Jun 28 | 2017

Strata Plan vs Title Insurance: Which One Do You Really Need?

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Strata plan vs title insuranceDarren* applied to change the use of his commercial condo unit to a medical one, but his request was denied. He was told by the municipality that the site plan agreement had not been complied with as the condo corporation required another 97 parking spaces to be added. The municipality then issued a Notice of Violation of the Site Plan Agreement due to the lack of parking spaces. The condo corporation has to decide whether it will add the parking to comply or try to change this requirement in the site plan agreement. This may mean an increase in common expenses or a special assessment to be paid by Darren and the other unit owners. Because Darren had a commercial title insurance policy from FCT, we are paying for the legal costs to defend him in dealing with the Notice of Violation.

In Darren’s case, the Site Plan Agreement would have needed to be compared with the Strata Plan to make sure they matched. However, having a strata plan would have provided no protection as it would not have covered his legal expenses or potential loss of value to his property if he can’t use it as he planned to.

A strata or condominium plan, like a survey, is created by a surveyor and it documents unit sizes and structures as well as what is common and exclusive use property. It also includes any parking or lockers that are part of the unit. However, if there’s an error in the strata plan or the structure does not match the plans – it’s the owner who may be responsible for part or all of the costs associated with remedying the issue.

A legal professional can provide an opinion on title based on the accuracy of information provided to them and an up-to-date or existing strata plan or survey. However, without a title insurance policy, a strata plan by itself offers no protection for the property owner or legal professional in case of incorrect information or discrepancies.

With an FCT title insurance policy, we protect both the legal professional and owner by providing loss of value coverage, duty to defend, funds to fix most municipal enforcements, fraud protection and more. It benefits lawyers by shifting the risk and liability associated with the title and strata/condo plan to us. Our condo endorsement also covers lack of disclosure in a Status Certificate, if the condo corporation has not been properly created and it results in a title defect. A Status Certificate is not always necessary for a loan policy depending on the insured amount.

While both a strata plan and title insurance are important in a condo or bare land purchase, choosing the one that offers you more protection is a safe bet!

*Name has been changed to protect the privacy of the individual.

Aug 12 | 2014

My Cottage is on Leased Native Lands

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Native Lands

With the high profile legal decisions about Aboriginal Title to Treaty Lands, one area that we are often asked about is protection for a cottager’s whose summer home resides on leased native lands. Here are the top questions and FCT’s responses:

How does title insurance benefit a cottager with a leasehold interest on native land? What coverage is provided?
The insured cottager would receive the same coverage as a title insurance policy on their primary home. With FCT there are over 33 covered risks. In addition the cottager with a leasehold interest on native land would receive coverage in the event of an unlawful eviction for a matter covered under the policy.

What is a leasehold interest? 
A leasehold title or estate is a form of land tenure where a party buys the right to occupy land or a building for a given length of time. It provides a tenant or lessee with the right of exclusive possession of a property for a certain period of time, being the term of the lease. A long term lease interest is a valuable asset which can be sold or mortgaged as a real property interest.

When someone is unlawfully evicted –how is this proven and what would they be compensated for?
It would depend on the claim.  For example, the Insureds would need to prove:
– loss of enjoyment due to a prior interest; or
– third party title claim; or
– lawful prevention of the use of the land or improvements permitted by the lease as a result of a covered title risk (eg. the use as of the Policy Date not being a permitted use as a result of zoning or perhaps there is a violation of a restrictive covenant, etc).

The Insured would be compensated for:
– value of the remaining lease term;
– reasonable costs of removing and relocating;
– cost of repairing the Personal Property caused by the removal and relocation;
– damages Insured is obligated to pay to subtenant on account of the breach of any sublease caused by the eviction; 
– the amount of rent, the Insured must continue to pay to the leaseholder after eviction.

