My lawyer says the lender requires me to buy title insurance. What exactly is title insurance?
Title insurance protects owners and lenders against losses that may be suffered due to fraud, defects, and encumbrances related to the legal title of real estate. In simpler terms, if the legal title to your real estate is not what you thought it was and you suffer a loss, title insurance may cover that loss, if it falls within the coverage purchased. Examples of the protection offered by title insurance policies include the following:
· Title fraud such as forgery, incapacity, or impersonation;
· Easements and encroachments disclosed by surveys done after closing;
· Liens against your property as a result of unpaid debts from previous owners;
· Liens arising from unpaid taxes; and
· Zoning non-compliance where the property use doesn’t meet the municipal by-laws.
At the same time, it is important to acknowledge the limitations of title insurance policies. Examples of losses not covered by title insurance policies include the following:
· Environmental matters;
· Matters created, allowed, or agreed to by the insured (i.e. the owner or lender);
· Overvaluation of the land; and
· The exercise of governmental power.
Most lenders in British Columbia require the borrower to purchase title insurance when buying or refinancing real estate. However, a lender’s only title insurance policy only benefits the lender and not the owner. Coverage can be extended to owners as well and it should be carefully considered because the cost of extending the coverage is low relative to the cost of the lender’s only policy. As the following example illustrates, extending coverage to the owner when the lender requires a title insurance policy is a no brainer.
An individual purchased a residential property in B.C. for $200,000 and obtained a mortgage in the amount of $180,000. The individual invested a considerable amount of money in renovating the property. The prior owner then claimed the transfer was fraudulent and the purchaser was forced to reconvey the property back to the prior owner. Neither the new purchaser nor the prior owner obtained title insurance. The prior owner was required to incur the cost of applying to court to have the property transferred back to him, while the new purchaser was unable to recoup the money spent on renovations. The lender did acquire title insurance so paid the lender’s legal fees related to the insured mortgage.
Even if an owner is purchasing real estate without borrowing, title insurance may still be a good idea. Most importantly, title insurance is a one-time cost as the policy provides coverage for the entire duration that you own the subject property.
The types of losses covered by title insurance can be costly, especially in the Lower Mainland where real estate prices have skyrocketed in recent years. Given that title insurance is a one-time cost, it is generally a good idea. There are only a handful of insurers offering title insurance in British Columbia but there may be significant differences in the coverage offered. In addition, title insurance policies can have varying coverage (typically through the addition of endorsements). If you need advice deciding whether you need title insurance or selecting the right insurer and policy, we’d be happy to advise.
Read More
What’s a startup without an app?
People are puzzled when we describe Arora Zbar LLP as a startup. To us, a startup means, among other things, a commitment to finding and fixing pain points using innovative solutions beyond those traditionally available to lawyers.
For instance, we noticed that clients, real estate agents, and mortgage brokers lacked easy access to the closing costs associated with a home purchase. So we designed and built PriceMyConveyance, a residential real estate closing cost calculator which provides clients and real estate professionals a better understanding of the total cost of a new home.
PriceMyConveyance was built with the help of coding whiz and long time friend of the firm, Travis Gritter.
Like most apps, PriceMyConveyance was born in a moment of “there must be a better way”. Eli’s eureka moment struck after a few months of realtors and mortgage brokers always asking him the same question before referring a client: “how much should I quote them for closing costs?”, to which Eli typically responded with: “it depends.” However, it usually depends on the same handful of factors. That’s when PriceMyConveyance was born. By programming the handful of factors into a calculator, real estate professionals can quickly provide accurate estimates of our fees and other associated closing costs for their client’s residential home purchase.
You can check out the calculator by clicking on any of the links above or by visiting pricemyconveyance.com. Arora Zbar LLP is committed to finding pain points like these and fixing them, which is why it’s a startup.
Transparency Register
Preparing and maintaining a Transparency Register is generally straightforward but can be confusing, particularly with large companies. Failure to follow the rules can result in fines of up to $100,000 for companies and $50,000 for individuals, so it is important to seek the advice of a prudent lawyer. Arora Zbar LLP would be more than happy to help.
Read More
How To Save Money On Legal Fees
Hiring a lawyer can be a costly endeavour. Lawyers are generally encouraged to bill for any and all tasks related to your case, no matter how big or small. In some instances, the cost of legal fees becomes greater than the amount of money saved by hiring the lawyer. There are a number of strategies you can use to keep those pesky legal fees down:
- Organize all your supporting documentation and place them in chronological order. Make sure that the copies you provide are legible and that there are no duplicates. If you send the documents to your lawyer in random order, you should expect to be billed for the time it takes to reorder them. If possible, also convert your documents into an electronic format as many firms are moving toward a paperless work environment and scanning documents can be a time-consuming process.
- Create a detailed chronology of what happened and precisely when it happened. Refer to any supporting documents in the chronology (e.g., “on January 1, 2021, I received Email #1 from Person X”). It also helps to create a list of individuals involved in the dispute and describe their involvement. This allows your lawyer to more easily understand the timeline of events and to begin forming a legal argument as soon as possible.
- Make sure you are well prepared for meetings and phone calls with your lawyer. Before the meeting or phone call, write down all the questions you would like to ask your lawyer. Those questions should be clear and relevant. Avoid asking questions that could be answered with an internet search. Additionally, take notes of any important points during the meeting so that you can avoid the need to follow up with your lawyer. Time spent with your lawyer is extremely valuable and should be used as wisely as possible.
- Respond to your lawyer’s requests in a timely manner and never leave things to the last minute. Legal proceedings involve many time sensitive issues and deadlines. The more diligent you are in working with your lawyer, the more quickly the case can be moved along. Resolving a case quickly and efficiently is one of the best ways to prevent legal fees from building up.
