Toronto Lecture Series 2012

Transcription

1 Toronto Lecture Series 2012 Wednesday September 19, 2012 The Toronto Congress Centre Key Covered Title Risks: What you Need to Know Presented by: Karen Decker & Sandra Thwaites Stewart Title Guaranty Company

2 KAREN DECKER, LL.B. Stewart Title Guaranty Company Senior Counsel Vice President Underwriting & Legal As Senior Counsel and Vice President Underwriting, Karen Decker is responsible for underwriting large commercial transactions, introducing policy and underwriting changes and developing new underwriting products. Her team of underwriters has extensive experience in dealing with both residential and commercial transactions in all provinces and territories. In addition Ms. Decker holds the role of V.P. Legal. As head of Stewart Title s Canadian legal department, she is responsible for all corporate legal matters. Ms. Decker joined Stewart Title in 1998 as Counsel for Underwriting and Business Development. In this role, she was responsible for both underwriting transactions and educating real estate lawyers about the benefits of title insurance. Prior to joining the management team of Stewart Title, Ms. Decker was a sole practitioner in Toronto, Ontario focusing on real estate law. Ms. Decker holds a Bachelor of Commerce Degree from Carleton University. She earned her LL.B. from Osgoode Hall Law School in Toronto and she was called to the Bar in SANDRA THWAITES LL.B. Stewart Title Guaranty Company Vice President Claims and Compliance In her role of Vice President Claims and Compliance, Sandra Thwaites is responsible for overseeing all aspects of Stewart Title s claims and compliance department. Her background in commercial and residential underwriting, regulatory matters and claims handling provide her with the necessary expertise to ensure effective claims management and regulatory compliance. Ms. Thwaites joined Stewart Title in 2003, bringing more than six years of experience in the Canadian title insurance industry to her role. In March 2004, she was asked to lend her experience to Stewart International s Australian operations and was responsible for overseeing and building the Australian team. She returned to Canada in 2006 to take her current position. Before joining Stewart Title, Ms. Thwaites held progressive positions within the Canadian title insurance industry. Prior to that, she was a member of the legal team at a major oil and gas company handling real estate and environmental issues. She began her career as an associate in the real estate department of Weir & Foulds in Mississauga. Ms. Thwaites earned a Bachelor of Arts and a Bachelor of Laws from Queen s University in Kingston and was called to the Bar in She has served seven years on the executive of the Women s Law Association of Ontario, including two years as its president.

3 TABLE OF CONTENTS Toronto Lecture Series September 19, 2012 Key Covered Title Risks What you Need to Know Karen Decker Senior Counsel, Vice President Legal & Underwriting Stewart Title Guaranty Company Sandra Thwaites Vice President Claims & Compliance Stewart Title Guaranty Company Introduction 1 Key Covered Title Risks/Endorsements Covered Title Risk 20(f) building permit 2 Claims Experience 2 Covered Title Risk 20(a) and 15(b) survey 6 Claims Experience 9 Covered Title Risk 11(c) - condominium special assessment 11 Claims Experience 12 Septic Endorsement 13 Claims Experience 13 Vacant Land Endorsement 14 Claims Experience 15 Multi-Unit Endorsement 16 Claims Experience 17 Water Potability and Quantity 18 Sample Endorsements 19

4 INTRODUCTION STEWART TITLE LECTURE SERIES 2012 Key Covered Title Risks What you Need to Know The Law Society of Upper Canada s Rules of Professional Conduct deal explicitly with the subject of title insurance in Rule 2.02(10). Included in the commentary to that rule is the following: The lawyer should be knowledgeable about title insurance and discuss with the client the advantages, conditions, and limitations of the various options and coverages generally available to the client through title insurance. Before recommending a specific title insurance product, the lawyer should be knowledgeable about the product and take such training as may be necessary in order to acquire the knowledge. Accordingly, lawyers are obligated to have an understanding of the coverage available so as to be able to advise clients accordingly. Since title insurance has been widely available in Ontario for more than a decade some patterns have developed in terms of the coverage that has resulted in claim inquiries. This paper addresses a number of these covered title risks and provides a detailed analysis of them in order enhance the understanding of lawyers in Ontario. The paper will discuss this in the context of Stewart Title Guaranty Company s residential owner policy (unless otherwise set out herein). Before looking at the specific covered title risks it is worth discussing the sometimes overlooked preamble to the policy which sets out some basic title insurance principles. It reads: We insure you against Actual Loss resulting from: Any risks described in the Covered Title Risks as set out in this Policy if the event creating the risk existed on the Policy Date or, to the extent expressly stated, after the Policy Date; and, Any costs, legal fees and expenses we have to pay under this Policy. Key to this preamble are the words Actual Loss which are defined in the policy to mean: the difference between the value of the insured estate or interest as insured and the value of the insured estate or interest subject to the defect, lien or encumbrance insured against by the Policy. Accordingly, an important principle of title insurance is that even though an insured may be aware of a matter that could give rise to a claim, until such time as an actual loss has occurred any claim would be pre-mature. In addition this preamble introduces the important concept of the Policy Date which date is generally the date of registration of the transfer (owner policy) or mortgage (lender policy). Thus, except as otherwise set out in the policy, matters that could give rise to a claim under the policy must exist as of the policy date (but are unknown to the insured). These items first come to the attention of the insured after the policy date and it is at that time that the insured makes a claim. 1

