Canada

Buying a home? Forget the title insurance

If you're ready to sign the papers on a new house, your bank may pitch you something called "title insurance" which some lawyers say is unnecessary and a waste of money.

For $200, an insurance company will protect you against any disputes over your ownership of the property.

"For the consumer, we are not only covering any losses that the consumer might have but (also) all of the legal costs in rectifying that problem," says Ed Frackowiak, vice president of First Canadian Title.

Title insurance is very big in the United States, mainly because many states have haphazard land registry systems and soft rules regarding land surveyors.

It is virtually impossible for someone to buy property without buying title insurance in the U.S. and the cost is high, starting at $800.

In Canada, home buyers have traditionally relied upon surveys of the properties to reveal any undisclosed information about the property through the title records.

Virtually all documents connected to the property or land are registered in the Registry Office as a matter of course and are public record.

Title insurance unheard of until 1991

Title insurance is supposed to protect against error or oversight by lawyers representing either party to a real estate transaction.

Title insurance was virtually unheard of in Canada until 1991, when three American insurance companies began selling it in Canada.

The companies are reaping the benefits. They make an average 94 per cent return on each policy sold south of the border.

That caused the government of Iowa to ban title insurance.

"This was not neccessarily a disreputable business but an inappropriate business to have going on in Iowa," says assistant attorney general Scott Gelenback.

Some lawyers in Alberta say they are not just concerned about the big profits earned from the insurance policy. They say title insurance will eventually throw the public land title registry system into chaos.

"It's a matter of preservation of a very good land title reservation system," says lawyer Jack Dunphy who fears title insurance could cause a myriad of bureaucratic problems.

Dunphy wants Alberta to follow Iowa's lead.

Real estate companies say title insurance may well have a place but only in complicated real estate transactions involving complex financing. It should be viewed as complementary to the traditional process of investigation.