How much does a title insurance leasehold interest policy on First nations land cost?
Premiums range depending on province, property type and property value. First Nation Lands leasehold interest policy for both lender and lessee policies starts at $500,  but can increase depending on property value. 

Does title insurance provide any protections in the case of a land claim for a cottager? 
If the property is non-urban and/or waterfront, we exclude any Native land claims.  Our definition of “urban” is that the property has to be hooked up to either municipal sewers and/ or municipal water. So provided that the property is “urban”, not on waterfront and the Insured is not aware of Native Land Claims, there would be coverage for actual loss in the event of a Native Land Claim.

Aug 5 | 2014

Evidence of the overlooked “middle child” of the commercial real estate industry

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commercial real estateLast week we touched upon the role of the commercial tenants in a real estate transaction – the so-called “middle child” of the real estate industry – wedged between the mandated requirements of the lender and the well-protected needs of property owners.

In this post we’ll look at anecdotal evidence that reveals the importance of a leasehold endorsement and just how it delivers all the care and attention the commercial tenant “middle child” needs.


Consider the consequences: A hypothetical claim

A telecommunications company signs a 10-year lease on an area of vacant land surrounded by a residential community with a plan to build a cell phone tower.

The company obtains the appropriate permits for the use and begins construction on the site, paving an access drive to the tower site, bringing in utilities, constructing the tower, installing its antennas and subleasing tower space to two smaller cell phone carriers.

A week after the site is operational, the telecommunications company is sued by neighbouring property owners who claim that the property is subject to a restrictive covenant prohibiting commercial use of the property. The company receives a court order prohibiting the use and is forced to cease operations, dismantle the tower and return the land to its original state.

As a result of this, the company is also sued by two of its sub-lessees for breach of lease. Not only is the company out of pocket for the massive construction it has undertaken, but also for the loss of future rental income based on the subleases and the damages it may be liable for to the subtenants.

With a leasehold endorsement in place, the company would make a claim to its insurer and have its expenditures and legal costs covered as set out in the endorsement, and then proceed to set up elsewhere. Not a simple solution, but far more attractive than the alternative.

Endorsement coverage

Coverage includes but is not limited to the following:

  • Transportation of tenant’s personal property to a new leased space, up to 200 km away
  • Rent payments due to the real landlord because the tenant made payments in good faith to someone other than real landlord due to fraud, impersonation, title defect, etc.
  • Payments to the end of the lease if a condition in the lease, to the landlord, even if tenant is no longer in possession
  • Payment of fair market value of sublease payments to tenant
  • Damages claimed by subtenants who are dispossessed
  • Payment of improvement costs paid out by tenant if not substantially completed when evicted, including:
      • Permits
      • Architect, engineering and construction management fees
      • Environmental testing fees and reviews
      • Landscaping
  • Payment of tenant’s reasonable relocation costs, including agent fees, higher rent etc.


Get a new lease on protection

If you’d like to learn more about leasehold endorsements, or simply want to share your own personal middle-child-syndrome stories, comment below. We want to hear from you!

Jul 30 | 2014

Commercial tenants: The overlooked “middle child” of the real estate industry

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Wedged between the mandated requirements of the lender and the well-protected needs of property owners, lies a grey area — a middle child, if you will. This “middle child” of the title insurance industry represents the tenants renting commercial properties that are often overlooked when discussing asset protection.

Ensure equal “attention” with a leasehold endorsementCommercial

A typical commercial title insurance policy is put in place to insure the fee simple interest of the property owner and its lender(s). Although it provides comprehensive protection for most commercial properties, on its own, this type of policy may overlook one important area — that of tenants.

Commercial tenants often sign a lease with a long duration and make costly leasehold improvements. If the landlord’s title is ever called into question or the permitted use (as disclosed to the insurer) under the lease is prevented, the tenant may be exposed to significant risk and potentially devastating losses.

When should a leasehold endorsement be considered?  

The simple answer: always.

