complicate your ownership. For example, someone might fraudulently sell your property without your knowledge. Title insurance may protect you financially if you become a victim of real estate fraud.

2. Errors in Public Records:

Mistakes in public records, like missing or incorrect signatures on documents, can create gaps in the chain of ownership. Title insurance may step in to resolve these issues by covering the costs to defend your ownership rights.

3. Encroachments and Easements:

Your neighbor’s garage might be a little too far over the property line, or you may find that part of your driveway is technically on another person’s land. These situations can cause legal disputes. Title insurance may help address and resolve such boundary issues.

4. Existing Liens Against the Property:

If the previous owner had unpaid debts—such as property taxes or unpaid contractor bills—those liens could transfer to you upon the purchase of the home. Title insurance may ensure that you won’t be on the hook for the debts of the previous owner. The largest two risks in Winnipeg are unpaid water (where new owners have seen unpaid bills as high as $87,000!) and when the previous owner did work on the house but didn’t pull permits.

5. Survey and Zoning Issues:

Title insurance may be able to help if the property was built in violation of local zoning laws, or if a new survey reveals discrepancies in property boundaries. Coverage includes legal fees and other costs necessary to remedy the problem.

6. Unmarketability of Title:

If there’s a problem with the title that prevents you from selling the property later, title insurance may help with legal costs or compensations related to the issue.

 

What Title Insurance Doesn’t Cover

While title insurance offers robust protection, it doesn’t cover every potential issue related to homeownership. For example, it won’t cover damages from natural disasters, home maintenance problems, or any title defects that arise after the policy is purchased. It’s essential to understand that title insurance is meant to protect against past issues with the title—not future risks. The biggest question that we get is around knob and tube wiring. Your fire insurance may not like knob and tube, but title insurance won’t cover things like that – if the city isn’t going to make you change it, title insurance likely isn’t going to cover it.

Is Title Insurance Worth It?

Given the relatively low cost of a one-time premium (often ranging between $300 and $600 in Canada), title insurance provides substantial peace of mind. It helps shield homeowners from a wide array of financial risks that could arise from defects in the title. Without it, you could face expensive legal bills or even the loss of your property in the event of a claim against your ownership.

In Conclusion

Title insurance is an essential but often overlooked part of Canadian real estate transactions. It ensures that you can enjoy your home free of legal complications stemming from past ownership issues. Whether required by your lender or voluntarily chosen for your protection, title insurance is a wise investment in safeguarding your most significant financial asset.

When considering your next real estate purchase, make sure to review your title insurance options with your lawyer thoroughly. With this added protection, you can confidently navigate the Canadian property market and protect your ownership rights long after the closing papers are signed.

With a clear understanding of why your bank requires title insurance and what it covers, you’ll be better equipped to make informed decisions about your real estate transactions.

Find the Answers You Need From a Real Estate Lawyer

By Real Estate

When it comes to buying or selling your house, you need a trusted team to answer all of your questions

Real Estate Law: Get Advice Tailored to You

Buying and selling property can be complicated, and you want to make sure you have the right legal help. Our real estate lawyers provide you with the answers you need to make the right decisions. With experience in all areas of real estate law, our lawyers are here to help you navigate the complexities of property law.

Affordable Fees, Transparent Pricing

At our firm, you never need to worry about hidden fees or surprise charges. We provide transparent pricing and affordable fees so you can make decisions with confidence. Most of our prices are available on our website, and if our fees are going to fall outside of that, we’ll let you know as soon as we can. Our lawyers will take the time to explain the process and answer all of your questions in plain language, so you can make informed decisions.

Get the Answers You Need Now

Don’t wait until after you’ve bought or sold your property to get the help you need. Our real estate lawyers are here to assist you with your property law questions and provide you with the advice you need to make the best decisions when dealing with your largest asset.

Give us a call to get the answers you need from your real estate team

Small house on a table with plans and a piggy bak

Top 5 Tips for Homebuyers

By Real Estate

There are several steps you can take to save time and money when purchasing a home in Winnipeg. Here are five things you need to know when buying a home:

 

  1. Understand closing costs.

In most cases, your lawyer will collect the balance of the purchase price, fees, and disbursements up front, directly from you.  If you are buying and selling at the same time, you may need to arrange bridge loan financing with your lender.

Closing costs are explained in more detail in this article.

 

  1. Secure your home insurance.

An insurance binder is a one-page document that proves that you have placed insurance on the property. Your lender will require you to have an insurance policy in place prior to possession. Ensure that your insurer has sent your “insurance binder” to your lawyer at least three days before possession. The “loss payable” must be your mortgage lender.

