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Title Insurance – a Tool to Be Considered

Author: Joseph Jarjour

For the purchaser or mortgage lender of an immovable, the vendor’s or the borrower’s title are of utmost importance. Traditionally, a professional, either a lawyer or a notary, would perform a title examination; if problems were identified, and unless there was an agreement to correct them, the purchaser or the lender had to either abandon the acquisition or financing, or bear the risks relating to the defects discovered.

Title insurance, which was created in the United States at the end of the 19th century and introduced in Quebec in the nineteen nineties, is an interesting alternative to this approach. Even if no up-to-date search is conducted of the titles to an immovable, upon payment of a single premium, one can obtain protection against loss resulting from irregularities in the titles, including, for example, the lack of a certificate of location, encroachments, servitudes, zoning compliance and other defects of title. Another great benefit of this tool is the insurer’s commitment, against payment of a premium, to offer the same protection to prospective purchasers of the immovable.

Naturally, title insurance protects against certain risks, but it does not correct related title problems. It therefore does not always replace the actions or corrections that may be required. However, many purchasers now purchase title insurance, and most institutional lenders make it a financing requirement. In addition, informed purchasers ask from the start and against payment of a pre-determined additional premium for a lender policy to be issued for pre financing.

Lastly, considering the relatively complex technical aspects, the vast number of riders and exceptions as well as the particular way in which insurance contracts are drafted, legal assistance when negotiating title insurance greatly enhances the quality and extent of the coverage obtained.

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