Buying a home is a risk. Unapproved alterations, fraud, planning defects, the registration gap and mistakes from the Council all threaten a new home-owner. These risks can’t always be negated during settlement.
Title insurance is a new type of property insurance available to buyers and home owners which protects your ownership and use of the property by guarding against these risks.
Take this scenario:
A buyer buys a home marketed as having four bedrooms and one bathroom. They apply for a building license to add an en-suite to the main bedroom, but the Council’s reply isn’t what they expect: the bedroom is approved only for use as a storeroom. The shire won’t assess the en-suite application until they upgrade the room to comply with the standards for a bedroom.
The buyer was completely unaware of the breach of building code. After all:
- It was marketed and furnished as a bedroom,
- The Council was unaware, so there were no outstanding Council orders or requisitions found during the settlement process, and
- A building inspection had failed to uncover the breach.
Now, the buyer faces the considerable costs of upgrading the bedroom – including the costs of waterproofing the floors, erecting wall frames and raising ceiling heights.
If the buyer had taken out title insurance, the insurance company would have covered all upgrade costs necessary to satisfy the Council’s requirements.
Title insurance also covers losses like:
- The cost of demolishing and rebuilding an illegal extension inherited from the previous owner,
- The cost of repaying outstanding rates and interest that were not identified during settlement due to Council error, and
- The financial loss of a home due to fraud, forgery and identity theft.
While the settlement process is designed to minimise risk to the buyer and seller, there are some things settlement agents just can’t pick up – so there’s no guarantee that loss won’t be suffered and your title won’t be adversely affected in the future.
Title insurance is designed to provide cover for risks which, for whatever reason, aren’t discovered or are ‘hidden’ when the property is purchased.
A one-off premium with Stewart Title will provide protection forever. With the cost of the insurance far outweighing the potential risk, title insurance is one option in a buyer’s risk-management toolkit.
Note: Like all insurance policies, a Stewart Title Policy excludes certain risks from cover. For full details on cover and exclusions from cover, refer to a sample policy available on Stewart Title’s website: www.stewartau.com