What does title insurance do?

In a recent real estate post, I discussed the need for a survey and why, often, it’s not as critical as it once was. The main reason for this is because of title insurance.

Title insurance, in a nice syllogism, insures your title. Basically, it protects you against issues that could come up to affect your ownership of the property that you did not or could not have found out about before your bought it – things like unregistered easements on your property, or encroachments from your neighbour’s property, or a prior owner doing work without a permit that would have normally not been permitted by the municipality. It also covers for fraud, in the event that someone impersonates you and puts a fake mortgage on your property or tries to sell it.

If you are getting a mortgage, you will almost always be required to get title insurance. Even if you aren’t, it’s usually a good idea – it’s low cost, and can give you peace of mind.

Fraud by Power of Attorney

A few weeks ago, two people were charged with defrauding an elderly woman in Clearview Township. They managed to commit the fraud through an abuse of a power of attorney.

There is a specific Criminal Code offence of theft by power of attorney. Section 331 of the Code states:

“3 Every one commits theft who, being entrusted, whether solely or jointly with another person, with a power of attorney for the sale, mortgage, pledge or other disposition of real or personal property, fraudulently sells, mortgages, pledges or otherwise disposes of the property or any part of it, or fraudulently converts the proceeds of a sale, mortgage, pledge or other disposition of the property, or any part of the proceeds, to a purpose other than that for which he was entrusted by the power of attorney.”

If you sign a power of attorney, it is very important to choose the right person to act for you. While none of us can control what that person ultimately does, the most important first step is picking someone who will always keep your best interest in mind – and not treat your money as their bank account, or decide to take what they consider their inheritance a little early.

Common law is not married

Period. End of story. In Ontario, common law spouses may be able to sue an estate for support, but they have no automatic right whatsoever to inherit if there is no will. It is harsh, but it is the law. If you are not legally married and most assets are not in your name, your partner needs a will or you will be left out in the cold.

Do you need a survey?

The answer is, sometimes.

If you can get a survey, they’re very useful. They can tell you all sorts of things – the legal limits of your property, whether there are any hydro or sewer lines, if there are any easements, even the proper location of a fence or your house. Often, however, a new survey isn’t available when you buy a house, if a survey is available at all.

If you are buying in an urban centre, the likelihood is that you don’t need a survey. It’s nice to have, to see where your lot lines are, but any encroachments from neighbours or easements that were never registered would usually be fully covered by your title insurance, so it’s not critical to have a survey up front.

Where it becomes more complicated is if you’re buying in a more rural area, and particularly if there are any questions about access to your property. Having a right-of-way to use someone else’s property to access your own can be a difficult matter to deal with; if it turns out that the travelled road is not where the legal description says it should be, the other owner doesn’t have to let you continue to use the travelled road. And then you could get stuck with no access to your property.

If you’re buying a subdivision house in town and there’s no survey, talk to your lawyer but you probably don’t need to worry. If you’re buying anything out of the ordinary, you may want to think twice before agreeing to not have a survey.

Plan for conflict, and hope it doesn’t happen

A recent TD Wealth survey found that 44% of planning professionals believe that family conflict is the biggest threat to estate planning today. And I think that’s absolutely correct.

In my personal experience, the estates that have the most difficulty are the ones where the parties don’t get along. Even if everything is being managed perfectly and properly, personal conflict will lead one party to hire their own lawyer, and sometimes even to start a lawsuit against the estate. Sometimes this even happens between executors who can’t get along. It wastes a huge amount of time and money that should be going through the estate to the beneficiaries.

The best advice that I can give if you must choose more than executor one is to choose executors who will get along, and to tell your beneficiaries ahead of time what your plans are. Processing it all now means fewer problems down the road.

Signing paper in a digital world

You’ve completed your offer and any signbacks over email, by signing it electronically. Then you get to the lawyer’s office and see a stack of paper. What’s up with that?

In Ontario, lawyers must have original documents signed on paper.  While it might be nice to sign everything electronically, we can’t do that unless the laws are changed.

Yes, we use a lot of paper. Unfortunately, we have to.

Do you know how to pass on your digital assets?

Many of us don’t see a whole lot of (if any) monetary value in our digital assets – there’s not much to gain in a Facebook or email account. However, there is always a possibility that there could be significant value to a digital asset, and either you don’t know, or your executor doesn’t know.

Do you have a gaming account? What about money stored in an eBay or PayPal account? A blog that creates defined value for your business? An e-commerce site? Music or video files purchased through an online store such as iTunes? Most difficult of all, digital currency, such as Bitcoin?

There is currently no law in Canada that allows your executor to access any of your digital assets. If you have anything at all that you would want your executor or beneficiaries to have access to, you must have a will.

Severing ties

I had a potential client call me this week about a property he owns with his wife, from whom he had recently separated. They are working through their separation agreement, but in the meantime, he felt uncomfortable leaving their house in joint names, as he wanted his share of it to go to their children if something happened to him, rather than going to his wife.

It’s not commonly known, but it is possible to sever a joint tenancy with no notice to the other owner. You sign a deed from yourself to yourself, and now you are tenants in common; if you die, your share now goes through your estate, rather than to the other owner.

 

It’s usually best to let your co-owners know what’s going on. But if you need to sever ties quickly, you can get it done on your own.

Without proper advice, mistakes are all too easy to make

I see it all the time – people look on Google, find something that seems to make sense, and follow it through without getting advice from a professional. And then, when the action they took turns out to not have the same result in the place where they live as it did in the place where the blogger or journalist lived, they end up paying way more than they would have to just leave things be. Here are some common ones:

  1. Not naming a backup beneficiary for life insurance or registered investments. It’s great if you’ve named your spouse, but what if you die at the same time? Naming an alternate (or contingent) beneficiary means that this money will pass outside of your estate, and not be taxed.
  2. Gifting property (including adding a child to your deed). Always, always, always get advice from a lawyer and accountant before doing this. There are more dangerous than can be stated in a blog post.
  3. Designating registered investments through your will. This can be set up properly, but there is a specific way to do it – if you’re not using a lawyer, you can run into a lot danger, and end up with taxes owing on them because they accidentally pass through your estate.
  4. Putting severe restrictions on inheritances in a will. More often than not, they’ll be found to be invalid.
  5. Leaving assets to minor or disabled beneficiaries without setting up trusts. They could squander the money, or they could lose valuable benefits. It’s always best to have a professional do your will; it’s vital if your beneficiaries need any assistance at all.

This is a complicated area of law. Be careful.

Electronic deals

In Ontario, except for a tiny (less than 1%) fraction of properties across the province that have major title issues, all real estate is done electronically. A lawyer who is licenced to do real estate law in Ontario can close a deal anywhere in the province. So, if you’re moving to or away from a city, and you want to use the same lawyer for both deals, you can.