5 Finally, the reference to any costs, legal fees, and expenses ties in to the Stewart Title s duty to defend which in residential owner policy reads as follows: We will defend your Title in any court case as to that part of the case that is based on a Covered Title Risk insured against by this Policy. We will pay the covered costs, legal fees, and expenses incurred in that defense. We can end this duty to defend your Title by exercising any of our options listed in item 4 of the Conditions. Item 4 sets out the Stewart Title s various options in resolving a claim. Thus, the duty to defend requires Stewart Title to respond to that part of court actions that is based on a covered matter but it does not require the insurer to continue that legal action if the title insurer chooses to resolve the claim in another manner. While Stewart Title is defending title it pays the legal fees, costs and expenses related thereto. Such costs generally need to be preapproved by Stewart Title and as such an insured should contact Stewart Title as soon as possible after being alerted to any court action that may involve a claim and should not commence court action without first consulted with its insurer. KEY COVERED TITLE RISKS/ENDORSEMENTS Covered Title Risk 20(f) the building permit coverage Covered Title Risk 20(f) deals with building permits. It states: 20. You are forced by a Governmental Authority to remove or remedy your existing structure(s), or any portion thereof, other than a boundary wall or fence, because (f) any portion of it was built without obtaining a building permit from the proper Governmental Authority, provided a building permit would have been required by such Governmental Authority at the time of construction of the structure or relevant portion thereof. Note for residential lender policies this coverage is found in Covered Title Risk 15. The key components of this Covered Title Risk include: i) the requirement that for a claim to be triggered the governmental authority must be requiring the insured to take action to remove or remedy the structure; and ii) that a building permit was required at the time of construction; and iii) no coverage is provided for fences or boundary walls. A Governmental Authority is defined in the policy to be a department or division of the government of Canada, or any province or territory or of the municipality in which the Lands is located which has jurisdiction with respect to matters of building and zoning compliance. Generally speaking the lack of a required permit is not something that would be revealed by a building and zoning search in most municipalities (unless the standard search would provide a list of all permits ever having been issued for the property). Accordingly, the fact that the building and zoning search is waived for residential single family property owner policies (and all residential lender policies) is not particularly relevant for building permit issues. Thus the Covered Title Risk 29 which reads Any adverse circumstance affecting the Land which would have been disclosed by a Local Authority Search of the Land at the Policy Date. is generally not applicable for matters where building permits were not obtained when required. On the other hand, where a building and zoning search reveals open permits (not closed due to lack of final inspection etc.) Covered Title Risk 29 is applicable. From a claims perspective, there is specific language in the residential owner policy dealing with claims under provision 20(f). Condition 4(i)(ii) reads as follows: 2

6 Our choices when you notify us of a Claim After we receive your claim notice or in any other way learn of a matter for which we are liable, we can do one or more of the following: (i) For a claim under Covered Title Risk 20(f), even if the defect is also covered under another Covered Title Risk, we have the following options: (i) Where the cost of removing or remedying the portion of the structure built without a permit is less than $50,000, we will pay for the removal or remediation. (ii) Where the cost of removing or remedying the portion of the structure built without a permit is greater than $50,000, we may, 1. Pay for the removal or remediation: or 2. End the coverage for the claim by paying you your Actual Loss as determined by an appraisal conducted by a member of the Accredited Appraiser Canadian Institute and those costs, legal fees and expenses incurred up to that time which we are obligated to pay. The appraiser will be selected by you from a list of at least 2 appraisers to be provided by us. The appraiser will be instructed by us. We will pay the appraiser s fees and expenses. If we cannot agree on the value of the Actual Loss, we can end all coverage under this Policy by paying you the current fair market value of the Land without regard to the defect insured against by the Policy, and you will transfer your Title to the Land to us. When we choose the options in paragraph 4 (a), (b), (d), (e), (f), (g), (h), (i), all our obligation for the claim ends, including our obligation to defend, or continue to defend or prosecute any legal action. Accordingly, for losses over $50,000 the claims department can decide under #2 above to obtain an appraisal and pay the loss determined by the value of the property with the structure that was built without a permit and the value with the structure. While we endeavour to fully satisfy the insured, there are occasions where a structure is not legally permitted to be re-built or where the cost to remediate is much greater than the value of the property (or the actual price the insured bought the property for) and accordingly we exercise our option as set out in this clause. The impact of the exclusions in the policy must also be considered. A residential owner policy includes the following exclusions from coverage: Exclusion #3: Risks: that are created, allowed, or agreed to by you; that are actually known to you, but not to us, on the Policy Date; Exclusion #7: The failure of your existing structure(s) or any part of them to be constructed in accordance with applicable building codes. This exclusion does not apply to violations of building codes if notice of the violation appears in the Public Records at the Policy Date or if the existence of the violation would have been disclosed by a Local Authority Search of the Land at the Policy Date. 3

7 This exclusion does not limit the coverage described in Item 20(f) or 29 of the Covered Title Risks. Exclusion #9: Any matters disclosed in a building inspection report or home inspection report obtained by the Insured prior to the Policy Date. In the event of a claim under a covered title risk that relates to a loss arising from a physical deficiency with the house such as under Covered Title Risk 20(f) the Claims Department will require that it be provided with a copy of the agreement of purchase and sale, any building inspection report and the SPIS (or other relevant material). If these documents or other circumstances reveal that the insured was aware of a deficiency that was not disclosed to Stewart Title prior to closing, and the insured agreed to close the transaction in any event, then it may fall within exclusion #3 as a risk that was agreed to or known to the insured but not Stewart Title. Exclusion #7 and #9 above may also apply. Accordingly, the prior knowledge of the insured is a crucial factor in determining whether a loss will be compensated under a policy. Stewart Title does not require that lawyers review available home inspection reports of Seller Property Information Statements ( SPIS ) in order to obtain a policy. However, where a SPIS or home inspection report is available, lawyers should inform their client of the fact that matters disclosed in them may affect coverage in the title insurance policy. This is particularly important where a Closing Protection Letter endorsement is being obtained. Should you decide to review the SPIS or home inspection report you must contact Stewart Title prior to closing for an underwriting decision should the SPIS or home inspection reveal deficiencies or matters that may impact the risk involved in insuring the property. Claims Experience - Covered Title Risk 20(f) A) An insured purchased a home in The house had a large deck across the entire back of the house. After moving, the insureds experienced water leaking in through the rear door and discovered that the deck was not properly fastened to the supporting structure. They had the municipality inspect the deck, and it was confirmed that the deck had been built without a permit, and an order was issued by the municipality. Engineering reports were commissioned which confirmed that the deck in no way met building code requirements and in order for a permit to issue work was required. The claim was investigated and it was determined through a review of the documents that the insureds were not aware of the lack of permit for the deck prior to the order issuing. Accordingly, coverage for the losses related to the deck was provided to the insured. The cost of replacing the deck was in excess of $30,000, and a settlement was made with the insured accordingly. It is important to note that the basis for coverage was not the lack of compliance with building code (since exclusion 7 applies), nor the fact that there was a work order (since it was issued post policy date). Rather, the coverage in Covered Title Risk 20(f) was applicable as the pre-requisites to that coverage existed; namely, work done without a required permit and the fact that the insured was being forced by the municipality to remedy the matter. B) In another instance, where a municipality issued an order relating to work done without a permit, because of the information contained in the pre-purchase home inspection report, unfortunately, we were unable to provide coverage to the insured. In that case the homeowner received an order from the municipality relating to the following: 4

