Title Insurance and Surveys, by Lorne Shuman
With the advent and popularity of title insurance, there is a widespread belief that it is no longer necessary to obtain a survey for a residential property purchase. This column will examine this belief and explain the differences between survey coverage under a title insurance policy and a survey of the property.
A survey is a document prepared by an Ontario land surveyor using calculations when viewing the property as compared with the registered title documents. The survey will show the measurements, dimensions and boundaries of the property. It also illustrates the location of the buildings on the land along with the improvements to the land such as fences, pools, hedges, easements and rights of way in favour of utility companies. Usually an Agreement of Purchase and Sale will provide that the seller agrees to provide a survey of the property to the purchaser, if available. If no survey is available, the purchase may wish to consider whether it wishes to pay to have an up to date survey prepared by a land surveyor which usually costs between $800-1000.
Title insurance insures title or ownership as of the closing date and indemnifies the purchaser for certain losses under the policy. Title insurance provides coverage for many risks which are not available with a lawyer’s traditional opinion on title. Examples of these risks are unpaid liens, zoning contraventions, unpaid final water bills and most importantly, coverage for fraud and forgery. With respect to survey coverage, most policies offer protection for losses suffered as a result of defects that would have been revealed had the purchaser obtained an up to date survey of the property. In theory, the protection of a title insurance policy should place the insured purchaser in the same position as if it had obtained an up to date survey of the property. This is not entirely accurate. In fact, title insurance is not always a replacement for a survey of the property. For instance, a title insurance policy cannot reveal the dimensions of the property. It cannot tell you whether or not the swimming pool, fences or any other additions are built within the lot lines. It cannot tell you the extent of your title or reveal that existence of rights of way or easements.
If you are arranging a mortgage as a part of your purchase, virtually all lenders will accept a title insurance policy in place of an up to date survey of the property. For a modest one-time premium, title insurance will insure your title for as long as you own it. From a value perspective, title insurance is inexpensive and provides peace of mind coverage to protect likely your largest investment.
Title insurance provides some coverage for survey issues, however, it is not always equivalent to obtaining as up to date survey. Most policies offer protection for an adverse circumstance that would have been revealed by an up to date survey such as an encroachment (except for boundary walls or fences). However, the response of the title insurance company to a survey related claim may not fully compensate the insured purchaser. This is why obtaining a survey depends on the needs and wants of the purchaser. If the purchaser intends to build on the property (i.e. addition, garage, or swimming pool) and needs to know whether or not the future plans are doable, then obtaining an up to date survey of the property is strongly recommended.
Title insurance offers significant benefits and it is always recommended that purchasers obtain it because of the benefits. It costs less money than obtaining an up to date survey of the property. However, as this column indicates, there may be circumstances where a purchaser should consider obtaining both a title insurance policy and an up to date survey of the property.
Courtesy: Lorne Shuman, Shuman Law