As we understand it, the government�s stated intention for the amendments to the Land Titles Act contained in Bill 152 is to return Ontario to a deferred indefeasibility regime as was in place prior to the decision by the Court of Appeal in Household v. Chan in late 2005. While it remains to be seen how the courts will interpret the new legislation, our expectation is that the following will be the impact of Bill 152 on property rights in Ontario:

Notwithstanding the changes to the legislation, title insurance is still an appropriate tool for property owners, property purchasers and mortgage lenders to use to protect their interest in real estate. For property owners, there are still circumstances where their title may be impacted by fraud, and where they will need to apply to the LTAF for compensation.

For property purchasers, until they can be guaranteed of the identity of a vendor, their purchase of a property will always be susceptible to attack by a predecessor in title.

For mortgage lenders, until they can be guaranteed of the identity of the vendor or the borrower, their mortgage interest in the title will always be susceptible to attack by a prior registered owner, and their right to compensation under the Land Titles Assurance Act will be limited by what the director of Land Titles deems to be appropriate due diligence in the mortgage lending process. At this time, there are no guidelines as to what the director considers to be appropriate due diligence.

Finally, in all circumstances there will be legal fees incurred by the property owner, purchaser, and lender in order to resolve the matter. It is unclear as to what extent legal fees will be covered by the LTAF. Further, while not an issue for most lenders, these fees, even if eventually compensated by the LTAF, may pose a significant up front burden to an individual.

Title insurance, with its defence of title provisions, allows for the payment of legal fees related to covered title risk without the insured having to pay these fees up front.

Additionally, the crown has taken the position on two recent cases that a mortgage lender who advances funds prior to the certification of the borrower�s title, can never be said to be relying on the register. The director of Land Titles may use this line of reasoning to deny a claim by a lender for compensation from the LTAF where the lender has advanced mortgage funds prior to the borrower�s deed being certified.

Not to be overlooked is that fact that title insurance provides substantial coverage for matters other than title fraud, including existing work orders, zoning non compliance, many survey related matters, tax arrears, legal access etc.

Accordingly, notwithstanding the passage of Bill 152 and the amendments to the Land Titles Act, title insurance represents good value for property owners, property purchasers and mortgage lenders, with respect to either residential or commercial property.

A Closer Look: Fraud Prevention Questions

Over the past year, Stewart Title has implemented questions for residential and commercial clients designed to elicit information and give indication if a transaction may be fraudulent. These carefully worded questions were designed to be as succinct and unobtrusive as possible, for the specific purpose of obtaining salient information to assist in identifying potential frauds. Transactions that are flagged in this process undergo additional underwriting review. Stewart Title understands the importance of a timely response from our underwriting department on flagged transactions. Your cooperation in responding to inquiries and providing documentation is greatly appreciated, as it assists in our ability to respond.

The basic framework of these questions can be used by lawyers as a template to consider when dealing with real estate transactions in general. The few minutes spent answering the additional fraud prevention questions can save a lawyer from having his or her practice investigated by police, The Law Society, and other investigators. This additional due diligence assists in avoiding the substantial cost, wasted time and potential tarnishing of professional reputation that results from a lawyer unwittingly acting on a fraudulent transaction.

Why are we asking these questions?
We have received inquiries as to why we question if there has been any amendments with respect to the purchase price and/or deposits after the date of the signing of the Agreement of Purchase and Sale. The reasoning behind this is that such subsequent amendments or further deposits are unusual and may indicate an intention to artificially manipulate the purchase price to obtain mortgage financing for which the individual might not otherwise qualify. Additionally, fraudsters have used this technique to avoid the need to bring in additional funds to close a transaction. Similarly, we ask if any portion of the deposit on a resale purchase is paid directly to the Vendor (not a Real Estate Agent or Solicitor). The mere fact of such a deposit does not necessarily indicate a fraud. However, large deposits paid directly to the vendor, particularly in private transactions, require closer examination as they may be indicative of an attempt to obtain mortgage financing in an amount not appropriate for the transaction or may indicate collusion between two parties in a title fraud scenario.

ID requirement
Obtaining, reviewing and retaining Canadian/provincial government issued photo identification are not only requirements of Stewart Title, but that of the Law Society of Upper Canada and of the majority of Canadian lenders. In addition, lawyers should consider protecting themselves by obtaining Canadian/provincial photo identification from all vendors, as lawyers who act on transactions where the vendor client turns out to be a fraudster have undergone increased scrutiny with respect to their due diligence in verifying their client�s identity.

Eliminating fraud is everyone�s business
The prevention of fraud is a primary goal of the entire real estate industry. By taking a leading role in the achievement of this goal, lawyers solidify their position in real estate transactions, cement their relationship with lenders and convincingly demonstrate that they are integral and irreplaceable in the transaction.

What are they?
A lodging house is a dwelling or part thereof containing one or more lodging units designed to accommodate more than one resident. The residents may share common areas of the dwelling other than the lodging unit and the residents do not appear to function as a household.

Lodging units are defined as being for the exclusive use of the resident; the individual unit is not normally accessible by other lodgers and may contain a kitchen or bathroom, but does not contain both. This does not include hotels/ motels, nursing homes, group homes, or residential care facilities.

