Survey Versus Title Insurance

Every lender on a first mortgage requires either a survey or title insurance. A lender wants assurance that the property is free from liens and encumbrances (except those that run with the land).

SURVEY

A survey is a document that shows the property boundaries and measurements, specifies the location of all buildings and structures (such as sheds, fences, and decks) on the property, and indicates any easements or encroachments. A survey will not solve a title problem; it will only show if there is a problem.

TITLE INSURANCE

"Title insurance is a policy of insurance that provides coverage for title-related risks associated with real estate transactions. It is insurance designed to cover the unpredictable or undetectable--issues such as forgery, fraud, missing heirs, etc.--that can affect rights of ownership. And because it is insurance, a title insurance policy moves the risk associated with title from the lending institution, the lawyer or the home buyer to the title insurer. If there is a problem with title that only becomes known after closing, the title insurer is obliged to rectify the problem or compensate the title insurance policyholder, provided the type of problem that surfaced was covered by the title insurance policy."

What does title insurance cover? In general, the following are covered:

• defects in title; mortgages or other encumbrances affecting title; unmarketability of title
• compliance risks such as non-compliance with restrictive covenants, the existence of work orders and major encroachments
• access-related problems such as the absence of a legal right of access to the home.

There is also a title product called TitlePLUS (available from lawyers) that also covers the legal services provided by the lawyer handling the purchase and mortgage.

What does title insurance not cover? Some standard exclusions include the following:

• environmental hazards
• the buyer’s rights to change the use of the land or undertake renovations or construction
• native land claims
• problems the buyer agreed to in the purchase agreement or failed to disclose to the lawyer
• minor utility easements or rights-of-way for a mutual driveway