Should I get title insurance when buying a property in a power of sale?

Title insurance is especially important — arguably even more important than in a standard purchase — when buying a property through a power of sale in Ontario. A power of sale is the process by which a mortgage lender sells a property after a borrower defaults, using their right under the mortgage to sell the property and recover the debt. Buyers in a power of sale transaction often receive very limited representations and warranties from the selling lender about the state of the property and its title.

Unlike a typical vendor, a lender exercising a power of sale typically sells the property "as is" and makes no promises about title defects, conditions of the property, or whether all prior encumbrances have been addressed. There may be unpaid property taxes, unresolved liens, or other registered claims that the lender is not disclosing or may not even know about. The lender is selling only the interest they can convey under the power of sale, which may not be a complete, clean title.

Title insurance gives you protection against exactly these kinds of unknown and undisclosed risks. Your lawyer will still do a full title search, but the "as is" nature of a power of sale makes the residual risk higher. Ensure your lawyer arranges both an owner's and a lender's policy as part of the power of sale closing.