Question:
I acted for clients who purchased a property. I am assisting them with a title insurance claim. There were many open permits which they didn’t know about. Should the lawyer not have found out and heldback some money on closing?
Answer:
It’s important to know how Title Insurance fits in with the lawyer’s role. A Buyer is given a choice:
1) Title Insurance, OR
2) Solicitor’s opinion (NOT BOTH).
Like all other types of insurance, title insurance only covers the unknown, the uncertain etc. Once something is “discovered”, it’s effectively “off the table” in terms of insurance. This program promotes itself by its cost, namely it’s relatively inexpensive and somewhat self-funding. That is, you save on search fees. If you add them all up the money your save just about covers the cost of the title insurance. Next, it offers a financial solution to the problem if something should arise. And, you agree that you can’t sue your own lawyer, for not doing the searches which you specifically asked them not to do.
The lawyer’s opinion is another route. The lawyer will “investigate, determine and verify” the material facts. (Yes, you have heard that one before). Their job is to find the problem and the next step is to solve the problem. If there is actually a problem, this can be costly.
Since most buyers select the title insurance option, the searches are not done, the facts are not uncovered and the problems never found. There are no holdbacks. Actually, most of the time, there are no problems. That’s why title insurance is relatively inexpensive. But, when there is a problem, you can’t blame the lawyers. That’s the whole purpose of the insurance option in the first place.
Brian Madigan LL.B., Broker