8 the existing two storey wood framed rear addition, has been constructed without benefit of building permit; does not conform to the Building Code and is in an unsafe condition due to structural deficiencies in as much as: 1. Wooden spandrel beams, that support rear addition are bearing directly on ground, severely deteriorated due to wood/soil contact and termite infestation. 2. The exterior walls, floor and ceiling of the addition is inadequately framed and supported. The transaction had been conditional upon a home inspection report which was reviewed by the claims handler. The following information was revealed in the Home Inspection Report: the rear structure of the house is low quality and may need expensive re-supporting in the long term termite treatment is required for the structure at the exterior of the house, the rear addition had wood/soil contact and did not provide the minimum 8 inch clearance required by Code. With respect to the structure generally, the inspector commend: o further evaluation of the foundation is recommended. o Settlement is visible in both the addition and main portion of the house. This is not a recent occurrence but should be monitored. The kitchen foundations may need eventual repair. o Joists sag, concentrated load o Walls cracked. Some shifting noted o There are termites embedded in the wall of the rear crawl space and basement posts and further evaluation by a specialist is recommended. Because the deficiencies set out in the order, namely the problem of wood/soil contact and termite infestation in the rear addition, and the improper supporting in the addition were referred to in the home inspection report, the matter was not covered by the policy. C) While the policy covers work orders issued where work has been done without a permit, there is an exclusion where the work is done by the insured themselves after they have purchased the property. Recently, we received a claim on a residential property where the insured received an order from the municipality relating to work done on the home without the benefit of a permit. As the property had been owned for an extensive period of time, we asked the insured to confirm that there had been no work done on the property since her purchase that required a permit, and she swore a statutory declaration to confirm that. We did review the MLS listing at the time of her purchase and the MLS listing when she tried to sell the property a year after she bought it. There were several discrepancies between the photos and the description of the property in the MLS listings from years earlier and the current state of the property. For example there were now two doors on the front façade instead of the one shown on the MLS listings, the second floor contained a kitchen, a bathroom and two bedrooms whereas in the MLS listing, it contained only bedrooms and bathrooms, the main floor contained bedrooms, whereas before it did not have any bedrooms only a living room, dining room and kitchen. As a result of our findings, the portion of the claim which relates to work done by the insured without a permit after she purchased the property will not be covered. 5

9 Covered Title Risk 20 (a) and 15(b) survey coverage One of the main benefits of title insurance is found in the survey coverage. In particular, Stewart Title does not require that an existing survey be available in order to provide our residential survey coverage to owners or lenders. There are two Covered Title Risks in the residential owner policy which deal with survey related matters. These are 20(a) and 15 (b). For residential owners Covered Title Risk 20 (a) reads: 20. You are forced by a Governmental Authority (or in the case of 20(a) hereunder, you are forced by the affected neighbour or a party who benefits from the Easement) to remove or remedy your existing structure(s), or any portion thereof, other than a boundary wall or fence, because: (a) it extends on to adjoining land or on to any Easement (even if the Easement is excepted in Schedule B); Covered Title Risk 20(a) deals with situations where the insured s structure encroaches onto an adjoining property. Mere knowledge that the encroachment exists will not trigger a claim under 20(a). Rather, in order for a claim to be made, the party who has the right to require the removal of the encroachment must be asserting that right. There is no coverage for the removal of a fence or boundary wall that is not on the lot line. Covered Title Risk 20(a) does not deal with encroachments onto the insured s land. This type of encroachment must be reviewed in the context of Covered Title Risks 15(b) and 21. Covered Title Risk 21 in the residential owner policy reads: 21. Someone else, after the Policy Date, builds a structure other than a boundary wall or fence which encroaches on to your Land. Covered Title Risk 21 involves a post policy date situation where a neighbour builds a structure onto the insured s property other than fences or boundary walls. Thus if, without permission of the insured, a neighbour builds a structure (other than a fence or boundary wall) on the insured s land and refused to remove the encroachment, the insured may claim under Covered Title Risk 21. Both Covered Title Risks 20(a) and 21 deal with situations where a loss occurs during the insured s ownership. Covered Title Risk 15 set out below deals with situations where the loss surfaces at the time of a future sale or mortgage of the land. Covered Title Risk 15(b) of the residential owner policy reads: 15. Your Land is unmarketable, which allows another person to refuse to perform a contract to purchase, lease or make a mortgage loan because: 6

10 (b) of adverse matters that would have been disclosed by an up-to-date Survey; A similar provision to 15(b) is found in the residential lender policy as follows: 16. Any violation, variation, or adverse circumstance affecting the Land that would have been disclosed by an accurate survey, including but not limited to any encroachment of existing improvements located on the Land onto adjoining land and any encroachment onto the Land of existing improvements located on adjoining lands; Covered Title Risk 15(b) is triggered when an insured is selling or mortgaging the land in the future and a future purchaser or lender refuses to close because of defects that would have been disclosed by an up to date survey obtained at the time of their original purchase (i.e. the policy date). Generally this type of claim is triggered by a requisition by the purchaser s lawyer. It is in Covered Title Risk 15 (b) where encroachments (that existed at the time of closing) onto the land may become subject to a claim if they are requisitioned by a potential purchaser or a lender refuses to lender because of the encroachment. It must be kept in mind that encroachments onto the insured land will not be dealt with as a claim during the insured s ownership unless the neighbour whose structure is encroaching claims to have a legal interest in the land on which his/her structure is encroaching. Otherwise, since the insured saw the structure in its location when he/she purchased the land, the mere knowledge obtained after closing that the structure encroaches will not trigger a claim. However, if after the insured requests that the neighbour remove the structure, that neighbour claims to have a right to keep the structure in its location, a claim under Covered Title Risk 1[Someone else owns an interest in your title] of the policy may be triggered. The claims analysis will also involve a determination if the agreed to by you exclusion applies since if the insured knew of the encroachment onto his/her land when he/she purchased and agreed to close notwithstanding, no coverage will be available. Other types of issues that may lead to a claim under Covered Title Risk 15(b) include situations where a survey would have revealed a right of way of which the insured was unaware or where the land as legally described does not correspond to the land as shown on an up to date survey. One common misconception that insureds have about title insurance is that the title insurer will purchase a new survey for them when they decide to sell the land. This is not the case. However, where an insured has obtained a new survey for the purpose of proving a claim and the claim is deemed valid, the cost of that new survey may be included in the amount of compensation to the insured. It is necessary to keep in mind that a title insurance policy covers ownership of the land as legally described. The legal description being insured is listed in Schedule A of the policy. Exclusion 5 also confirms the limit as to what is being insured as it states that there is no coverage for lack of a right to any land outside the area specifically described in item 4 of Schedule A. This exclusion does not limit the coverage in 20(a) [encroachments] as discussed above. Accordingly, the policy is insuring that the insured owns the land listed in the legal description set out in Schedule A. It is not insuring that the dimensions set out in an agreement of purchase and sale or MLS listing are accurate. However, if the legal description on the title does contain measurements (including acreage) then the policy does insure that this is what the insured owns. Thus, if exact acreage or dimensions is very important to the client, it is prudent to obtain a new survey. 7

