Buying a home in the Lower Mainland is a major milestone, but the closing process comes with a lot of new terminology. One term you will likely encounter when reviewing paperwork with your legal professional is title insurance.
By the end of this guide, you will understand exactly what title insurance is, what risks it covers, and how much you should expect to pay for it in Metro Vancouver. You will also learn how it’s different from other insurances, why it’s needed, and how to get it. Let’s dive in.
What Is Title Insurance in BC?
Before we review what title insurance is, we must understand what a title is, because when you buy real estate, you are buying the “title” to the property. The title is basically your legal right to own, use, and eventually sell the land and the home, which is something you can insure.
Title insurance is a specialized type of insurance policy that’s designed to protect you, as a property owner and your associated lenders, against financial losses related to disputes over property ownership.
It’s main purpose for protection is protecting you against issues that happened in the past but remain undiscovered until after you complete the purchase.
Example
Let’s say you purchase a detached home in Richmond, BC, only to find out months later that a distant relative of the previous owner, from Kelowna, claims they have a legal right to the property. Without title insurance, you could face costly legal battles or even lose your claim to the home. Which could turn into a major headache down the road.
There are tons of examples where title insurance was used and needed.
Title Search vs. Title Insurance
Now, don’t get title insurance confused with a title search.
During the closing process, your lawyer or notary will conduct a title search through the BC Land Title and Survey Authority, to review the public records to identify known issues, such as existing mortgages, registered easements, or builders’ liens that need to be cleared before you take ownership.
A great Realtor will help you cover this during your home buying process, too.
A title search is excellent for uncovering documented problems, but it cannot find hidden issues that are missing from the public record. This is where title insurance steps in. Title insurance protects you against those hidden or past problems.
Is Title Insurance Mandatory in BC?
If you are buying a home in BC without a mortgage, luckily your title insurance will be optional..
However, if you’re financing the property through a lender anywhere in the Lower Mainland, you’ll need to get title insurance. Most major Canadian banks and mortgage lenders require a lender’s title insurance policy as a strict condition for financing.
Owner’s Policy vs. Lender’s Policy
Understanding who the insurance actually protects is vital for new buyers.
Lender’s Policy
A lender’s policy will protect the financial institution or lender that issued your mortgage and financing. If a title dispute threatens the property’s value, the lender’s investment is secure.
Owner’s Policy
An owner’s policy protects your financial investment and equity in the home. It covers your legal fees and potential losses if someone challenges your ownership. This coverage lasts for as long as you (or your heirs) own the property.
Many buyers make the mistake to believe that the lender-required policy automatically protects their own equity, but it doesn’t.
Recommended Resource: Red Flags to Watch Out for When Buying a Home in Metro Vancouver
What Does Title Insurance Cover in BC?
There are many ways a title insurance policy can protect you and your lender.
Title Fraud and Identity Theft
The first big one is real estate fraud is a scary topic for any homeowner. However, it’s easier to happen than you think. Title fraud can happen when someone steals your identity and illegally sells your property or takes out a mortgage against it.
BC has specific legal nuances regarding fraud. In many cases, if a fraudster successfully sells your home to an innocent third-party buyer, the innocent buyer may actually get to keep your home, which sounds crazy, but it can leave you completely exposed without this policy.
Title insurance steps in to cover the extensive legal fees required to fight the fraud and can compensate you for the financial loss if the title cannot be restored to your name.
Hidden Defects and Past Issues
When you buy a home, you inherit its history. Title insurance covers a broad range of past issues caused by previous owners. Examples include:
- Unpaid debts: Property taxes, strata fees, or municipal utility bills left unpaid by the previous owner.
- Work orders: Unknown municipal orders demanding the repair of an illegal suite or an unsafe structure.
- Encroachments: Finding out that the previous owner built a garage or fence that crosses the property line onto a neighbour’s land.
- Permit issues: Discovering that major renovations were completed without the proper municipal permits.
New Builds and Presales
It is a common misconception that brand-new homes have a perfectly clean history. Title insurance absolutely applies to new builds and presales in Metro Vancouver. Even new developments can face builders’ liens from unpaid tradespeople, zoning compliance errors, or boundary mistakes made during construction. Even big builders can run into troubles
There are other nuanced ways where title insurance can protect you, but as you can see, it’s important to have this coverage in case of the worst.
What Title Insurance Usually Doesn’t Cover
While this insurance is useful, it has specific use cases and may not cover every problem related to your property purchase. While exclusions vary slightly depending on your specific provider, most policies won’t cover:
- Known defects: If you knew about an unpermitted deck before you signed the purchase agreement, the policy will not cover the cost to legalize it.
- Environmental hazards: Issues like soil contamination, radon gas, or asbestos are generally excluded.
- Future changes: If you build a fence that encroaches on your neighbour’s yard after you take possession, your policy will not protect you from the consequences of your own actions.
- Zoning changes: Changes to municipal zoning bylaws that restrict how you can use the land.
How Much Is Title Insurance in BC?
The great thing about this associated cost when buying is that it’s a one-time premium paid right at closing. There are no monthly or annual renewal fees.
This cost for title insurance tyically ranges from $150 to $1,000 depending on the insurance provider and the property type.
Recommended Resources: The Guide to Closing Costs in BC When Buying a Home
Is Title Insurance Worth It in Metro Vancouver?
When you look at the incredibly high value of real estate in Metro Vancouver and the small cost that’s associated with the purchase, it’s easy to justify. On top of that, sometimes you cannot avoid this added cost if your lender requires it.
Title Insurance vs Home Insurance
Comparatively, title insurance is also different than your house or condo insurance policy. It’s very common to get these confused.
What makes home insurance different is that it protects you from physical losses that can happen in the future. For example, if a pipe bursts and floods your kitchen next year, or if a windstorm damages your roof, your home insurance steps in.
Title insurance protects your legal ownership from events that happened in the past but are only discovered today.
Many people get both, as home insurance is typically required, as well, if you have a lender.
How Do You Get Title Insurance in BC?
The process of getting title insurance is very hands-off for the buyer. It is usually arranged entirely by your lawyer or notary public during the closing process, so you can sit back and relax. They’ll assess your transaction and explain your coverage options. Then, order the policy on your behalf, and roll the premium into your final statement of adjustments.
Recommended Resource: Deposit On A Home in BC: Guide for New Home Buyers
Frequently Asked Questions
Is title insurance worth it in BC?
It’s definitely worth it, especially given the multi-million dollar property values in the Lower Mainland, a title dispute could ruin you financially. The one-time cost of a few hundred dollars is worth it for the protection it provides.
Do you need title insurance when buying a condo in BC?
While not legally required for cash buyers, it is highly recommended. It’s especially recommended if you’re buying property that has a Strata. The exposure can bleed into things like an undisclosed special assessment, Form B errors, and unpermitted internal renovations completed by previous owners.
Does title insurance replace a land survey in BC?
This is a great question, but no, title insurance does not replace a land survey. A survey is much different in that it physically maps out the exact boundaries of your lot. They both have very different purposes.
Can I buy title insurance after closing?
Technically, yes, you can purchase an existing homeowner’s policy after closing, if you’re buying your home in cash. However, it is significantly easier and more cost-effective to arrange it through your legal representative during the initial closing process.
Final Thoughts
Understanding title insurance is an essential part of becoming a confident homeowner in British Columbia. If you are preparing to buy a home in Metro Vancouver and want to ensure your closing process is smooth and fully protected, we invite you to contact MVL today. Our team is ready to guide you through every step of your real estate journey.
