Title insurance is a specialised insurance policy which protects against possible risks that can threaten the legal ownership of purchased property or affect a person’s right to occupy and use their land and therefore cause financial loss.
It covers risks that were unknown when the contract was signed, because it is outside the range of a settlement agent or lawyer’s instructions when acting in a routine settlement to make every possible enquiry regarding the new property.
In the worst case, it is possible to lose the legal ownership of the property due to a fraudulent sale. Another scenario is financial loss caused when the council forcibly removes an illegal structure built by the previous owner or loss of land due to survey errors, boundary defects or non-compliance with zoning obligations or development laws.
How does it work?
In the above-mentioned scenarios title insurance operates like a normal insurance policy. A person needs to make a claim and, if eligible, the insurer will cover the costs involved. For example, a home-owner cannot ascertain prior to settlement whether a shed or extension on the property has received council approval or not. Title Insurance is purchased to cover the cost of rectifying the non-compliant structure, or of gaining retrospective approval.
What is generally not covered by title insurance?
- Risks which cause no loss or damage
- Boundary walls or fences
- Native title claims
- Risks or loss arising from environmental contamination or environmental protection
- Structures not built to approved standards or dilapidation of structures
- Pest infestation
How much does it cost?
At today’s date there are currently two providers of title insurance in Western Australia: First Title and Stewart Title. Both providers offer a policy of lifetime protection for a one-off premium.
Generally, as of April 2015, both these providers offer cover for a standard residential property with no known risks valued at $500,000 for just under $500.
Who needs it?
Anyone who is concerned whether the property of interest may have risks involved that are not readily seen, such as:
- Illegal or unapproved building works or extensions
- Survey and boundary problems
- Fraud, counterfeit and identity theft
- Unpaid rates or taxes
- Unregistered easements
- Disadvantage due to non-compliance with zoning or development laws
Julie Pedulla, Property Consultant