 

  1. Arrange financing two weeks prior to your possession date.

Once loan documents have been signed with your mortgage specialist, your lender will send mortgage instructions to your lawyer. Your lawyer can only move forward with your deal after they have mortgage instructions. A delay in mortgage instructions could result in additional rush fees. If your lawyer receives mortgage instructions early, it will be much easier for you to schedule an appointment at a convenient time, and you will save money on legal fees.

 

  1. Choose your lender carefully.

From credit unions, to banks, to broker-channel lenders, there are a wide array of institutions who will lend you funds to buy your home. Shop around, not just for your interest rate, but also for less obvious but equally important terms such as pre-payment privileges and penalties, renewal fees, and front-end servicing fees. You may want to specifically ask if additional documentation will need to be signed with your lawyer. Law firms will often charge additional fees on home purchases where significant additional paperwork is required. Remember that you will be dealing with your lender for the full term of your loan, and early experiences may be a telling sign.

 

  1. Be available to pick up keys.

Depending on the specifics of your transaction, you may need to pick up the keys to your new home on the business day before the possession date. Make sure you are available to swing by your lawyer’s office during regular office hours, or that you have made alternate arrangements for key pick up.

 

Being well-prepared and well-informed on all aspects of your purchase is key. Make sure you have a trusted team of professionals to guide you through the process.

If you have any questions, or wish to inquire about our real estate services, please do not hesitate to contact our office at 204-977-1706 ext. 8, and we would be more than happy to help you.

 

D. Johnson

Closing Costs Demystified

By Real Estate

When buying a home, you will need to bring money to your lawyer before the possession date to close the deal. This money is commonly called “closing costs.” The funds will need to be provided to your lawyer by certified cheque or bank draft.

Your lawyer will send you a detailed Estimate of Closing Costs after they receive mortgage instructions from your bank or credit union. However, understanding closing costs in advance will help avoid last-minute surprises.

Closing costs are made up of 3 parts, the balance of the purchase price, legal fees, and disbursements.

 

  1. Balance of Purchase Price

 

The balance of the purchase price is calculated using the following formula.

Purchase Price MINUS Initial Deposit on House MINUS Mortgage Funds being provided by the bank or credit union PLUS OR MINUS Adjustments

Example:


Purchase Price: $250,000.00

MINUS Initial Deposit: $10,000.00

MINUS Mortgage Funds: $200,000.00

PLUS Adjustments – Annual Property Taxes ($3,650.00) paid in full for year and prorated to possession date of September 22 (100 days): $1,000.00


Balance of purchase price: $41,000.00

 

Mortgage Funds – If there are additional fees (for example: mortgage insurance premiums such as CMHC, appraisal fees, or servicing fees), these fees will be taken off at the bank or credit union, before your lawyer receives the funds.

Adjustments – No matter what date taxes are due, they are adjusted for the entire calendar year, as of the possession date. Depending on whether the vendor has paid the taxes, you will either give or receive a credit. Additional adjustments beyond taxes may apply if you are purchasing a condo, rental property, or new build home.

 

  1. Legal Fees

Fees represent the amount charged for legal work and they will vary based on the particulars of your transaction.

 

  1. Disbursements

Disbursements are out-of-pocket costs that your lawyer will pay as part of the transaction.

 

  • Registration Costs are paid to the Government of Manitoba. As of 2021, it costs $109 to register the Transfer and $109 to register the Mortgage.

 

  • Title Insurance protects both you and your mortgage lender. It is usually required by the bank or credit union when you are getting a mortgage. The cost is mostly determined by the purchase price of your home and the amount of your mortgage.

 

  • Searches are required to investigate the title at Land Titles and the tax account. You are only charged for the actual number of searches conducted.

 

  • Couriers are used to deliver documents and cheques. Again, you are only charged for the actual number of courier deliveries called.

 

  • Administrative costs such as photocopying, software transaction charges, file storage, and postage are charged differently by each firm. When choosing a lawyer, be sure to inquire about these types of costs, as they can quickly add up.

 

Taxes are applicable to fees and some disbursements.

 

Being well-prepared and well-informed on all aspects of your purchase is key. Make sure you have a trusted team of professionals to guide you through the process.

If you have any questions, or wish to inquire about our real estate services, please do not hesitate to contact our office at 204-977-1706 ext. 8, and we would be more than happy to help you.

 

D. Johnson