It is a common understanding among real estate lawyers that residential title insurance will provide protection against municipal work orders and building bylaw violations discovered by buyers after they purchase a home.
But it turns out that not all title insurers offer this protection.
The issue came to light recently in the case of Paul and Stefanie Macdonald v. Chicago Title Insurance Company of Canada. Back in April, 2006, the Macdonalds bought a house in Toronto which had been renovated before they purchased it.
They later discovered that, during the renovation, load-bearing walls had been removed, making the second floor unsafe to use. No building permit had been issued for the alterations.
In November, 2013 the City of Toronto issued a work order requiring work to support the floor structure. The Macdonalds did the work and made a claim for the costs under their Chicago Title policy.
The policy itself provides insurance coverage for itemized risks if they affect title on or after the date of the policy, including expenses to repair the structure because of any outstanding notice of violation.
Yet Chicago Title denied the Macdonalds coverage on the basis that it was not covered by the policy.