Title Insurance in Quebec | Protection Against Title Defects

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Title insurance is a policy that protects the property owner or mortgage lender against financial losses resulting from defects or issues related to the title of a property. Unlike most Canadian common law provinces that use the Torrens title registration system, Quebec operates under a civil law regime with a system of publication of real rights. This distinction means title insurance has historically been less common in Quebec than elsewhere in Canada, since notaries traditionally perform an in-depth title examination for every real estate transaction. However, title insurance has been growing in popularity in Quebec over recent years. Major title insurers active in Canada include First Canadian Title (FCT), Stewart Title, and Chicago Title. The policy generally covers risks such as real estate fraud and document forgery, errors in public registries, undetected encroachments, undisclosed charges or mortgages, registration defects, and title defects predating the policy date. Title insurance is paid once, at the time of purchase or refinancing, and remains in force as long as the owner holds the property. For mortgage lenders, title insurance is often required in certain situations, particularly during refinancing or when minor irregularities are detected in the chain of title. Mortgage brokers must be able to explain to their clients when and why this protection may be required or recommended.

Title Insurance: Protection Against Hidden Risks

Title insurance is a policy designed to protect property owners or mortgage lenders against financial losses that could arise from defects, deficiencies, or irregularities related to a property's title. Unlike standard insurance that covers future events, title insurance protects against problems that existed before the policy date but had not been discovered. It is paid once, at the time of the transaction, and remains in force as long as the owner retains the property.

Quebec's Unique Context

Quebec differs from other Canadian provinces through its civil law regime and its system of publication of real rights at the Quebec Land Registry. In this system, the notary plays a central role by performing a detailed examination of the chain of title for every real estate transaction, in accordance with the Civil Code of Quebec (art. 2938 and following) and the Notarial Act (CQLR, c. N-3). This traditional role of the notary explains why title insurance was adopted later in Quebec than in common law provinces using the Torrens system. Nevertheless, title insurance has become increasingly common in Quebec, particularly since the early 2000s.

Risks Covered by Title Insurance

Real estate fraud and document forgery (owner identity theft)
Errors or omissions in public registries (Quebec Land Registry)
Encroachments not detected by the certificate of location
Undisclosed legal hypothecs, charges, or servitudes
Title defects arising from estates, prior judgments, or procedural irregularities
Non-compliance with existing zoning regulations at the time of purchase

When Is Title Insurance Recommended or Required?

Several situations warrant title insurance in Quebec. Mortgage lenders frequently require it during refinancing to avoid the costs and delays of obtaining a new certificate of location. It is also recommended when the certificate of location is more than 10 years old and changes may have occurred to the property or neighbouring lots. When purchasing an older property with a complex title history, title insurance provides additional protection against risks that the notarial examination may not fully cover.

The Mortgage Broker's Role

Mortgage brokers in Quebec must understand how title insurance works and be able to explain it to their clients. When a lender requires title insurance as a financing condition, the broker must clearly inform the client of the cost, coverage, and reasons for this requirement. The main title insurance providers in Canada are First Canadian Title (FCT), Stewart Title, and Chicago Title. The broker should direct the client to the acting notary for policy purchase, as it is typically obtained at closing.

Frequently Asked Questions

What is title insurance and what does it cover?

Title insurance is a policy that protects against financial losses related to defects in a property's title. It covers real estate fraud, errors in public registries, undetected encroachments, undisclosed mortgages, and title defects predating the policy date. It is paid once and remains in force as long as you hold the property.

Is title insurance mandatory in Quebec?

No, title insurance is not legally mandatory in Quebec. However, some lenders may require it in specific situations, particularly during refinancing, when there are minor irregularities in the chain of title, or when the lender agrees to waive the requirement for an up-to-date certificate of location.

Does title insurance replace the notary's title examination?

No. In Quebec, the notary remains responsible for title examination during a real estate transaction under the Civil Code of Quebec and the Notarial Act. Title insurance provides an additional layer of protection against risks that even a thorough examination might not detect, such as fraud or registry errors.

How much does title insurance cost in Quebec?

The cost of a title insurance policy in Quebec generally ranges from $250 to $500 for a standard residential property, depending on the property value and the type of coverage chosen (owner, lender, or both). It is a one-time payment at closing.

Does title insurance protect against real estate fraud?

Yes. Real estate fraud, including identity theft and document forgery, is one of the major risks covered by title insurance. In Quebec, cases of identity fraud have been reported where individuals impersonate the real owner to sell or mortgage a property without the true owner's consent.