If you are thinking of buying a property, taking out title insurance may be a valuable option to consider. There are many risks involved in buying a property, including illegal building works, boundary defects and non-compliance with development laws, to name just a few. Title insurance may protect you against these risks.
Doesn’t my settlement agent look after me?
In most cases appointing a competent settlement agent or settlement lawyer will remove most of the risk involved in buying a property. A settlement agent or lawyer will make a set of standard enquiries regarding the rates and taxes of the property and make reasonable efforts to ensure you receive title to the property at settlement.
However, some risks remain, even with the most competent agent, because it is outside the scope of a settlement agent or lawyer’s instructions when acting in a routine settlement to make every conceivable enquiry relating to your new property. Moreover, if you were going to make a full range of enquiries regarding a property or seek legal advice, you’d be better off doing that before you signed the contract.
Some risks such as incorrect boundary lines and unapproved buildings can continue to exist, despite the diligent work of your settlement agent, and are often only discovered years after settlement takes place. This is where title insurance can come in handy. If you’ve never heard of this particular type of insurance before, you’re not alone: title insurance is relatively new in Western Australia.
What is title insurance?
Title insurance is a specialised insurance policy, which protects against certain risks that threaten your ownership or affect your right to occupy and use your land. Title insurance includes cover for risks that were not known at the time of signing a contract. Examples may include:
- Illegal building works
- Survey and boundary issues
- Fraud, forgery and identity theft
- Unpaid rates and taxes
- Unregistered easements and interests affecting your interest
- Loss due to non-compliance with zoning or development laws
In cases where these issues arise, title insurance works like a normal insurance policy. You make a claim and, if you are eligible, the insurer will cover the costs involved. For example: a homeowner discovers after settlement that a shed or extension on the property has not received council approval. The insurer could cover the cost of rectifying the non-compliant structure, or of gaining retrospective approval.
As with all insurance you must check the wording of your policy carefully when signing up to see what you are covered for.
Some risks that are generally not covered by title insurance include:
- Risk which causes no loss or damage
- Boundary walls and 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?
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. As a rough guide, as of April 2015 both providers offer cover for a standard residential property with no known risks valued at $500,000 for just under $500. Interested parties should read their policy carefully and consult the insurer to determine the appropriate level of cover.
The verdict
Title insurance appears to provide property buyers with cover against a range of minor risks they may be exposed to at the time of purchase. The matters covered by title insurance are all in the “extremely unlikely” category, which is reflected in the relatively low, one-off premium payable. Nevertheless, for the risk-averse property buyer, title insurance is worth careful consideration. As always, the devil is in the detail and property buyers should read the insurance policy carefully.