11 An example as to how this fits within the survey coverage is as follows: Legal description is: Part of Lot 10, Plan 128, being parts 1 and 2 on Reference Plan 43R Property is in Land Titles. No survey is available at closing. Had one been available it would have shown the fences are not on the lot line. The fence to the west encroaches onto to adjoining land and the fence to the east is inside the lot line. A diagram depicting this is: lot line North lot line fence South fence Westerly boundary issue: If the owner of the land to the west objects to the encroachment of the fence onto his/her land coverage under Covered Title Risk 20(a) is not triggered because the coverage does not include removing fence of boundary wall encroachments. However, coverage under Covered Title Risk 7 Someone else has the legal right to limit your use of the land as well as under Covered Title Risk 15 (b) (at the time of a future sale or mortgage) may apply. Thus, where it is determined that the insured does not have legal title to the land lying between the fence and the lot line as defined by the legal description, the insured should seek a claims determination. While each case is viewed on its particular facts, if land is fenced in which the insured is using and was under the belief that it was his/her land, then it coverage would be available. Generally speaking, the extent of the loss payable under the policy would be the loss in value of the property without that particular strip of land. The insured can use that money to try to purchase the land. 8

12 Easterly boundary issue: In this case, the fence is within the lot line. In a Land Titles system (unless adverse possession was established prior to the conversion to Land Titles) the adjoining owner will not (as a result of possession) obtain ownership of the strip of land lying between the fence and the lot line of the insured land. If the insured discovers that the fence is not in the correct location, this will not lead to an automatic claims payment nor will Stewart Title pay to move the fence. Rather the insured can exercise his/her right to move the fence to the lot line. If the adjoining owner objects to the moving of the fence to the lot line and claims to have a legal right to the strip of land, then the duty to defend is triggered as the adjoining owner is claiming to own an interest in the title to the insured s land and Covered Title Risk 1 applies. In this case, Stewart Title will determine the appropriate remedy which may include simply paying the loss in value or may involve defending the insured s ownership interest in court. Note for properties in the Registry System, claims are handled in a similar manner. However, evidence of adverse possession is often crucial to determining who owns a disputed parcel of land. With respect to correcting title i.e. getting a reference plan and new legal description (and potentially a severance) so that the legal description reflects what is actually on the ground timing of the claim in important. At the time of a settlement of a claim that occurs during the insured s ownership of the land, obtaining a new legal description will not generally be part of how a claim is resolved. However, in the event of a future sale, if this is requisitioned and a new purchaser (or lender) refuses to close a transaction without a new legal description, then at that time one of the options to be considered in resolving the claims is to get a new legal description. One area that some insureds mistaken believe falls within the survey coverage are situations dealing with issues of trespass or disagreement between neighbours over mutual driveways. If a neighbour is simply trespassing by leaving his/her car parked on a mutual driveway and thus blocking the insured, this is not a covered matter. If, however, the neighbour, has asserted the legal right to occupy the driveway exclusively (i.e. via litigation being commenced or a demand type letter from a lawyer) then the duty to defend the insured s title may be triggered because someone else is claiming an interest in the land (Covered Title Risk 1 applies). Claims Experience Survey Issues There are a number of different types of claims which arise under the survey coverage provisions of the policy, including boundary disputes with neighbours, claims for adverse possession, encroachments on to neighbouring properties of a portion, or all of a structure. While a great many of these occur on rural and cottage properties, urban properties as well can have defects related to matters that would be revealed by an up to date survey. There are a number of pre-conditions to coverage being available. First the defect has to be shown on a survey, and frequently this means the insured will have to obtain a survey. Where it leads to a claim compensable under the policy, then the cost of the survey is part of the claim. Where the defect is an encroachment onto a neighbouring property, the mere existence of the encroachment is insufficient to trigger a claim, rather someone, either a governmental authority or adjoining property owner must be forcing the removal of the encroachment. 9

13 A) In a recent claim, an insured purchased lake front property. He was aware that there was a shoreline road allowance and an encroachment agreement with the municipality with respect to a structure located on the shoreline road allowance. Shortly after closing, he started enlarging that structure and was issued with a stop work order by the municipality. In the course of complying with that stop work order, he discovered that in addition to the shoreline road allowance between his lot and the lake, one side of his property was adjacent to an unopened road allowance, and there was a shed, garden pool, retaining wall, and large gravel roadway that he used which were all located on the unopened road allowance. As well, a portion of a driveway leading to a detached garage building encroached onto the unopened road allowance. All of these had to be removed. Unfortunately, given the location of the garage, and garage door opening facing the unopened road allowance, it was not going to be possible to continue to use the structure as a garage. The original purchase price of the property was less than $200,000, however, the cost to remove all the improvements, and build a new garage was in excess of $50,000. B) As with all Covered Title Risks under the Policy, there is no coverage where the insured either knew about the defect prior to closing or agreed to the risk. We received a claim from an insured relating to a neighbour claiming adverse possession. At the time of purchase, the insured received a survey showing that the fences were not located on the property boundary, but inside the property boundary. Shortly after the insured moved into the property the insured advised the neighbour that they would be moving the fence on the southern boundary back to the legal lot line. The neighbour claimed adverse possession of the property between the fence and the legal lot line, and the insured submitted a claim. As part of the investigation we requested a copy of the Agreement of Purchase and Sale and all closing documents. In addition to the insured having reviewed the survey prior to closing, the Agreement of Purchase and Sale contained the following specific provision: The purchaser acknowledges that some of the fences on the property are not on the property lines as shown on the Survey attached hereto. The Purchaser agrees to accept the existing location of all existing structures, fences and landscaping on the property and will not raise an issue ownership (sic) of the property between the fence and the lot lines at the east and south of the property and agree to complete this transaction with full knowledge of these fact, without incident, adjustment or abatement in the sale price. None of this information had been disclosed to Stewart Title s underwriting department. If it had, the appropriate exceptions with respect to the fences could have been included in the Policy. Generally where at the time of closing a survey shows that fences are not located on the property boundaries, the following language is included in Schedule B exceptions to coverage: The location of a fence does not correspond to the location of the boundary line of the Property. This policy does not insure against loss or damage which arises from claims relating to title to and/or possession of that portion of the lands between the fence and the boundary line, which loss or damage includes but is not limited to claims arising from loss of use, loss in marketability and defence of title; furthermore, this policy does not insure against loss or damage arising from the removal or rebuilding of the fence. While it certainly would have been ideal if that language had been included in this particular policy, the lack of it does not change that the insured was aware at the time of purchase that the fences were not on the property line, and negotiated a purchase price which took into account the 10

