Clients often have a lot of questions about the purchase process, such as ‘when do I get my keys’ and ‘will we meet in person or virtually to sign the closing documents’. One question that often comes up regularly is ‘what is a title search’. Most clients understand that doing the search is important, but are not clear as to why.
In short, a title search will provide vital information about the property being purchased, such as confirming who the registered owner of the property is and what the dimensions of the boundaries are. While the list below is not exhaustive, here is a summary of the important details a title search can provide about a property:
Registered Owner: Unfortunately, there are occasions when someone signs an agreement of purchase and sale and they are not a registered owner. This can happen not only in the case of fraud, but also in circumstances where there is an honest mistake (such as not transferring title after the death of an owner). If the seller does not have the proper authority, then the buyer would not be the legal owner of the property when the deed is registered.
Legal Description: The agreement of purchase and sale should have certain details about the property, including a legal description and dimensions. In the event a proper search is not done, a buyer could end up with a smaller property than expected (for example, if the agreement said the dimensions were 50 feet by 100 feet but title shows the property is only 25 feet by 100 feet) or the wrong property altogether.
Charges or Liens: Unless otherwise agreed upon in the agreement of purchase and sale, the seller is generally required to discharge any charges (such as mortgages or secured lines of credit) or liens (for example, those relating to property tax arrears) registered on title. If these items are not properly discharged, this can cause serious problems with a buyer’s financing as their mortgage will not have priority over the existing registrations.
Easements and Rights of Way: Many properties will have easements in favour of utility companies over part or all of the property so that they can have legal access to the property to maintain their lines, pipes, equipment, and other items. Furthermore, properties may also have rights of way in favour of neighbouring properties to allow them to access part of the property in question for a certain purpose (such as driving over part of a property to access parking or walking over a portion of land to access a backyard in the case of a townhouse). If a buyer is unaware of the easements and rights of way affecting the property, this could result in numerous issues, including the buyer installing a shed on an easement and having to remove it (since it is on the easement and obstructing the utility company’s ability to use it) or not having a legal way to access the property (which is a very serious problem).
Covenants: In some cases, especially in recently built subdivisions, there will be covenants on title that restrict what a buyer can and cannot do with the property. Some common covenants would be not allowing the slope or grading of the property to be altered, restricting the types of trees that can be planted, and possibly prohibiting the installation of a swimming pool. As a result, a buyer should know what covenants are registered on title to ensure they comply with them and that they will not affect any future plans the buyer has for the property.
As I mentioned earlier, this is just a sample of the many items that can be registered on title. Their impact can be quite large so it is important for a buyer to understand what is on title and how it impacts them before closing. If a buyer is not aware of what is registered on title, they could encounter many unpleasant surprises after the fact.