We recommend that you consider taking out a Title Insurance Policy when making possibly the single biggest investment of your life. For a single premium, Title insurance protects against claims for various unknown and (disclosed) known risks that threaten ownership and use (including structures) of the property until its resale.
What are ‘known’ and ‘unknown’ risks?
‘Unknown risks’ are risks that are not identified during the conveyancing transaction before settlement but that may arise during property ownership and cause financial loss to the owner. Usually such risks cannot be easily identified, even with the full range of inspections and reports.
‘Known risks’ are any risks disclosed by the vendor or otherwise discovered by the purchaser prior to settlement (eg. building works completed without council approval, a building encroaching onto or from the land being purchased, or an extension having been built on a utility easement). If there are no known risks evident a policy will be issued for ‘clean title’.
What does a Title Insurance policy typically cover?
A typical home owner’s policy protects against the following risks – which commonly give rise to claims:
- illegal building works / structures – Archicentre have reported that over 43% of properties in South Australia have illegal building works
- incorrect signature of a document resulting in potential problems with the registration of the transfer
- forgery, fraud, duress, incompetency, incapacity or impersonation prior to settlement
- mortgage or title fraud after settlement e.g. a third party takes out a mortgage over the purchased property without the purchaser knowing
- defective registration of a document
- lack of rights of access or use of services
- breach of covenants
- boundary issues such as an encroachment by or on to the insured property
Who uses Title Insurance?
A growing class of Title Insurance users in Australia and New Zealand are people purchasing homes, or who already own homes.
As the value of properties have soared, purchasers are faced with growing risks such as fraud or forgery, illegal building works and other title defects that are more likely to have a significant financial impact. Title Insurance offers numerous benefits in relation to such risks. Under the traditional conveyancing process in South Australia, where a defect in title is discovered, a purchaser’s options can be categorised loosely as follows:
- if the contract has not been signed by all parties or the purchaser has not lost the right to cool off, the purchaser may choose not to proceed or may try to negotiate a reduction in the purchase price
- if the contract has been concluded and any right to cool off has passed, the purchaser may have a right to rescind (in limited circumstances) or to claim compensation
With Title Insurance, the purchaser has a further option. For the first time in Australia, a purchaser can now take out insurance cover in respect of a known title defect.
What does Title Insurance do?
Title Insurance provides a viable solution to numerous issues that might present themselves in a conveyancing transaction. Title Insurance:
- provides a wider range of options to find practical, safe and financially efficient ways of managing a transaction, particularly if problems arise
- provides protection in respect of disclosed known risks as well as unknown risks
- provides protection over key risks such as illegal building structures –
- provides a quick and inexpensive route out of time consuming legal problems without the need to prove negligence
- provides the costs of defending the title should problems ever arise and compensation if the title cannot be defended
What does Title Insurance not do?
It doesn’t replace a competent Conveyancer – although it will cover various negligent mistakes made by a conveyancer. In addition, Title Insurance cannot deal with non-title matters such as contamination – and the policy wording needs to be carefully read to understand the terms, conditions and exclusions – which may vary from title
How much does a home owner’s Title Insurance Policy cost?
Title Insurance is inexpensive. The premium is a one-off low cost payment that protects the purchaser for the life of ownership.
How do I purchase a Title Insurance policy?
For a new property purchase, ask your Conveyancer to request a Title Insurance policy from your chosen insurer. (You or your conveyancer can order policies). The policy will then be provided to you together with an invoice requesting payment which is required within 7 days of settlement.
I already own my home, can I still be insured?
Title Insurance is available for a property which is already owned. You receive the same types of protection against fraud and forgery and ownership rights.
Does your policy cover pest & building inspections?
No, it doesn’t – this is specifically a policy designed to cover title defects and ownership issues.
How long does a policy last?
A policy is valid whilst the person owns the insured property.
It is important to read the policy document provided by the insurer to fully understand what your policy cover provides.