14 risk relating to a dispute over ownership of the property between the fence line and the property boundary. Covered Title Risk 11(c) condominium special assessment coverage Covered Title Risk 11(c) of the residential owner policy reads: There is a lien or charge on your Title because of: (c) a charge by a condominium corporation. It is through this Covered Title Risk that claims related to arrears of common expenses (payable by the vendor) or special assessments may be covered. Unless the exclusions to the policy apply, such as where the arrears were agreed to be assumed by the insured, common expense arrears (up to the policy date) are covered by the policy. There does not have to be a registered lien on title, it is sufficient that the arrears pre-date the policy date and are due and payable and a lien could be registered if not paid. With respect to condominium special assessments, Stewart Title s guidelines with respect to the currency of a status certificate are factored into the analysis. Stewart Title s current guidelines are: Status certificate is dated 0-30 days before closing no need for an update Status certificate is dated days before closing the law firm should attempt to obtain a verbal update; if a verbal update is not available, this is sufficient Status certificate is dated days before closing a verbal update must be obtained, failing which a new certificate must be obtained. Status certificate is dated over 90 days before closing a new status certificate must be obtained In addition, residential condominium owner policies contain the following exception clause in Schedule B: Terms, Conditions, Agreements, Covenants, Restrictions, Obligations, Reservations, and Easements created by or contained in the Condominium Declaration, including the By-laws and Rules and Regulations annexed thereto, as same may be (further) amended. Items disclosed by the Status Certificate, including but not limited to, adequacy of the reserve fund. This does not limit the coverage in paragraph 11(c) of the Gold Comprehensive Protection Owner s Policy. Taken together, the Schedule B wording and Covered Title Risk 11(c), in conjunction with our status certificate guidelines, mean that that the owner is covered for condominium common expense arrears and outstanding special assessments due as at the policy date or which would have been disclosed by a status certificate obtained as of the policy date. Of course, where the insured is aware of these items he/she should properly adjust for them on closing. There is no coverage for such items as adequacy of the reserve fund, litigation against the condominium corporation, and major work that is occurring or may need to be completed in the future. 11

15 For residential lenders where the requirement for a status certificate is waived, there is coverage for losses incurred by the lender for adverse circumstances (including common expense arrears and special assessments) affecting the land that would have been disclosed by a status certificate obtained as of the policy date. Claims Experience condominium special assessments A) With respect to condominium special assessments, where the assessment is levied prior to the policy date, as outlined above, there is coverage for this matter under the policy. We have seen claims where a status certificate is obtained 30 days prior to closing in accordance with Stewart Title s requirement. However, in the period between the date of the status certificate and the date of closing, a special assessment is passed. In those circumstances, there is coverage for the full amount of the special assessment under the policy. Where, however, the board has not passed a special assessment until after the closing date, unfortunately, there is no coverage under the policy. There have been instances where board meetings occur weeks after closing to discuss the results of engineering studies or reserve fund studies, and as a result of the findings of those studies, special assessments are levied at those post policy meetings, there is no coverage for this under the policy. As a general note, our experience with respect to condominium properties is that we are seeing a rise in claims. These claims can arise in several different areas. The first and most common type of claim is the missed parking or storage unit. In these claims, the insured s lawyer missed the fact that in addition to the deeded residential unit, the insured should be getting a registered interest in a parking unit or storage unit as well. Frequently we see that these units have been dropped from a chain of transactions often dating back decades. Related to this type of claim is the claim where the parking unit the insured has title to is not the parking unit which they expected to own. Not all parking units are created equally. Depending on the location of concrete piers, some parking units are more desirable than others, as are covered as opposed to surface parking spots. It is important for lawyers to review all the condo plans with the purchaser to have them confirm that they are getting title to the units they were shown by the real estate agent. Where a parking or storage unit has been missed, we can try to resolve the claim by trying to locate the last registered owner of the unit and having them sign a transfer of that unit to the insured. Where that is not possible, we bring a court application to obtain a court order transferring the parking unit or storage unit to the insured. Additionally, as was mentioned earlier, if a matter is disclosed in the status certificate, there is no coverage for it under the policy. We have received claims where an insured purchased multiple units in a townhouse complex near a post secondary institution with the express intention of adding and extra bedroom and bathroom in the basement, and renting each unit out to as many students as possible. After he completed those renovations (for which he did not seek condo board approval or obtain building permits), he was told by the condominium board that there was a limit as to the number of people he could have as tenants in the structure. This restriction was contained in the condominium rules and specifically referenced in the status certificate. 12

16 Septic Endorsement The Septic Endorsement is provided for residential policies only. It may be obtained without conducting a letter inquiry search with the local governmental authority. A few key items that purchasers should be made aware of are: It is not a functionality warranty nor a guarantee of the age of the system if it breaks down that does not mean Stewart Title will repair it It deals with the legal status of the system Coverage is only available if there is a local governmental authority that will respond to letter search inquiries A no record response is not an adverse circumstances that will lead to a claim Coverage exists for losses arising from 3 items: 1 - work orders or deficiency notices against the system that exist at the policy date but are unknown to the purchaser; 2 losses if a local authority search would have disclosed: that the certificate of approval and/or the use permit issued for the private septic system servicing the land does not conform with the current as-built nature of construction; or 3 losses if a local authority search would have disclosed: that a certificate of approval and/or a use permit had not been issued at the time the system was constructed and a certificate and/or use permit was required at the time of construction. Claims Experience Septic Endorsement Claims relating to septic issues are certainly amongst the most time sensitive that we receive. Problems with a septic system can lead to a significant impairment of the use and enjoyment of a home. Unfortunately, the mere malfunctioning of a system does not lead to coverage under the policy, but rather the claim must fall within the specific coverage provisions mentioned in the septic endorsement. With septic claims, the same investigation occurs as with other types of claims, that is, that closing documents, the MLS listing, the Agreement of Purchase and Sale, the seller property information statement (if any) and any pre-purchase home inspection reports are reviewed. This information does show what knowledge the insured had at the time of purchasing. A) In a recent claim, the insureds purchased a property where the septic system had been installed recently, however within two years of moving into the property, the insured noticed that the system was not functioning properly. An inspection from the local Health Unit revealed that the system had been approved for a home with two bedrooms and two bathrooms, but that a third bedroom had added to the house. While the tank itself was still satisfactory, the Health Unit determined that the leaching bed was undersized by one third and required that it be increased in size. Coverage for this matter was given as a local authority search would have revealed that the septic system approvals were for a house with fewer bedrooms. The total cost of the claim was just under $50,000. B) In another claim, the insured purchased a cottage property in the Muskokas. In that area, the Health Unit is embarking on a review of all properties to determine if the septic systems are 13

17 adequate or need to be replaced. After closing when the insured attended at the cottage, they found a copy of an order issued prior to closing ordering them to replace the septic system. During the investigation of the claim, we reviewed the agreement of purchase and sale. A specific clause had been added to the agreement that stated that the purchasers acknowledged that the septic system needed to be replaced. It was apparent from reviewing the Agreement that the purchasers had tried to negotiate that it was to be replaced at the vendor s expense, however, the vendor struck out the reference to the system being replaced at the vendor s expense. It turned out the health Unit had attended at the property while the property was for sale and had issued the order shortly before the Agreement of Purchase and Sale was signed. The vendor required the purchaser to acknowledge that the septic system needed to be replaced, as he wanted to pass that responsibility onto the purchaser, and made sure that the purchaser was aware of it during negotiations of the Agreement of Purchase and Sale. In this instance, because the purchaser was aware that the septic system needed to be replaced during negotiations, the claim was denied as an agreed to risk. Vacant Land Endorsement When dealing with vacant land it must first be determined as to which type of policy is to be ordered. In that regard, Stewart Title s general guidelines are: A residential policy will be issued where: i) the policy amount is up to $2 million and the zoning is NOT commercial or industrial; or ii) the policy amount is over $2 million and the land is specifically zoned residential. If the property does not fit within i) or ii) above, a commercial policy is will be provided. For residential policies, a vacant land endorsement is attached to the policy. That endorsement confirms that the only zoning coverage being provided is that the current use as vacant land can continue. Specifically the endorsement indicates that The Company does not insure against loss or damage arising from the zoning for the Land not permitting the construction of a residential dwelling or any other improvement on the Land. In addition the endorsement states that there is no coverage for the inability of the Insured: a) to have constructed any improvements on the Land; b) to legally use any improvements on the Land constructed after the Policy Date; or c) to have constructed on the Land a single family residence. For consistency with the policy jacket, Covered Title Risk 25 which reads A residential with the municipal address shown in Schedule A is not located on the Land as at the Policy Date is deleted. Accordingly, where a client intends to build upon a parcel of vacant land it is appropriate to discuss with the client the advisability of conducting a zoning search and getting building permits in place. Otherwise, the client may be disappointed to find out that they cannot build what they want to build on the property. For clients also obtaining the Closing Protection Letter endorsement (also known as StewartProtect TM, the Purchaser Acknowledgement form that the purchaser must sign in order to obtain this additional coverage requires the purchaser to acknowledge that that their title 14

18 insurance does not cover any future changes or additions to the structures or that the use of the land may change in the future. The vacant land endorsement is often used in conjunction with an Improvement Endorsement. Again, this endorsement does not guarantee that future improvements can occur. What it deals with is increasing the value of the policy to reflect the value of the land and the improvements. In this fashion your client obtains the benefit of a greater policy amount. Our guidelines are as follows: Improvement Endorsement If your client is constructing improvements that will increase the value of the land, you may select the Improvement Endorsement if: i) construction is to commence within 6 months of closing; and ii) you have a written estimate as to the future value of the land including the improvements (This may be in the form of a certified appraisal or a construction contract). Please note: a realtor s letter of opinion is NOT an acceptable form of appraisal for valuing the improvement in situations where the improvement has not yet been built. We will accept a realtor s letter of appraisal when the improvement is completed. The policy amount will be increased to the estimated future value. Additional premiums may apply should the value of the improvements increase the total policy amount to a higher premium pricing threshold. If construction is to commence after 6 months from closing, the Improvement Endorsement should NOT be selected. The purchaser may contact Stewart Title after 6 months to request that the Improvement Endorsement be issued at that time. An administrative fee will be charged, as well as any additional premium applicable. Notwithstanding the limitations imposed by the Vacant Land endorsement, obtaining a policy for residential vacant land still contains valuable coverage provisions dealing with issues such as: title defects Planning Act compliance unknown easements affecting the land unknown rights of adverse possession title fraud particularly for lenders one of the areas of most risk that we are experiencing is for lender polices involving vacant land (mortgage free) access coverage tax arrears land is unmarketable because of adverse matters that would have been disclosed by an accurate survey Claims experience Vacant Land Endorsement Claims under the Vacant Land endorsement are not frequent; however, they do arise on occasion. The most frequent claim that is filed is that after closing the insured discovers that they cannot build on the land at all, or they cannot build the specific house that they want to build on the land. There are several reasons why an insured may be unable to build altogether, including the property being zoned Environmental Protection, access to the property being via a registered right of way, and not having frontage on a public road way, or the property being in a floodplain. 15

19 Unfortunately, there is no coverage under the policy to pay any damages where an insured is unable to build on the property. A title insurance policy insures the use of the property at the policy date. The Vacant Land endorsement does not change this. Where property is being purchased as vacant land, the policy specifically excludes losses related to an inability to construct anything on the land. As well, if there were a title related defect, such as an easement or right of way, losses as a result of those defects are calculated only on how they impact the use of the property as vacant land. The other type of claim which we frequently see where a Vacant Land endorsement is issued is where an insured discovers during the course of applying for a building permit, that in addition to paying for the permit, there are also lot levies or development charges which need to be paid. Because these levies vary depending on what the insured plans to build on the property, and are not due and owing until after the Policy Date, there is no coverage for those costs under the policy. While the Vacant Land Endorsement does impose limits on coverage under the policy, there are instances where purchasing a policy, even with this limit is advantageous. Three years ago we received a claim from an insured where the insured had purchased a large vacant residential lot with the intention of building their dream home. The property was purchased mortgage free, and for tax purposes, was registered in the name of a corporation. Shortly after closing a fraudster impersonated the corporate officer, and a large mortgage was registered against title. There was coverage under the policy for post policy fraudulent mortgages, and the legal fees incurred to cover the cost of having the fraudulent mortgage removed from title were covered. Multi-Unit Endorsement For residential policies of 2-6 units Stewart Title s protocols for multi-unit properties apply and they may affect the coverage available to owners. There are two key Covered Title Risks in a residential owner policy dealing with the zoning of the property. These provisions are: 15. Your Land is unmarketable, which allows another person to refuse to perform a contract to purchase, lease or make a mortgage loan because (c) your Land violates an existing zoning bylaw or ordinance. 20. You are forced by a Governmental Authority to remove or remedy your existing structure(s), or any portion thereof, other than a boundary wall or fence, because: (c) it violates an existing zoning by-law or ordinance. Unless a Multi-Unit Endorsement is attached to a policy, the use that applies with respect to the coverage in 15(c) and 20 is for use as a Single Family Residential Dwelling or Condominium Unit. If a Multi-Unit Endorsement is attached to the policy, the coverage is for the number of units (2-6) listed in that endorsement. In order for an owner to obtain a Multi-Unit Endorsement, a building and zoning search must be conducted to determine the legal number of units. [A fire work order search must also be conducted for residential owner policies.] As long as the number units that are in existence at the policy date are permitted according to the zoning bylaws, then the number of units in existence may be inserted into the Multi-Unit endorsement. Lenders will 16

20 receive the said endorsement without the need for a search and as such in that case it is the number of units input into the endorsement is the actual number of units in existence. In the event the required building and zoning search is not conducted an exception clause is added to Schedule B of the residential owner policy which reads: The Company insures the Property as a single family residential dwelling only. There is no coverage under this policy for loss or damage arising from the use of the Property for more than a single family residential dwelling. In particular, but not limited to, there is no coverage under Covered Title Risks 15, 20, 22, 29 and 32 for loss or damage related to the use of the Property for more than a single family residential dwelling. Accordingly, if the municipality requires the additional units to be removed, there would be no coverage. There would also be no coverage for work orders or lack of required building permits that relate to the additional units. Coverage still remains for use of the property as single family residential and for work orders or lack of permits provided they relate to the main unit and is unrelated to the additional units. If the fire work order search is not conducted the following exception is added to the residential owner policy: The within policy does not cover the Owner for loss or damage arising from work orders, notices of violation, or deficiency notices against the Property issued by the fire department. Clients should be advised about this exception language in the policy. [No exception is added to a lender policy when the searches are not conducted unless the law firm is aware of a problem and in that case it should be discussed with an underwriter prior to closing]. If a building and zoning search reveals that the number of units in existence is not legal, a Stewart Title underwriter should be contacted as soon as possible prior to closing for an underwriting determination. Generally speaking the owner will not be provided with coverage however, upon adducing enough evidence of a legal non conforming use, there may be coverage available. Such evidence involves sufficient statutory declaration evidence indicating continuous use prior to the date of the zoning by-law. Lenders may receive coverage even if sufficient evidence is not available depending on various factors, including the equity in the property. Claims experience Multi-unit Endorsement There is a significant claims experience with multi-unit residential properties. Prior to 2004, coverage was provided for multi-unit residential properties without requiring a search of building and zoning department records. This was changed in mid 2004, and to obtain coverage for the use and zoning of the property as a multi-unit residential property, a search of the building and zoning department records is required. While we continue to see claims for policies issued prior to the underwriting change, there has been a reduction in claims relating to the issue since the building and zoning search was required to obtain the multi-unit endorsement. A) One insured purchased a four-plex in Three years later, the municipality advised that under the existing zoning by-law, only two residential units were permitted, and issued a zoning violation, property standards violation and Fire Department orders against the property. The Fire 17

21 Order detailed fire code violations, including lack of fire separation and smoke detectors. The Property Standards order identified building code infractions including electrical violations and door and window maintenance issues. While there was no coverage with respect to the post policy date fire order and property standard violations, there was coverage with respect to the zoning issued as the property was insured as a 4-unit dwelling and the Multi-Unit Endorsement formed part of the policy. An appraisal was obtained to determine the loss of value of the property as a result of it only containing two rather than four units, and a settlement was paid to the insured. Water Potability and Quantity The policy provides no coverage with respect to the potability of quantity of water. Exclusion 6 reads as follows: Environmental concerns or matters of any kind, including but not limited to, legislation with respect to environmental protection, underground fuel storage tanks, water quality and water quantity. Notwithstanding the language of the policy, we do receive claims relating to either the insufficiency of water quantity, or that there is a problem with the potability of the water at the insured property. Generally, these claims include a detailed report with conversations with neighbours, area well drillers, the local health unit, water supply companies and others which lead to the conclusion that the vendors knew about the problem with the water and failed to disclose it. Where the claim is coming from a lawyer on behalf on an insured, it often includes a brief treatise on fraudulent misrepresentation and the concealment of latent defects. While it may be true that the vendor made a fraudulent misrepresentation or concealed a latent defect, unfortunately, there is no coverage under the owner policy for damages relating to the quantity or quality of water. The exclusion with respect to water quality and quantity applies to all properties, whether serviced by a well or on municipal water, where the complaint may relate to the level of lead or other contaminants in the property. Residential lender policies may have a water potability endorsement attached to them which states: The Company insures the Insured against loss or damage resulting from water supplying the Land not being potable as of the Date of Policy according to the standards of the Department of Environment to service the Land, provided, however, that nothing in this Endorsement or the Policy itself shall be construed as coverage for health issues related to the potability of the water. This Endorsement applies only if the Land is a residential single family home. This endorsement is not issued if there are known potability concerns with the water. It is important to note that for a loss to be covered under this endorsement it must be demonstrated that the water was not potable as at the policy date (i.e. mortgage registration date), not merely that at some future time it became unsuitable for human consumption. * This paper is of a general informational nature only. Please review the actual policy terms for full coverage particulars. Each claim is resolved on its own facts and circumstances. 18

