What is a title defect and what happens if my property has one?

A title defect is any flaw in the public record that undermines your clear, unencumbered ownership of a property. Defects range in seriousness: a minor defect might be an old mortgage that was paid off but never formally discharged; a major defect could be a forged deed in the chain of ownership or an unresolved court claim against the property.

When a defect turns up before closing, your lawyer will typically ask the seller to cure it — for example, by obtaining a discharge of an old charge or getting a court order resolving an ownership dispute. If the defect cannot be cured in time, you may have the right to delay closing or, in some situations, to rescind the purchase agreement entirely depending on what your contract says.

If a defect surfaces after you take ownership, your options depend on whether you have title insurance and whether the property is in the Land Titles system. Title insurance can cover your legal costs and losses flowing from many categories of pre-existing defects. The Land Titles Assurance Fund also provides a remedy for registered owners who suffer a loss due to certain fraud or errors in the Land Titles system.