Title insurance is a specialty insurance policy that protects the legal ownership of your property and can cover you for costs arising from risks you do not know about or are not disclosed by the Vendor as part of the normal conveyancing procedure. They are matters or events that come to light after settlement has taken place and it could be some years before this happens.
There are two types of risk:
- ‘Known risks’ – These are risks that have been disclosed or identified during the conveyancing transaction prior to settlement (eg. building works completed without council approval, an encroachment of a boundary fence or an unapproved conversion of a garage to a room). You may still be able to apply for Title Insurance however your application would be assessed on a case by case basis and the insurance coverage offered is generally limited.
- ‘Unknown risks’ are risks that are not identified during the conveyancing transaction before settlement but that may arise during property ownership and cause financial loss to the owner. Usually such risks cannot be easily identified, even with the full range of inspections and reports.
Even the most thorough conveyancing process cannot discover all the potential risks against your property. That’s where title insurance comes in.
Some examples of what these risks are:
- planning and title defects
- illegal building works and structures such an unapproved pergola or an extension to the home
- boundary issues such as an encroachment
- fraud and forgery against your certificate of title
- unpaid rates and taxes
- unregistered rights of way and easements
- adverse possession
- zoning non-compliance.
WHO CAN TAKE OUT TITLE INSURANCE?
Purchasers when purchasing a home/investment property or existing owners who already have their own home. In this electronic age purchasers are faced with growing risks such as fraud or forgery. The impact of this along with any illegal building works and other title defects are likely to have a significant financial cost to the owner. Title insurance offers numerous benefits in relation to such risks.For a new property purchase, simply contact your conveyancer or solicitor to request a policy from Stewart Title or First Title. The policy will then be provided to you and payment is usually made at settlement making the process easy for you.
Even if you are an owner of your own home the property can still be exposed to some of the above risks such as fraud or forgery so Title Insurance can be of a huge benefit for existing owners as well.
If after signing a contract but before settlement, you become aware of an issue which might affect the title (ie you are told that there are boundary issues), you should advise Stewart Title before settlement and they still may cover you against any loss which you may suffer in respect of that issue if you suffer a loss down the track without paying an additional premium. It is best to disclose these issues before settlement if you become aware of them.
WHAT DOES TITLE INSURANCE DO?
- Title insurance provides a range of options to find practical, safe and financially efficient ways of managing a problem should one arise.
- It provides a quick and inexpensive way to avoid time consuming legal problems, without the need to prove negligence.
- It will cover the cost of defending the title if problems arise, and compensation if the title cannot be defended.
- It will cover various mistakes made by conveyancers.
- It also provides a registration gap to protect you against a dealing (ie caveat) being lodged on the title between settlement and registration
WHAT DOES TITLE INSURANCE NOT DO?
- Title Insurance does not replace building / contents insurance (ie it will not cover against loss suffered as a result of property damage caused by fire, flood, etc).
- Title insurance cannot deal with non-title matters such as contamination.
- Title insurance is a policy designed to cover title defects and ownership issues and not matters found during building or pest inspections.
- Title Insurance does not cover boundary issues where the land size exceed 50 acres.
The policy wording needs to be carefully read to understand the terms, conditions and exclusions.
HOW MUCH DOES TITLE INSURANCE COST?
Title Insurance is inexpensive. The premium is a one-off low cost payment that protects the purchaser for the life of ownership
KEY FEATURES OF TITLE INSURANCE:
- Once off fee – based on the purchase price
- Policy continues until property sold to a third party
- No excess on any claim made
- Policy passes to beneficiaries after death. It also passes to spouse, legal partner or children if • No restriction on the number of claims which you can make transferred to them under the Family Court Act
- Title Insurance includes a 200% inflation allowance to allow for increases in value over time. If improvements made to property exceed 200% of initial purchase price, you can contact the insurance company and pay an additional premium to cover increased value.
- Insurer will deal direct with the Authority (eg, Council) on your behalf to reach a resolution for the parties involved
- Insurer will cover your legal fees incurred to defend any claim
- Policy coverage is effective from date of settlement
- Must suffer a loss to be able to make a claim
- Must be defect on title to make a claim (ie council or other regulatory body must issue enforcement action against the title which results in a loss to the owner – for example, if unapproved developments on the land, no claim can be made until the council lodges an enforcement action against the title to demolish or fix the development)
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers