Understanding Title Insurance And Conveyancing Risks In British Columbia

What Is Title Insurance?

Title insurance is an insurance policy that protects homeowners and lenders against the loss of property titles. It deals with the legal ownership and use of your property.

It is worth noting that title insurance is different from home insurance. While home insurance covers physical damage to your house, title insurance covers loss of your ownership. It involves various legal complications that may affect the property’s title transferred to you.

There are two major types of title insurance policies owner’s policy and lender’s policy.

The owner’s policy protects the ownership rights of a homebuyer as long as they own the property. On the other hand, the lender’s policy protects the mortgage lender’s interest in the property against which they provide a loan to their borrower.

Title Insurance Risks And Limitations

Title insurance covers the following for homebuyers and mortgage lenders:

• Fraudulent selling and forgery
• Title defects
• Property encroachments
• Zoning non-compliance
• Incomplete or unpermitted work
• Survey errors

However, most property title risks in Canada are associated with the aspects that title insurance doesn’t cover.

Here is what your title insurance will not cover:

• Issues you knew about before buying the property
• Environmental complications arising after the purchase (contaminated soil, etc.)
• Indigenous land claims
• Zoning change after purchase
• Decline in property value after purchase

While title insurance offers sufficient protection, it is not an alternative to due diligence. Work with your property and conveyance lawyer to conduct thorough due diligence before finalizing your deal.

What Is Conveyancing?

Conveyancing is the legal transfer of property ownership. It is carried out with the help of qualified conveyancing lawyers or notaries.

Here is what conveyancing typically involves:

• Detailed property title review
• Identifying any charges, encumbrances, or liens
• Drafting and registering legal documents
• Ensuring that taxes and utilities are paid before the deal
• Handling fund transfers, including deposits and mortgage proceeds

Common Conveyancing Risks In BC

The conveyancing process in BC involves two major risks – title-related and transactional.

Here are some of the most common conveyancing risks involved in property transactions in BC:

Title Defects

These complications are related to a property’s legal ownership. Your conveyancing lawyer in BC will focus on the following major title defects to ensure safe transactions:

• Boundary disputes
• Undisclosed easements
• Judgements of liens against the property you want to buy
• Errors in older surveys or deeds

If these defects remain unresolved, they may cause you trouble in refinancing, selling, or even properly using the property.

Fraud And Forgery

Real estate fraud is common and has been a nuisance for decades. Scammers often impersonate owners to sign deals for properties they do not own.

Work with your property lawyer to conduct due diligence and multiple checks before finalizing your deal and transferring funds.

Outstanding Fees Or Charges

Many property buyers in BC have realized that the sellers have left behind unpaid property taxes, condominium fees, utility bills, and other charges. Paying these bills and charges will become your responsibility if you do not check, disclose, and address these matters before buying a property in BC.

Zoning Or Permit Issues

The property you want to purchase may no longer comply with the ongoing local zoning laws. The owner may also have made renovations without obtaining the necessary permits. If you discover such violations later, you will need to pay for remediation and penalties. You may also be asked to remove the installations or improvements made without obtaining the required permissions.

Administrative Errors

Even the smallest administrative errors, such as a typing mistake or missed signature, can affect your property ownership rights. Moreover, correcting such mistakes takes a lot of time and money. Your conveyancing lawyer in BC will look for such errors and fix them before you finalize your deal and sign your agreement.