Leasehold endorsements provide coverage that is above and beyond the usual coverage in an owner’s and lender’s policy and is available for both a tenant and its lender. Leasehold endorsements come standard with each and every commercial policy issued by FCT.

Not sure if middle-child-syndrome is real?   Tell us your experiences by commenting below and be sure to check back with us next week as we delve into the anecdotal evidence.

Jul 15 | 2014

Aboriginal Title and Commercial Development on Native Lands

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Aboriginal TitleWith recent court decisions, the scope of lands covered by aboriginal title land is poised to become greater. The recent rulings indicate that the courts are not taking a restrictive interpretation on the rights of First Nations on ancestral aboriginal land. Instead the Supreme Court has rendered the decision in Tsilhiqot’in granting further say to First Nations on development of ancestral aboriginal land. The decision in Grassy Narrows has also confirmed provincial rights over these types of lands.

While the implications of these decisions are still being assessed, I think that this is a very positive development which will facilitate much needed economic development in native communities. A number of resource company executives and legal experts are making similar comments in the press. A Global News story http://ow.ly/z0GSU cites B.C. Grand Chief Stewart Phillip as saying that, bands are “quite sensitive” to the need for economic development. “They want it on their terms and they want it based on the fact that they own the resources and the land.” Also Xeni Gwet’in Chief Roger Williams put it: “Once the first people of this country have title, then only good things going to come.”

Canada does have a history of disputes between government and First Nations over land claims, but Canada also has a mutually beneficial history of joint native-private sector developments on native lands. FCT has been willing to shoulder the risk to private sector developers and their lenders for First Nation projects. FCT coverage has facilitated private sector commercial developments on FN lands, including energy projects, shopping malls and residential construction

One need only look to the development on the Westbank First Nation in British Columbia to see the mutual success for both the First Nations and the business community. Situated on Lake Okanagan, the First Nation is now the site of several retail shopping centres. In late 2007, FCT title insured leasehold interests on Hub Centre on these lands for the tenants of the shopping plaza and their lender, a life insurance company. We believe it may have been the first time that a Canadian life insurance company has provided permanent financing for a development on such lands.

In the past, while Canadian chartered banks have provided mortgages for commercial developments on First Nations lands, other commercial lenders have not. The availability of title insurance has enhanced the perceived security afforded to major tenants and lenders on First Nations lands and has made First Nations lands much more attractive from a commercial point of view. See coverage details: http://ow.ly/z0kT6

I believe that most companies recognize that First Nations are strategic economic development partners. The more the private sector can do to bring economic development to support First Nations across Canada, the better off all Canadians will be.

Jul 9 | 2014

Creative ways to help your vendor close the deal

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In my previous blog posts I have focused on the value title insurance brings to commercial real estate lawyers/notaries that are acting on behalf of purchasers. Now I would like to discuss how title insurance can be leveraged when acting on behalf of the vendor to help close deals. Below are two situations where a commercial lawyer/notary can leverage title insurance to ensure a deal closes as planned:

Reduce the odds of a purchaser walking away from a deal

• The situation: Every once in a while when acting on a sale, you may come across that purchaser who is looking for any excuse to walk away. This can potentially mean the end of a deal for your vendor. As a lawyer acting on behalf of the vendor, you want to limit these reasons and increase the chances of closing.
• The solution: The Agreement of Purchase and Sale provides that the purchaser will accept a title insurance policy which insures over various title objections that are unknown to the vendor and could be raised by the purchaser. As a result, the purchaser can’t walk away from the deal if title insurance can cover the issue. This could include any issues that arise during the due diligence process, including encroachments, old mortgages not yet discharged, discrepancies in the legal description, non-compliance with zoning by-laws and so on.

