Title Insurance
OPINIONby Nicola Wilson
Business Development Manager
Victoria and South Australia
First Title - Title Insurance
Most land in Victoria is registered under what is known as the "Torrens System" of land registration. While 
the system was adequate when introduced in the 1800’s, Sir Robert Torrens did not anticipate the way in which 3 levels of government would affect land ownership a hundred years later. Nicola Wilson, Business Development Manager – VIC & SA for First Title explains some of the ways in which title insurance can benefit purchasers and existing owners of real estate.
What is Title Insurance?
Put simply, a Title Insurance policy is a no-fault contract of indemnity based upon an agreed representation of the state of title to a particular property as at the policy date (being the date of settlement).
The four common types of Title Insurance policy are for:
- home owners
- commercial property owners
- residential mortgage lenders
- commercial mortgage lenders.
During a conveyancing transaction a Solicitor or Conveyancer will work diligently to identify risks that may affect property. They will often find matters that could affect use of the property in the future; however, there are also risks that the most diligent process cannot discover which may be insured under a Title Insurance policy.
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What is Home Owner Title Insurance?
Title Insurance for home owners generally, and in particular First Title’s Home Owners GOLD policy, protects purchasers and existing owners of residential property against risks that could cause stress and financial loss in the future. These risks may not always be discovered before settlement and can be categorised as ‘known’ or ‘unknown’ risks. In effect, a home owner policy insures over the property title due diligence process and if a purchaser suffers a loss, they simply make a claim.
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What are ‘known’ and ‘unknown’ risks?
‘Unknown risks’ are risks that are not identified during the Conveyancing transaction before settlement but that may arise during property ownership and cause financial loss to the owner. ‘Known risks’ are any defects in title that are disclosed by the vendor or otherwise discovered by the purchaser prior to settlement (eg. Building works completed without council approval). If there are no known risks evident a policy will be issued for ‘clean title’.
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What does a Title Insurance policy typically provide coverage for?
A typical home owner’s policy protects against risks including:
- illegal building works / structures
- mortgage or title fraud after settlement
- incorrect signature of a document
- forgery, fraud, duress, incompetency, incapacity or impersonation prior to settlement
- defective registration of a document
- lack of rights of access or use of services
- breach of covenants
- survey cover for boundary issues
- encroachment by or on to the insured property
- lack of zoning certificates
- title being vested in someone other than the insured
- problems with the registration gap (eg. Issues arising in recent Black v Garnock case)
The Title Insurer will also defend any challenge to the insured’s title, and if ultimately unsuccessful, will indemnify the insured against their loss if an insured risk occurs.
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Who uses Title Insurance?
A growing class of Title Insurance users in Australia and New Zealand are people purchasing homes, or who already own homes.
As the value of properties have soared, faced with growing risks such as fraud or forgery, illegal building works and other title defects that are more likely to have a significant financial impact, Title Insurance offers numerous benefits.
In addition, Title Insurance provides a solution for identified risks. Under the traditional conveyancing process, where a defect in title is discovered, a purchaser’s options can be categorised loosely as follows:
- if before exchange of contract, the purchaser can choose not to proceed or try and negotiate a reduction in the purchase price;
- if after exchange, the purchaser may have a right to rescind (in limited circumstances) or to claim compensation.
With Title Insurance, the purchaser has a further option. For the first time in Australia, a purchaser can take out insurance cover in respect of a known title defect.
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What does Title Insurance do?
Title Insurance is a viable solution to numerous issues that might present themselves in a conveyancing transaction:
- The most important thing Title Insurance does is to give the Conveyancer a wider range of options in helping clients to find practical, safe and financially efficient ways of managing their transaction.
- Title Insurance can offer protection in respect of known risks.
- Title Insurance offers protection over key risks such as illegal building structures – which is particularly important, given a recent Archicentre Report which suggested more than 25% of homes Australia-wide have some form of illegal building works.
- It can offer a quick route out of otherwise time consuming (important with fixed fees) problems.
- It offers reassurance to clients that someone else will meet the costs of defending their title should problems ever arise and will compensate them if the title cannot be defended, without the need to prove negligence.
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What does Title Insurance not do?
It doesn’t replace a competent Solicitor or Conveyancer. Title Insurance allows the Practitioner to transfer some of the labour and liability for certain aspects of title examination, but still requires the Practitioner’s input on a range of important matters necessary in a conveyance.
Title Insurance cannot deal with non-title matters such as contamination – and the Solicitor or Conveyancer needs to look carefully at the policy wording to understand the terms, conditions and exclusions – which may vary from title insurer to title insurer.
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How much does a home owner’s Title Insurance Policy cost?
Title Insurance is inexpensive. The premium is a one-off low cost payment that protects the purchaser for the life of ownership. For example, First Title’s Home Owners GOLD premium is from as little as $332.75 which includes GST and Stamp Duty (based on a Victorian policy for ‘clean’ title with a purchase price of up to $600,000).
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What does this mean for my Solicitor or Conveyancer?
Overall, Title Insurance can make the conveyancing process more streamlined for their clients, driving office efficiency and providing a risk management tool.
By ensuring that their client has considered and/or purchased Title Insurance, the Solicitor or Conveyancer is likely to have reduced professional exposure to risks inherent in the property title due diligence process that may not be determined despite the Conveyancing practitioner acting diligently – particularly where there is often insufficient time to carry out a thorough investigation into title before settlement.
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How do I purchase a Title Insurance policy?
Simply contact your Solicitor or Conveyancer to request a Title Insurance policy. First Title isa general insurerlicensed to issue Title Insurance policies in the Commonwealth of Australia.
Your practitioner will complete a request on your behalf and forward to First Title for approval. The policy will then provided to you together with an invoice requesting payment which is required within 7 days of the policy being issued.
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Who is First Title?
In Australia and New Zealand, the First American Group of Companies trade as First Title. As a general insurer First Title only issues Title Insurance policies; it does not issue any other type of insurance product.
First Title operates under the authority of the Australian Prudential Regulation Authority and is a registered company with the Australian Securities and Investments Commission.
First Title holds an Australian Financial Services (AFS) licence (licence no. 263876) which authorises it to provide general insurance product advice and to deal in general insurance products to both retail and wholesale clients. Underwriting risks are reinsured with our parent company in the United States, First American Title Insurance Company, which is the largest Title Insurer in the world and has been operating for over 100 years.
Through Title Insurance and a range of related processing and settlement services, First Title assists property lenders and owners with the streamlining and protecting of real estate transactions to greater levels than can be achieved through traditional avenues.
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I already own my home, can I still be insured?
Yes, First Title offers Existing Home Owners GOLD as protection for a property which is already owned. You’ll receive the same types of protection against fraud and forgery and ownership rights. Simply contact First Title on 1300 362 178 to arrange a policy.
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Does the policy cover pest & building inspections?
No, it doesn’t – this is specifically a policy designed to cover title defects and ownership issues.
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How long does a policy last?
The length depends on the type of Title Insurance policy – a home owner policy is valid for the life of ownership of the insured property whilst a Lenders’ policy is valid for the duration of their mortgage.
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