Let's Survey the Situation

The art of surveying is a professional that has undergone great changes in the past decade and as we enter the new millennium the role of surveyors in residential real estate remains in a state of fluctuation. The advent of automation of the local land registry offices, the conversion of properties from the land registry registration system to land titles (where the government provides a certificate of the title) and the emergence of title insurance has resulted methods which offer homeowners new options from the traditional reliance upon the survey in assisting persons to resolve title deficiencies related to building location and lot line issues. Surveyors have had to remain agile to move with these changes in the face of their changing roles and the way they are perceived by the public and the legal community.

The main culprit for surveyors has been title insurance. Title insurance has been introduced into the real estate transaction via the United States as cost efficient alternative to the traditional method of conveying property in Ontario. Understandably, the initial reaction to title insurance was perceived as a threat, with reactions bordering at times on hostile. But as things have settled down, people began to accept that title insurance could have a role in real estate transactions, and not necessarily be a threat to the business that lawyers and surveyors have traditionally done.

Title insurance made its greatest strides into the real estate transaction as an insurance to guard clients from title problems which arise from building location or lot line disputes. For example, people began to look increasingly to title insurance to address situations where they were purchasing a new house, which either had no survey, or an out-of date survey. The banks insistence upon an up to date survey resulted in clients turning to title insurance as a more cost efficient response to the bank’s request.

Before title insurance, these problems were flushed out and resolved by the purchase of a survey, which served the purpose of accurately identifying the problem with the property, and supporting legal work to address and correct the problem. This meant a two step process, involving the work of both a surveyor and a lawyer, and as a result, increased cost and, usual, delays, for the client. Title insurance presented itself as an alternative, at a cost to the client considerably less than the option described above, with normally no delays, in the completion of the transaction. Understandably, this option has been selected by many clients.

However, the purchase of title insurance is seen by some as an incomplete answer to a possibly greater problem. Some criticize title insurance solution is a short sighted bandaid fix to a larger problem, which it does not address at all. The problem, if ignored, will not go away. It will simply be deferred for a while and may come back to haunt you later as a larger problem then it originally was, at a time, Murphy’s law dictates, when you probably need the problem the least, such as when you are selling the property, or applying for a building permit to do renovations.

Critics say, if you have a title defect, you have a title defect. By buying title insurance, you do not address that problem, you simply obtain a covenant from the title insurance company to resolve that problem for you, if they are called to do so, subject to any limitations are exclusions they may have contained in their policy to you. Therefore, if that title defect must be resolved at a later date, the insurance company agrees to rectify it.

Because title insurance is so new in Ontario, the track records of how well title insurance companies actually perform in rectifying these problems later on has yet to be determined. What can be expected, is that the title insurance companies will want to limit their claims pay outs and therefore cut corners in dealing with these problems as they arise. People may find it frustrating to find, when they go to sell their properties, or when they apply for building permits to improve their properties, that title deficiencies that they did not address with the purchase of a survey have resulted in a delay or an inability to complete a desired project, at least until the title insurance company has responded to the claim. Others believe that title insurance will, over the long run, encourage, as opposed to discourage, more property disputes. The reasoning is that if one conflicting neighbour finds out that the other holds a title insurance policy with respect to their property, they may be more inclined to pursue their claim against that neighbour, knowing that an insurance company will stand behind any successful claim that is made.

There is no doubt that title insurance is here for the long haul. There is also no question that title insurance offers a new and cost efficient method to deal with some immediate problems which arise in the closing of a real estate transaction. Nonetheless, as with all matters, there can be corresponding negatives which the consumer needs to be aware of. Title insurance has not eliminated the need for surveys at all; it has simply presented another option to deal with problems that a survey would disclose.