The vendor knows of an existing problem with the property

• The situation: The vendor is aware of a problem with the property that is being sold (e.g. the building encroaches into the municipal setbacks) and is concerned that a prospective purchaser might walk away from the deal or insist on abating the purchase price because of it. Often times these issues are relatively minor and have existed on the property for many years.
• The solution: Speak to an underwriter at FCT first to confirm that coverage is available. If so, then the vendor must disclose the issue to the potential purchaser and add it as a condition that the purchaser will accept title insurance to cover the defect. This means that there is less likelihood that the purchase price will be called into question or the deal will fall through.

To effectively implement these solutions, we have provided samples clauses that can be easily inserted into your agreements. Click here to view these clauses.

With a better understanding of our policies, lawyers/notaries are making the most of the myriad benefits they offer. By finding new ways to introduce title insurance at the beginning of transactions, you can add value to all parties, including vendors. By maximizing the coverage it affords, vendor clauses will provide a smoother and more efficient closing process for both you and your clients, while saving money and stress.

Are there any other ways you use title insurance to help close your deals? Tell us!

Jun 4 | 2014

Duty to defend. Another customer care tool for your clients

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customer care

In my last blog posting I touched on how title insurance brings coverage solutions and/or efficiencies to commercial transactions depending on how lawyers/notaries decide to use it. In this post I will discuss how it can also be a great customer care and retention tool. With title insurance you have the ability to turn a potentially stressful situation into a positive experience for your customers specifically when an issue arises post-closing and the duty to defend provision is triggered.

What is this duty to defend?
Duty to defend essentially means that if anyone challenges or raises an issue that is covered under the policy, it is then the title insurer’s responsibility to pay all the legal costs and expenses to defend the insured’s interest in the land. The duty to defend is included in both residential and commercial policies, but for the purposes of this blog I will speak to its application to commercial properties.

How does it work?
You can be the best commercial real estate lawyer or notary on earth and do everything possible to ensure your client’s real estate purchase is a secure investment, but issues can still come up — issues that are out of your control that can leave you with an unhappy client.

The issue
The most common covered title risk that triggers the duty to defend is when third parties claim interest in the insured’s land. In most instances the third party has a valid claim; however, often claims are completely invalid. Some of the most common scenarios are:

The valid third-party claim:
• The Land Registrar may have neglected to bring forward an interest on conversion into the Land Titles system (e.g.an old easement) or an instrument is registered on the wrong parcel.
• The surveyor made an error on the location of the boundaries and it turns out the neighbour actually owns some of the insured’s property.

The invalid claim:
• This tends to happen when there is an intentionally difficult or opportunistic neighbour involved. There is clearly no issue or error at all, however a neighbour believes he/she has a right to the insured’s land. Often times this individual is motivated by another matter altogether and the end goal is to pressure the insured into offering a concession.This is probably the most prevalent invalid claim issue and definitely the most frustrating to deal with as an owner or as a lawyer/notary.

Regardless of whether the claim is valid or not,nothing can be done as a legal professional to avoid the issue. Furthermore, the unhappy client may be pointing the finger at his or her legal counsel in frustration. What happens next is dictated by whether or not the client has a title insurance policy in place.

The resolution without title insurance
Without title insurance the property owner’s lawyer or notary would explain the issue, the next steps and then quote the legal costs and expenses required to try and resolve the dispute/issue (even if it is a bogus claim!). Upon resolution, not only would the client be out legal expenses, but could be stuck with a diminution in value if the resolution is unfavorable.

The resolution with title insurance
With title insurance in place, lawyers and notaries have the ability to explain the issue to the client and let the client know that since the claim relates to a covered title risk, all legal fees and related costs are covered under the policy. At this point, we would retain a lawyer to defend the insured’s interest in the land, often providing an option to the existing lawyer/notary to continue on with the file to ensure the client is handled with the best possible care without additional cost.

It’s important to remember that FCT’s duty to defend takes effect whether the third-party claim is valid or not, as long as it relates to a covered risk. Also, there is no maximum dollar amount capping these costs and invoking this benefit does not reduce the amount of insurance. A significant portion of our claims dollars spent on commercial policies falls under our duty to defend coverage and many commercial legal professionals have seen firsthand how valuable this tool can be.

