As a successful commercial real estate investor, you know how to assess and manage your risk as you grow your portfolio. But not all risks on a deal are apparent.
Every transaction comes with unknowns, and those unknowns can come with price tags. Title insurance protects you and your portfolio from the hard-to-anticipate risks present on every property. As your portfolio expands, those risks compound. Here are three examples:
1. Title fraud
Purchasing title insurance as part of closing lets you move forward knowing that, if the worst happens, your investment is protected. The seller may not be who they say they are, and not every discharge on the title may be legitimate. Every deal carries the risk of substantial losses, because ID theft and title fraud in Canada are getting more sophisticated.
But so are we. FCT is the leader in fraud detection and prevention among title insurers in Canada. Our ability to react to new fraud trends, techniques and technology lets us keep your protection up to date. FCT’s underwriters monitor deals we receive for signs of fraud, and step in to inform buyers and lenders of red flags.
Fraud continues to pose risks to your investment long after point of sale. That is why FCT’s commercial title insurance covers up to $5 million in post-policy losses from fraud. Without that protection, it can be difficult or even impossible to recover any part of your loss from a fraudster registering a mortgage on your property or transferring its ownership.
2. Gap coverage
Even the most straightforward deals have gap periods—points in a transaction where an intervening interest can, even unintentionally, cause losses. Two gaps in particular pose risks for investors:
The work order gap
When you purchase a commercial property, your lawyer will submit municipal searches to check if any work orders have been issued. While the search is in progress, a new work order could be submitted, and you might not find out about it until after the closing date. FCT’s commercial coverage includes an endorsement to protect against losses from work orders submitted after your lawyer’s search and before your closing date.
The title registration gap
When your lawyer submits your transaction documents to a Land Titles Office (LTO), you are still at risk until those documents finish certification. If there are issues with the documents themselves, or worse, an intervening registration is submitted before certification completes, the LTO can reject those documents. Depending on your jurisdiction, this can happen even after you have transferred the funds and received the keys. This is why registration gap coverage is included in every FCT title insurance policy.
3. Errors in government responses
Your lawyer conducts thorough searches on the titles of the properties you purchase. They protect you by conducting due diligence, writing to applicable authorities to verify status and reviewing all the documents attached to your new property’s title to ensure you are aware of potential risks.
If government responses contain any errors, you could take on significant losses without warning, following closing or even years later when you sell. To help prevent this from happening to you, FCT’s commercial policies include a government response endorsement that provides coverage for losses from errors in written off-title responses from government that deal with deficiency notices, outstanding work orders or zoning.
It’s our duty to defend you
Title fraud, gap coverage and errors in government responses are not the only risks you face on every property you purchase—you may also have to defend your title, when the time comes. Your title insurance policy outlines dozens of covered risks, and FCT’s underwriters work to find new ways we can protect our insureds. Defending your interests is an important part of that protection, separate from coverage itself.
Every title insurance policy from FCT carries a duty to defend. That means that if someone claims an interest in your property, we take on the costs of defending your title, even going to court if necessary.
Title insurance is valuable because it can cover losses thousands of times higher than what you paid for the protection. It helps de-risk your position, letting you deploy more capital, with lower reserves. But, possibly most importantly, it provides peace of mind. It lets you focus on what really matters: growing your portfolio. Unexpected risks can always arise—FCT will be there to meet them with you. Visit FCT.ca to learn more.