Which type of policy should be ordered?
A residential policy should be ordered where the dwelling has a shared kitchen and bathroom(s). Essentially this is a single residential dwelling where lodgers are renting rooms. This is regardless of the number of rooms being rented (i.e., where ten lodgers are permitted, this is still a residential policy).

A commercial policy should be ordered in the event that there are more than six self contained units (i.e., they contain their own kitchen and bathroom).

Search Requirements
In instances where a residential policy is being issued for a lodging house and the owner is seeking coverage for adverse circumstances that would be disclosed by a building and zoning search, this search must be completed prior to the completion of the transaction. If there are any deficiencies or adverse matters disclosed by the search, a Stewart Title underwriter should be consulted for guidance from an underwriting perspective.

• If the building and zoning search is not done, an underwriter should also be consulted to ensure that appropriate exclusionary wording is added to Schedule B of the owner�s policy. There will be no exclusion for the lender.
• If the policy being ordered is commercial, the building and zoning search is not required as long as the policy amount is within our commercial thresholds as set out in our commercial search requirements.
• If the policy amount exceeds the thresholds, then the search should be done.

Additionally, regardless of the type of policy being obtained, in those municipalities with a licensing requirement, the lawyer must confirm that a valid licence exists and will not expire before closing.

Ordering Policies For :

Properties with Boat Houses

As of January 1, 2006, the Ministry of Natural Resources (Ontario) reintroduced the requirement that owners of certain boathouses located on Crown Land, including the beds of most waters in Ontario, must enter into a lease with the Crown and pay rent in order for the boathouse to remain.

This lease requirement affects boathouses with second storeys (regardless of use), boathouses containing living accommodation, or boathouses located remotely from the owner�s privately owned upland property.

Search Requirements
If you are acting on a transaction where there is a boathouse situated on Crown Land or you are uncertain as to whether the boathouse is on Crown Land, we require that you conduct the appropriate inquiry with the Ministry to determine if there is a lease requirement and if it has been entered into. If you do not conduct this inquiry or the result is adverse, you must contact an underwriter prior to the completion of the transaction so that this issue can be excluded on the owner�s policy. Generally speaking, lenders will receive coverage. The underwriter will exercise his/her discretion when determining whether the lender should receive coverage for this issue.

Multi-Unit Requirements
Additionally, if there is a living accommodation in the boathouse in addition to a cottage on the property, we consider the living unit in the boathouse to be a second unit triggering our building and zoning and fire department work order search requirement for owners.

If no search is conducted or results are adverse, then we will exclude this issue for the owner. An underwriter should be contacted in these circumstances. Generally speaking, lenders may be covered subject to equity and the value of the boathouse compared to the overall property value.

We have become aware that some municipalities in Ontario have passed by-laws requiring two-unit properties to be registered with the municipality in order for these two-unit homes to be considered legal. Essentially this is to deal with basement apartments.

Background Section 167 of the Municipal Act, 2001 S.O. 2001, c.25 allows a municipality to pass by-laws to provide for the registration of two-unit houses. The net effect is that, notwithstanding the zoning designation of the area in which a dwelling is situate, all two-unit dwellings in the municipalities that have passed such a by-law must be registered in order to be considered legal.

The city will not usually comment on the registration status of a property in a zoning compliance report unless it is expressly asked to do so in the request, or unless they have something in their file which suggests multi-unit use; in other words, a standard zoning compliance request may not flag the deficiency.

Municipalities Affected
To date, we are aware that the following municipalities have this requirement:

• Barrie
• East Gwillimbury
• Guelph
• Oakville
• Oshawa
• Pickering

Search Requirements for affected municipalities are as follows: City of Barrie - has created an online list of properties that have been registered with its municipality as two-unit dwellings. Click here to determine whether the property has been registered.

When submitting your building and zoning report to the City of Barrie to confirm whether the present use as a duplex complies with the present zoning by laws, we require that you expressly ask about the registration status of the dwelling.

Please note � the fire department work order search must also be done.Other Municipalities � For the balance of the affected municipalities, if there is no online inquiry available, you need only follow the second requirement and ensure that you request information as to the registration status of the two-unit dwelling when submitting your building and zoning compliance request.

Underwriting
If you are unable to confirm that registration has occurred, we must add a specific exception to the owner policy for the lender to receive full coverage. It reads as follows:

�The Property is not registered with the City of ******* as a legal two-unit dwelling. All matters arising therefrom, including, but not limited to, work orders, zoning non compliance, and fire retrofit are expressly excluded from coverage�.

In addition to traditional MPAC tax assessments and certified appraisals, Stewart Title will now accept letters of opinion from realtors, eliminating the requirement for a "market value appraisal" designation. When an existing owner policy is being issued, this letter of opinion will be used in assessing fair market value on property.

All of Stewart Title�s marketing materials are just a button click away! Click here to browse our database of downloadable PDF brochures at any time.

Stewart Title would like to thank those who participated in the �Visit the NEW stewart.ca and WIN!� contest.

Refinancing is the perfect time for clients to acquire protection of Stewart�s Existing Homeowner Policy!

Contact your local Business Development Representative or click here for more information on the policy.