Has the duty to defend helped you provide a great customer experience? Let us know by commenting below or contacting us at FCTblog@fct.ca.

May 13 | 2014

Commercial title insurance as a ‘safety net’ vs. title insurance as a ‘Band-Aid’

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Commercial title insurance In my last blog, The value of commercial title insurance, I highlighted the key areas of coverage offered by our commercial policies (e.g. title, off-title and transactional). What I stopped short of describing was how the policies also provide legal professionals with the ability to close transactions much more efficiently by reducing the need for certain steps in the closing process. I usually like to explain this benefit to customers by showing how title insurance acts as a ‘safety net’ as opposed to how many people view it as more of a ‘Band-Aid’.

As a Band-Aid

I sometimes get comments that title insurance is just a ‘Band-Aid’ solution to a title defect. It doesn’t fix the problem, but rather, just bounces the issue down the road for another day. Some of these are issues that only lawyers would understand and care about, such as old leases where the tenant is no longer in possession; old mortgages that have been paid out but not discharged; old construction liens; a dower rights issue; minor encroachments etc. When used in this way, title insurance can insure over these matters and allow the deal to close on time while protecting the insured. The purchaser can always decide whether or not it wants to spend the time and money to have these matters cleaned up after closing.

But what about unknown defects that are also covered on closing? One analogy is title insurance as a protective ‘safety net’.

As a safety net

If you think of the closing process as the journey a hiker would take to get from one mountain top to the next. That hiker has two potential options:

Option 1) The valley

You could travel from the top of the mountain down to the valley and back up the next mountain ridge. Taking this path is time consuming as it includes many steps/obstacles, such as crossing streams or going around cliffs and it could present many risks that you need to react to. In comparison to a real estate closing, these steps could include getting a survey; confirming agreement compliance; and confirmation of the non-existence of work orders. The risks you find could be an encroachment or zoning issue, or that a work order is outstanding. We can provide coverage over some of these known issues as per the Band-Aid analogy; however did you know there is another option? An option of using title insurance proactively vs reactively to cover a known issue….

Option 2) The foot bridge

You can also take the foot bridge from peak-to-peak. This is the quickest way to get from point A to point B, avoiding some of the steps/obstacles and risks in the valley. But as a prudent lawyer you would never take a shortcut knowing the potential risk associated with this path. Is the bridge safe all the way to the other side or rickety somewhere along the way? What if a sudden storm arises when the hiker is at the middle of the bridge? Traditionally you would never take this path, but with title insurance as your ‘safety net’ you can, and many commercial lawyers do.

When you decide to get title insurance earlier in the deal, it gives you this option to take the quickest path making for the most efficient closing process. You avoid the time, money and effort associated with conducting many searches, while providing coverage for known and unknown issues that could come up later. And the best part is that this safety net will be there for the next transaction as well.

So ask yourself:  will you choose to make the trek through the valley or will you rely on the safety net? The journey is yours.

Apr 16 | 2014

The Value of Commercial Title Insurance

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Commercial Title InsuranceDuring my 11 years in the title insurance industry I’ve been often asked the question: “What is the value of title insurance?” This is invariably followed by a comment like: “We have a great and robust land titles system so nothing can go wrong.” A former colleague of mine told me at one point that we should be really calling it off-title insurance, as the policies cover, not only title issues, but also many off-title matters as well. Commercial coverage tends to fall under 3 distinct areas: 1) title issues; 2) off-title issues; and 3) transactional issues. Let’s look at some real underwriting and claims examples.

