Will title insurance protect me if the previous owner owed property taxes?

Property tax arrears are one of the off-title due diligence items your real estate lawyer checks before closing. A tax arrears search with the municipality or region reveals whether the seller owes outstanding property taxes on the property. Because tax arrears represent a charge that can be enforced against the land, outstanding taxes must typically be cleared from the sale proceeds on closing — the seller's lawyer ensures that any arrears are paid as part of the closing funds flow.

If the tax arrears search is done properly and the arrears are paid on closing, there should be no issue for you as the buyer. However, title insurance provides a backstop against scenarios where the arrears search misses something or where an assessment was issued shortly before closing and was not yet reflected in the municipal system.

Standard residential title insurance policies in Ontario typically include coverage for losses from outstanding property tax arrears or local improvement charges that were not disclosed or discovered prior to closing. This gives you protection if you later receive a notice that past taxes are owing that the pre-closing search did not catch.

This does not mean you should rely on insurance instead of the search — the correct approach is always to do the search, clear any arrears at closing, and have title insurance as a backstop for the rare case where something slips through.