Title Insurance Revisited

Title insurance has now become such an essential part of a real estate transaction in Ontario. It is crucial to know what a standard policy in a purchase transaction covers; and more importantly, what it does NOT cover.

What is title insurance?

Title insurance protects your ownership interest (i.e. title) of your property from losses incurred as a result of unknown title defects or other covered matters that exist at the time of your purchase, but are unknown to you at that time.

~Stewart Title Guarantee Company

What does title insurance cover?

  • Someone else claiming an interest in your title
  • Fraud, forgery and false impersonation affecting the validity of your title
  • Existing liens against the title including realty tax arrears and municipal utility charges
  • Violations of municipal zoning by-laws
  • Many forms of encroachment onto the property or adjoining land
  • Existing work orders
  • Lack of legal access to the property
  • Unmarketability of land due to adverse matters that an up-to-date survey/real property report (RPR)/Building Location Certificate would have revealed

What is not covered?

  • Title or other defects created, allowed, or agreed to by you
  • Title or other defects known to you but not Stewart Title prior to the policy date
  • Environmental matters
  • Native land claims
  • Matters that result in no loss to you
  • Matters disclosed in home inspection or building inspection reports obtained by you

Celebrating 20 years

Someone once said:

“Experience is a comb that life gives you after you lose your hair.”

If any of you has seen me, this statement cannot be more appropriate!!
With 20 years under my belt, I can safely say that I have seen pretty much everything there is to see as a real estate lawyer. With the wealth of experience I have gained over the years, from closing simple residential deals to complicated commercial transactions, it has made me a better lawyer by sharpening my advocacy and negotiating skills.

Here’s to another 20 years serving my community! Thank you for all of your support!

Matrimonial homes

A matrimonial home is the home where two people who are married are living, at the time of their separation. It is a well known fact that in the event of a separation, the value of the matrimonial home is equally divided between the parties. But did you know that the equal division of the home takes place even if your spouse’s name is not on title, and he/she has made no financial contributions to the property!

For example: Tina invests wisely for many years, and now owns her Burlington town home free and clear – no mortgage. She meets John. They fall in love, John moves into her home and they get married. After two (2) blissful years of marriage, Tina and John grow apart, and separate.

In this fictitious scenario, The Family Law Act provides that John will be entitled to half of the value of Tina’s house, even though he has made no financial contributions to the purchase or upkeep of the property, and is not on title. All other premarital assets owned by Tina will be deducted from the equalization of net family property. However, the matrimonial home is the exception to the general rule.

What is the lesson to be learned from this for Tina? Before you move in with someone, ensure that a Domestic Agreement is duly signed. The Domestic Agreement, whether it is a cohabitation agreement or marriage agreement, will exclude the matrimonial home from the equalization of net family property thus saving you tens of thousands of dollars in the long run!

Another benefit of a will

Remember, if you have minor children, you have a right to appoint a guardian in your Will who will take care of your children upon the deaths of you and your spouse. If you fail to write a Will and appoint a guardian for your minor children, a court will appoint a guardian for them and, chances are, the guardian will probably not be someone you would choose. Be sure to prepare your Wills, especially if you have minor children so that you have some input on who will end up looking after your children.

Where there is a Will… there are relatives

Many people mistakenly think they don’t need a Will. They assume that if one spouse dies, the other spouse will automatically inherit everything. Unfortunately, this is often not the case.

According to the provincial succession laws, in the absence of a Will, a surviving spouse may automatically inherit only the first $200,000 dollars of the estate. Any surplus would have to be shared with the children or other family members.

Common law spouses are even worse off in a situation where there is no Will. For example, in Ontario, even if you and your common-law spouse have been living in a common-law marriage for 40 years, the surviving spouse would not automatically inherit anything, since they may not be considered “spouses” under the provincial succession laws when it comes to inheriting an estate!

Take the time to put a carefully written will in place, for the ones you love the most.

Beware the Doctrine of Merger

This doctrine states that, upon closing, the agreement and the parties’ rights therein are “merged” in the deed. This means that after closing, the parties can no longer rely any warranties or representations of the original contract.

Make sure that your Offer expressly states that a warranty or a representation will survive the closing, otherwise this doctrine can preclude you from doing anything when a promise is not fulfilled or a representation is false.

The Essence of Time

The clause “time is of the essence” is treated as a boiler plate clause with little or no significance. If a Buyer delivers his deposit cheque past a deadline or if the closing takes place even 10 or minutes past the time for closing, most often the thinking is that this should not be a “big deal” – after all, the buyer has the intention and the good faith to complete the transaction and that it would be unjust or inequitable to insist on strict compliance with the deadline.

While some Courts have taken this approach and have allowed some “grace period” in these situations, overall the law is quite clear regarding “time of the essence clause” – if a buyer, for example is late in delivering his deposit cheque or if one of the parties is unable to meet a certain deadline under the Agreement, Courts will almost always enforce this clause to the detriment of the late party and allow the innocent part to terminate the agreement.

So please never underestimate the importance of this clause… and also remember to insert this clause when preparing any amendments to an Offer, so that time continues to remain of the essence.

Do You Need a Cohabitation Agreement?

Although in many cases the question of when you are considered to be married at common law depends on the circumstances, in Ontario, you are considered to be in a common law relationship if you and your partner have lived together for 3 years, or have a child and a relationship of some permanence.

What most people in a common law relationship don’t realize is that they do not have the same built in protections as married couples when it comes to asset division upon the termination of their relationship.The biggest misconception people have about cohabitation is that the property they live in will be split equally if the relationship ends. This is not true. The rule of 50/50 asset division applies only to married couples. If you are in a common law relationship with all of the assets, including the home, in the other spouse’s name, the only way you might succeed in claiming an interest in these assets is through a very expensive court case.

So, if you are planning to move in with a partner—or are already living together—be sure to have a cohabitation agreement in place laying out the terms for division of your assets and spousal support in case your common-law relationship comes to an end.

Use of power of attorney when buying

With the growing fears of title and mortgage fraud, most banks and title insurance companies will not allow a closing to take place under a Power of Attorney unless and until they have vetted this document to make sure it meets their requirements. In fact, some lenders now days will simply not even recognize a Power of Attorney and will expect the buyer to be present to complete the transaction.

Accordingly, in case you are dealing with a buyer who will be absent for her closing, make sure that she takes the time to meet with her lender prior to her departure and confirm not only that the lender will accept a Power of Attorney, but also that this Power of Attorney is precisely in the form and content of what the particular lender will approve.

When you assume…

After several months of trying, John Sellerski finally signs an agreement to sell his home by allowing Susan Buyaranandan to assume his existing mortgage with TD Bank. On closing, Sellerski’s lawyer contacts TD Bank to get a written release so that Sellerski will no longer be “on the hook” for this mortgage. The bank, having no incentive to release Sellerski, will probably deny the request.

As a result, Sellerski will have no choice but to close the transaction while remaining liable for the mortgage, even though it has been transferred to Buyaranandan. If Buyaranandan ever defaults under this mortgage, the bank has every right to come after Sellerski.

How to avoid this? If the offer signed by both parties contains only a standard clause making it a condition that Buyaranandan assumes Sellerski’s mortgage, be sure to add a provision making the offer also conditional on Sellerski getting a release from the bank for that mortgage. That additional non-standard clause will also protect Sellerski’s interests.