1)    Title Issues
We are often presented with a situation where a lawyer is closing a purchaser or loan transaction and the certificate of title reveals a caveat that was registered, for example, some 30 years ago, and the document has been misplaced by the Land Titles office and therefore cannot be reviewed. What would you, as a prudent solicitor, do? Without title insurance, you would advise your client as to the possible risks involved (although this would be difficult without knowing the contents of the caveat) and the client would then decide whether to accept the risk or not. However as title insurers we can underwrite this title defect and determine whether we can give either full or limited marketability coverage and thereby minimize your client’s risk and allow the deal to proceed. Another example we come across is where a caveat or other document has been registered in error by the Land Registrar on the wrong title. Title insurance can again be the solution to allow this deal to close.

2)    Off-Title Issues
An insured wanted to buy an existing 9 hole golf course in a resort area with the view of redeveloping the site into an 18 hole course surrounded by accommodations, restaurants and other amenities. The insured spent a considerable amount of time discussing its proposal with the local municipal officials to ensure that its new development would be acceptable to the municipality and comply with the applicable zoning by-laws then in place. Based on the assurances received from the municipal officials, the insured proceeded to close the transaction with a purchase price that reflected the proposed use. Two weeks after closing the insured received an email from the municipal official dealing with the matter entitled “Oops”. The official had neglected to take into consideration an amendment to the zoning by-laws which effectively meant that the proposed project would not be permitted. The value of the land had therefore just plummeted. The insured made a claim under its title policy based on the error by the municipal official and was compensated for the diminution in value of the property.

3)    Transactional Issues
Our insured was purchasing a leasehold interest and had submitted the lease for registration. Unbeknownst to the insured tenant, the landlord was simultaneously completing a corporate re-organization that included a change in name. Due to bad timing, the landlords request to change its name on title was submitted prior to the lease and therefore the lease was rejected as it did not show the proper name of the landlord as it now appeared on title. As the lease could not the registered, the insured submitted a claim. We retained counsel to correct the lease and have it resubmitted for registration and also covered the risk of any possible intervening registrations happening during this gap period that may have affected our insured’s interest.

These are but a few examples of how title insurance can be of value in a commercial real estate transaction. Other examples are fraud, super priority liens, survey issues, and many more.

What types of issues or challenges have you faced in your transactions?

Mar 18 | 2014

Suspicion of fraud? Why denying a policy may benefit both lawyer and lender

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fraudIt is difficult to pick up a newspaper today, and not see an article relating to real estate title fraud. While consumers or lenders can rest more easily if they have a title insurance policy, what about the law firm who acted on a transaction which turns out to be fraudulent? Title insurance will compensate the owner or lender for losses suffered as a result of fraud and title insurers waive their right of subrogation against the lawyer; however they are unable to protect the law firm’s reputation. A lender may also suffer from such a reputational loss.

You can only imagine the damage to a firm’s reputation when the local police department, the OPP or the RCMP arrive at your office, which may be filled with clients, armed with a search warrant and asking to review your real estate files. The Law Society will not be far behind to perform its own review. These are very real possibilities, and as a lawyer or law clerk you have the ability to help prevent real estate fraud and save your firm from the stress and havoc real estate fraud can pose on your firm. Similar investigations may happen to lenders.

As title insurers, we see both the best and, unfortunately, the very worst of real estate transactions. As such, we have developed sophisticated tools and techniques to weed out suspicious transactions related to title fraud that have proven to be very successful. These tools and techniques continue to develop and change as the fraudsters adapt their approaches to get around these barriers.

By co-operating with your title insurer on purchase and mortgage transactions we all end up working together to help combat fraud. While the underwriting process and questions may seem to be obtrusive or tedious at times, they are put in place to not only protect your clients, but also to protect the law firm, the lender and of course us as well.

What this means to you as a legal professional or lender is that we, as title insurers, are another set of eyes to review your deals based on our experience and stringent analysis of fraudulent transactions. If we do end up denying to insure one of your transactions because we suspect fraud, we not only mitigate our risk but also may be saving you the hardships and embarrassments from being associated with a fraud.