You can insure many things: your cat, your credit card balance, your teeth, your mortgage payments. But faced with the wide range of protections offered, it is not always easy to assess their relevance. Title insurance is no exception.
You don’t know what it is? It’s normal. This type of insurance is one of the most misunderstood in Quebec.
Basically, title insurance protects homeowners against title issues. This official document certifies that your house does indeed belong to you and describes the premises. At first glance, it may seem strange to insure the content of a document, I agree. But this type of policy protects against a host of situations that can be costly.
“Over the years there have been a lot of urban legends about what title insurance does and does not cover. There was misunderstanding. Some notaries refuse to use this product. It is still misunderstood, but there is progress,” explains Brigitte Lemieux-Beauchesne, notary and vice-president responsible for national underwriting at the Chicago Title Insurance Company, a specialist in the field.
According to the brokerage firm ABRI, only 4% of real estate owners in Quebec have purchased title insurance to protect themselves, compared to 92% elsewhere in North America. A huge gap which is mainly explained by the work of notaries, a profession absent elsewhere in the country and in the United States.
There are various types of policies, but the most common is that which the owner can obtain at the time of the purchase of the building, specifies the AMF.
This product is “complementary” to the work of notaries since it covers “many aspects that are not part of their usual verification process”, such as obtaining permits before the work, argues broker J. Gérard Fortin & Associates, which has been selling title insurance since January.
In fact, if you learn that the former owner of your house had an extension or a terrace built that does not comply with municipal regulations, you could file a claim with the insurer to cover your legal or demolition costs. and rebuilding. The same applies to disputes with neighbors regarding encroachment, easements or acquired rights.
“But one of the biggest problems is identity theft and fraud. No one is immune, says the vice-president of J. Gérard Fortin & Associés, Vincent Fortin. Just for this coverage, it’s worth it. Typically, scammers impersonate people whose property is mortgage-free, or nearly mortgage-free, refinance it, and push themselves with the money they get from the bank.
Houses have even been sold without the knowledge of their owner, a situation which particularly affects the elderly who spend the winter in the South, indicates broker Louis Cyr, nicknamed the strong man of insurance. “Fraud is the biggest cause of claims,” says the man who has been selling title insurance since 2019.
Chicago Title Insurance Company is currently seeing an upsurge in fraudulent mortgages in Ontario. Quebec would be spared, according to the Chamber of Notaries, since its members “block many possibilities of fraud”, indicates its president, Hélène Potvin. Words that startled Louis Cyr. “We have the same fraud rate in Quebec as in Ontario. Bandits are everywhere and the scheme works everywhere. »
Title insurance, purchased through a notary at the same time as a new house, also provides protection against legal construction hypothecs, when the contractor has not assumed his financial responsibilities. “The notary cannot certify that all the subcontractors’ invoices have been paid. He has no way of doing it,” says Brigitte Lemieux-Beauchesne.
On the Radio-Canada show The bill, in 2018, the former president of the Chambre des notaires François Bibeau explained that its members were not mandated to carry out this type of verification. He was reacting to the story of homeowners being forced to pay twice for their homes due to a pile of legal mortgages.
Most disturbing is that the report showed the deeds of sale provided to these unfortunate owners. It read black and white that “all architects, contractors, sub-contractors, material suppliers and workers were paid in full during the erection of the buildings”.
At the Chambre des notaires, even though legal hypothecs have been denounced for a long time, we do not recommend automatically taking out title insurance.
“It’s limited. You have to be careful, because there are a lot of exclusions,” emphasizes Hélène Potvin. To make an informed decision, she suggests consumers talk to a notary.
But some professionals express reservations about this product from the United States. This is the case of Pierre Péladeau, for whom title insurance is downright “useless because of the verification obligations” incumbent on him. When buying a new home, he gives as an example, he prefers to protect his clients by withholding part of the payment due to the contractor for a certain period of time.
However, during his career, Louis Cyr has seen that notaries make mistakes like everyone else. And that it is extremely difficult and costly for a consumer to succeed after filing a complaint with the Chamber of Notaries.
Unlike home insurance, title insurance is payable only once and remains valid for as long as you own. There is no deductible when making a claim.
Insuring a $500,000 new home costs around $400. It is then necessary to go through a notary and the latter cannot receive a commission. It may, however, charge fees for research and management. Owners of “existing” homes will pay around $300 through a broker.
According to the Association of Mortgage and Title Insurance Companies of Canada (ACAHTC), title insurance has gone from “an obscure insurance product to a standard product” in 15 years. But in Quebec, it is still in the shadows, so the evidence to support its effectiveness, unfortunately, is lacking.