Why is a Title Search Important?
First time homeowners in Canada will hear many different terms throughout the home buying process that they may not be familiar with. There are a lot of documents to be signed and processes to be completed. One of the most important steps in the home buying process is a title search, which will identify any issues that could prevent the buyer from taking possession of the property.
What is a Title Search?
In Canada, ownership of land, including the title registered to the owner, is publicly recorded at the Land Title Office (LTO). A title search is a process in which all documents relating to a piece of real estate property are gathered and examined to make sure that:
- The seller has the legal right to own and sell the property.
- There are no third parties with a claim to the property that the current owner may be unaware of, such as liens, unpaid taxes, or pending lawsuits.
The title search is critical because it confirms that there are no issues that could affect the transfer of ownership, and the buyer will be the sole owner of the property once the purchase is complete.
When Does a Title Search Happen?
The title search is performed during the due diligence period of any real estate transaction in Canada. Due diligence is the fact-finding portion of the home buying process in which the buyer investigates the details of the property to make sure the transaction is sound. This process varies depending on the property, but some things that may be involved in the due diligence period other than the title search include:
- Physically inspecting the property, including environment and structure inspections.
- Checking the property’s zoning and land use laws to make sure it can be used for the buyer’s intended purposes.
- Checking the seller’s covenants, conditions, and restrictions (CC&Rs) relating to the property.
- Reviewing leases to confirm information on any tenants in the property, if applicable, such as their term length and income.
How Long Does a Title Search Take?
The title search can take as little as a few hours or as much as five days to complete, depending on a few factors:
- The amount of documents that need to be reviewed and how readily available they are.
- The age and history of the home.
- The presence of any unresolved liens or other title issues.
- The nature of the property and the transaction.
- The schedule of the title company or freelance title searcher performing the search.
What Information Can Be Uncovered in the Search?
A title search will uncover the following information on a property:
- The legal owner’s name and address.
- Information on the type of ownership, including whether there are any tenants in the property.
- The date of title registration.
- Information regarding taxes on the property.
- An official legal description of the land.
- Information on any third party interests in the property, including but not limited to:
- Liens, such as builder’s liens or tax liens
- Legal judgments against the property
- Restrictive covenants
Do I Need Title Insurance?
Your home is likely to be your biggest expense and investment, and title insurance is an important step in protecting it. For a one-time cost, your property rights to your home will be protected from unforeseen problems for as long as you or your heirs own it.
Title insurance protects your property from any potential unknown defects or problems that may arise in the future. This includes issues that even an extensive title search would not uncover, including:
- Forged, falsely executed, or improperly recorded legal documents, including deeds, mortgages, or wills.
- A previously unknown heir or a former owner of the property claiming ownership of the property.
- Errors in tax records.
- Any legal action pending against the property.
While a title search may seem like another step in an already complicated process, it will give you the peace of mind of knowing that your property is truly yours once the purchase is complete.
Kevin McTigue of JSMT Media is a copywriter for several websites in various industries, including Scott Title Services, a New Jersey based title insurance company.