- Expect to play an active role as a client. Don’t expect to be able to sit back while your lawyer moves the case forward and achieves your desired result, particularly if you want to avoid costly legal fees. Instead, take the time to try to understand the issues so that you can collaborate effectively with your lawyer to achieve your desired result in a timely manner. It is important to understand that it’s your file and that your lawyer works for you, not the other way around.
We hope you find these strategies useful. At Arora Zbar LLP, we use a progressive business model that allows us to provide exceptional legal services at affordable prices. Whether you become involved in a legal battle, incorporate a business, or purchase a property, we aim to make your experience as affordable and pain-free as possible.
Read MoreCannabis and the RTA
With the recent legalization of Cannabis in Canada, you may find yourself wondering what rights you or your renters have with respect to growing and smoking cannabis in a rental property. Perhaps you’re a landlord and you discover your renters are growing cannabis plants in your property, or perhaps you’re a renter and you like to enjoy cannabis from time to time, but you’re cautious about violating your lease agreement or breaking the law. Hopefully we can help clear up some of your confusion.
On October 17, 2018, non-medical cannabis was legalized in Canada with the passing of Bill 30. Among the changes made to the law was a new section added to the Residential Tenancy Act – section 21.1. This section includes a retroactive prohibition of smoking and growing cannabis in residential properties. This change applies to all tenancies entered into before the date that section 14 of the Cannabis Control and Licensing Act came into force, or May 31, 2018.
Under the new law, all tenancy agreements entered into before May 31, 2018 which already included a term that prohibits smoking tobacco and does not include a term that expressly permits smoking cannabis are considered to prohibit smoking cannabis (but not vaporizing cannabis) in the same manner. Tenancy agreements that are silent on the topic of smoking will be considered to allow smoking cannabis, regardless of the date that the agreement was made.
Similarly, all tenancy agreements entered into before May 31, 2018 are considered to prohibit the growing, cultivation, and harvesting of cannabis in or on rental properties. As with smoking, tenancy agreements created on or after May 31, 2018 that are silent on the topic of growing cannabis will be considered to allow growing cannabis. Thus, in order to prevent renters from smoking or growing cannabis in or on one’s property, any tenancy agreement entered into on or after May 31, 2018 must include a term that specifically prohibits the activity.
Keep in mind that the fact your tenancy agreement permits growing cannabis does not mean you can grow as much as you want. The federal Cannabis Act prohibits individuals from possessing more than four cannabis plants, and you must be 19 years of age or older to smoke or grow cannabis in B.C. Additionally, you must choose your growing location carefully, as growing cannabis anywhere visible from a public place is prohibited. Also keep in mind that these terms refer only to non-medical cannabis. With respect to medical cannabis, tenants may be able to grow more than the standard limit of four cannabis plants, but only with the proper authorization from a licensed medical practitioner.
Read More
Non-Financial Charges on a Real Estate Title
Charges Against Property
Property is often purchased with a particular purpose in mind and when this vision cannot be realized due to charges against the property, purchasers may end up disappointed. Charges are legal instruments registered against title to the property that indicate some sort of third-party interest in the property. At first glance of a title search, these charges offer little information as to their nature. When purchasing property, always seek the help of a prudent lawyer to review the title and the charge documents themselves. This could potentially save you thousands of dollars and a major headache. Check out the following examples of different charges that may be held against your property.
Easements
An easement is a specific interest in one property in favour of another property. These typically grant the right to do some positive act on another owner’s property. Examples include traveling through the property and running utilities through the property. Easements arise by express grant or by implication, such as when the only access to a landlocked property is through a neighbouring property. When purchasing property, it is crucial that any existing easements are identified as the existence of an easement can create significant difficulties for future use and development of the property. Easements must be read carefully to identify which specific rights are granted. Removal of an easement requires cooperation and consent from the owner of the property that holds the benefit of the easement.
Restrictive Covenants
A restrictive covenant typically imposes a restriction on the use an owner may make of his or her property. Examples include preventing construction that blocks light from a neighbour’s window or preventing a specific type of business activity. Potential purchasers of property should be made aware of all restrictive covenants that may limit their intended use of the property as removing or modifying restrictive covenants can be a time-consuming and expensive process with no guarantee of success. Disputes relating to restrictive covenants normally relate to whether the covenant “runs with the land”, meaning that the restriction survives the transfer of the property and is binding on the purchaser of the property.
Statutory Rights of Way
A statutory right of way allows the creation of an interest similar to an easement for the benefit of a specific group, generally government and its agencies. Government bodies typically acquire statutory rights of way for utilities or for public access. The key difference between an easement and a statutory right of way is that a statutory right of way need not benefit another parcel of land. A statutory right of way runs with the land and therefore burdens the subsequent owners of the property. Consequently, once a person ceases to be the owner of the property subject to the statutory right of way, they are no longer liable for breaches of the statutory right of way that may occur later on.
Building Schemes
A building scheme is a charge registered against a property that forms part of a community, often to ensure a continuity of the design of a neighbourhood or to provide guidance for future construction of the property. Building schemes allow owners or developers of property who wish to sell or lease at least two parcels of property to create restrictions consistent with a general plan of development on the property. Because building schemes are registered against the title to all of the affected properties and run with the land, all purchasers must comply with the restrictions. Building schemes can be enforced by the owner or developer of the property who can withhold approval of any development unless the proposed plans comply with the restrictions set out in the building scheme.
Whether you’re planning on purchasing a property or have already purchased one, you’ll want help identifying the nature of the charges on title and how your property is affected. Arora Zbar LLP can help. Don’t hesitate to get in touch.
Read More