Real Estate is a topic that you can’t seem to escape in Toronto. Whether it’s as a discussion at your latest social gathering, on the news at CP24, or in the latest version of Toronto Life, we are seemingly inundated with news about Real Estate, and familiarizing with the process. As such, there’s very little about the market the average person doesn’t know about, to at least some degree. However, there’s one subject that through my discussions and work seems to be very misunderstood by both newcomer homebuyers and seasoned folks alike. That is the Title Search.
When you’re embarking on the journey of buying or selling a property in Toronto, the title search is a crucial process. As unknown as it is to many, a title search is equally vital. A title search can reveal hidden issues in a home, and protect one’s investment. Sounds important? It is. As such, it’s critical everyone understands what it is and what the implications of it are, but in my experience, very few are confident explaining what a title search is, and why we do it.
In this blog post, we’ll dive deep into what happens in a title search in Ontario real estate and why it’s so important.
What is a Title Search?
A title search is the process of reviewing historical records and legal documents associated with a property, which helps to understand the current state of its ownership. It’s conducted most simply to confirm that the seller has the legal right to sell the property, and further to ensure there are no outstanding claims or encumbrances that could affect a new owner’s rights.
What’s the Process?
In Ontario, title searches are typically initiated by the buyer’s lawyer. The process begins by accessing the records at the local land registry office, where all property transactions are recorded. Within this review, many things will be determined and uncovered:
- Property Ownership History: The title search first delves into the history of property ownership, going all the way back to the original grant from the Crown. This is done to ensure that the seller has the legal authority to transfer ownership (sell the property).
- Outstanding Liens and Mortgages: This part of the search uncovers any outstanding liens, mortgages, or debts associated with the property. Prior to closing, any and all of these must be settled before the sale can proceed.
- Easements and Rights of Way: The Title Search also identifies any easements or rights of way that may affect the property. In Toronto, this is common for parking associated with a property, often through laneways or mutual driveways. For example, a neighbouring property might have a right of way across another’s land for garage access purposes.
- Restrictions and Zoning: Title searches reveal any land use restrictions or zoning regulations that could impact the property’s intended use. This information is crucial for buyers planning specific developments, or hoping to use the purchased property for a different use than what is current.
- Encroachments: The search may uncover encroachments, where part of the property extends onto adjacent land or vice versa. These issues would need to be resolved to ensure a clear title.
Why Do We Do Title Searches?
A thorough title search is crucial for several reasons:
- Ownership Verification: As outlined above, it’s critical to confirm that the seller is the rightful owner with the authority to sell the property. Without this, the sale will almost certainly be invalid.
- Debt and Liens: Again, a title search identifies any outstanding debts or liens that must be paid off before the sale of the property can close. Ignoring these issues can lead to legal complications down the road, or a buyer assuming unknown financial obligations.
- Legal Compliance: The search ensures that the property complies with all local zoning and land use regulations, preventing future disputes or the need to rectify non-compliance with authorities or neighbours.
- Seller Transparency: In many cases, items uncovered during the Title Search are a surprise to the Seller, meaning sellers benefit from a title search as well. It can help them cooperate to address any title-related issues upfront, preventing surprises during the closing process.
- Protection for Buyers: For buyers, a clear title is essential for obtaining title insurance, which safeguards their investment against unforeseen issues, both at the time of purchase and into the future.
What Is Title Insurance?
Introduced in Ontario in the 1990s, title insurance provides an extra layer of protection during and after the completion of real estate transactions. Title insurance policies can cover various issues that may arise after the purchase, such as fraud, survey errors, and unregistered liens. While title insurance doesn’t replace a title search, it offers peace of mind and protection for both buyers and lenders. Title insurance is a one-time fee paid at the time of transaction, and is nominal relative to the cost of transacting a home in Toronto. We encourage all our clients to explore the benefits of title insurance and think it is more than a worthwhile investment.
So – The Title Search Uncovered an Issue. Now What?
If a title search reveals any problems, they must be resolved before the transaction can close. This may involve paying off outstanding debts, obtaining necessary approvals, or negotiating with neighbours regarding easements or encroachments. Working with the other side of the transaction, the respective lawyers and real estate professionals, and engaging the governing bodies as necessary, will help to navigate the process of rectifying any title issues, and ensure a smooth closing.
A title search in Ontario real estate is a comprehensive investigation into a property’s history and legal status. It plays a crucial role in protecting the interests of both buyers and sellers, ensuring that the transaction proceeds smoothly and without legal complications. While the process may seem complex, it’s a necessary step in any real estate transaction, providing the peace of mind that your investment is secure and your rights as a property owner are protected.
If you have any other questions about the title search process, or anything about the process of the Real Estate Transaction, the market, or otherwise, please do not hesitate to reach out. We’re happy to chat, and always interested in helping.
Most importantly, don’t be scared of the Title Search. It’s important, and as my father always said, it’s always better to know about a potential concern than to be left in the dark.
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