In light of the December 18, 2015 decision of the B.C. Court of Appeal in Lin v. CIBC Mortgages Inc., 2015 BCCA 518, it’s worth mentioning again that one of the best values in Canadian real estate is title insurance.
In 2013 Lin re-mortgaged his home with CIBC to pay out an existing Bank of Nova Scotia (“BNS”) mortgage and to have some left over funds for other purposes. While he and his wife received the left over funds, their BC notary, Agatha Chung stole the mortgage proceeds destined to pay off the BNS mortgage (along with millions of dollars of other clients’ money).
Much to their chagrin Lin and his wife then had TWO mortgages on their home instead of just the new CIBC mortgage.
Fortunately for them they had purchased an owner’s title insurance policy* some ten years earlier and the title insurer defended their claim that CIBC’s registered mortgage was invalid.
The legal reasoning of the Court of Appeal is in my opinion, dubious, BUT as it is the highest court in BC, its decision is now the law in this province.
It was held that CIBC’s mortgage was not valid and enforceable in these circumstances (as the funds were never really “advanced,” given that the bank’s notary’s undertakings were not complied with by the borrower’s notary).
The net result was that CIBC’s mortgage was struck from the borrowers’ title and the borrowers did not have to pay it back (other than the “left over monies” which they actually did receive). The title insurance company also covered all of their litigation costs through the BC Supreme Court and then the BC Court of Appeal (which would have likely been well over $100K).
Why is Title Insurance such a great bargain?
1. The owner’s policy only cost a few hundred dollars.
2. NO annual premiums are charged after the policy is purchased.
3. There is NO deductible when a claim is made.
4. The policy remains in place for the full purchase price for as long as the owner owns the property.
5. The coverage is much wider than any legal opinion that a lawyer or notary can provide.
6. There is no need to sue the notary (who in this case had fled to China with the mortgage proceeds by then), as the policy is “no fault,” meaning that if the claim is covered it is not necessary to prove negligence or malfeasance to collect (as it is against a notary or lawyer).
How Do You Buy Title Insurance?
Title insurance in BC is generally purchased through a buyer’s lawyer or notary when the property is bought, however it can also be obtained after a purchase as well (called an “existing home owners policy.”)
It covers many risks including title fraud, forgery, survey issues (i.e. encroachments), unpaid liens, taxes or strata levies, outstanding work orders or lack of proper building permits and generally any other claim against the title to the property which a.) the purchaser did not know about and b.) did not cause or agree to.**
Major title insurance companies in Canada include First Canadian Title, Stewarts Title Guarantee Company,* Title Plus and Chicago Title. They are regulated in British Columbia by the Financial Institutions Commission (“FICOM”).
*Stewarts Title Guarantee Company was the title insurer involved in this case which offered protection to its insureds under the “duty to defend” provision of the owners policy.
**Refer to individual policy wording for terms and conditions of coverage.
Disclaimer: The foregoing is for information purposes only and not intended as legal advice to the reader. Always consult with an experienced real estate lawyer when modifying the standard real estate contract in use in BC. In addition statutory law as well as case law may change from time to time which could render this analysis inaccurate in the future.
(C) 2016 Pazder Law Corporation