22 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. O-7763 Charge $Nil ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY SEPTIC ENDORSEMENT Owner Policy 1. The Company insures against loss or damage sustained by the Insured arising from any outstanding notice of violation, deficiency notice or work order issued as of the Policy Date affecting the septic system which services the Land. 2. The Company also insures against loss or damage sustained by the Insured in the event that a Local Authority Search would have disclosed: a) that the certificate of approval and/or the use permit issued for the septic system servicing the Land does not conform with the current as-built nature of construction; or b) that a certificate of approval and/or a use permit had not been issued at the time the septic system was constructed and a certificate and/or use permit was required at the time of construction. 3. The Company does not insure against any loss or damage related to the functionality and/or age of the septic system unless such loss or damage arises from an issue covered under paragraphs 1 and 2 above. 4. For the purposes of item 29 under the Covered Title Risks section of this policy a response to a Local Authority Search indicating that there is no record with respect to a septic system installation or permit for the Land shall not constitute an adverse circumstance for the purposes of item Coverage under this Endorsement applies provided that the Governmental Authority having jurisdiction over the regulation of the septic system would respond to requests for certificates of approval, use permits and/or work orders, if requested. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

23 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. O-7763 Charge $Nil ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY 6. Coverage under this Policy and Endorsement applies if the septic system services only a residential house of 1-6 units. There is no coverage under this Policy and Endorsement for septic systems that service commercial buildings or residential buildings of more than 6 units or for mixed use commercial/residential buildings. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

24 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. M Charge $Nil ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY SEPTIC ENDORSEMENT Lender s Policy 1. The Company insures the Insured against loss or damage arising from any outstanding notice of violation, deficiency notice or work order issued as of the Policy Date affecting the septic system which services the land. 2. The Company also insures the Insured against loss or damage in the event that a local authority search would have disclosed: a) that the certificate of approval and/or the use permit issued for the private septic system servicing the land does not conform with the current as-built nature of construction; or b) that a certificate of approval and/or a use permit had not been issued at the time the system was constructed and a certificate and/or use permit was required at the time of construction. 3. The Company does not insure against any loss or damage related to the functionality and/or age of the system unless such loss or damage arises from an issue covered under paragraphs 1 and 2 above. 4. Coverage under this Endorsement applies provided that the governmental authority having jurisdiction over the regulation of the septic system would respond to requests for certificates of approval, use permits and/or work orders, if requested. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

25 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No(s). ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY Charge $Nil 1. The within Policy is hereby amended as follows: VACANT LAND ENDORSEMENT Owner Policy a. The addition of a new Covered Title Risk 34 which shall read: The following use is allowed as of the Policy Date under the zoning classification applicable to the Land continuation of the present use as vacant land. b. The deletion of Covered Title Risk Schedule B of this Policy is hereby amended to add the following exception from coverage: The Company does not insure against loss or damage arising from the zoning for the Land not permitting the construction of a residential dwelling or any other improvements on the Land. 3. Notwithstanding any other provisions of this Policy, the Company is not liable for and will not pay any loss or damage related to the inability of the Insured: a. to have constructed any improvements on the Land; b. to legally use any improvements on the Land constructed after the Policy Date; or c. to have constructed on the Land a single family residence. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

26 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No(s). ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY Charge $Nil 1. The within Policy is hereby amended as follows: a. The deletion of Covered Title Risk 12. VACANT LAND ENDORSEMENT Lender Policy 2. The Company is not liable for and will not pay any loss or damage related to the inability of the Insured: a. to have constructed any improvements on the Land other than a single family residential structure. This provision does not limit the coverage in Covered Title Risks 15, 17, and 19 of the Gold Residential Loan Policy. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

27 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. O-7763 Charge $Nil ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY MULTI-UNIT RESIDENTIAL ENDORSEMENT Owner Policy The within Policy is hereby amended as follows: 1. Covered Title Risk #20 is hereby deleted and replaced with the following: You are forced by a Governmental Authority (or in the case of 20(a) hereunder, you are forced by the affected neighbour or a party who benefits from the Easement) to remove or remedy your existing structure(s), or any portion thereof, other than a boundary wall or fence, or it cannot be used for residential dwelling units because: a) it extends on to adjoining land or on to any Easement (even if the Easement is excepted in Schedule B); b) it violates a restriction, covenant or condition affecting the Land, even if the restriction, covenant or condition is excepted in Schedule B; c) it violates an existing zoning by-law or ordinance; d) it is located on land under the jurisdiction of a conservation or similar governmental authority without approval; e) of any outstanding notice of violation or deficiency notice; f) any portion of it was built without obtaining a building permit from the proper Governmental Authority, provided a building permit would have been required by such Governmental Authority at the time of construction of the structure or relevant portion thereof. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada

28 ENDORSEMENT TO TITLE POLICY Attached to and forming part of Policy No. M-7764 Charge $Nil ISSUED BY STEWART TITLE GUARANTY COMPANY HEREIN CALLED THE COMPANY The policy is hereby amended as follows: MULTI-UNIT RESIDENTIAL ENDORSEMENT Lender Policy 1. Covered Title Risk #12 is hereby deleted and replaced with the following: The failure of the land to contain residential dwelling units, with the municipal address(es) shown in schedule A. 2. Covered Title Risk #13(c) is hereby deleted and replaced with the following: The failure of the Land to be zoned to permit residential dwelling units. 3. Covered Title Risk #17 is hereby deleted and replaced with the following: The inability to use the existing residential dwelling units, or any portion thereof, or any replacement thereof constructed after Date of Policy for residential purposes because that use violates any restrictions referred to in paragraph 7 of the Exclusions from Coverage. 4. Covered Title Risk #20 is hereby deleted and replaced with the following: Any use of the land for residential dwelling units being affected or impaired by reason of any lease, grant, exception or reservation of minerals or mineral rights referred to in paragraph 7 of the Exclusions from Coverage and damage to existing and future improvements, including lawns, shrubbery and trees resulting from the future exercise of any right to use the surface of the Land for the extraction or development of the minerals or mineral rights referred to in paragraph 7 of the Exclusions from Coverage. This Endorsement is made a part of the policy and is subject to all the terms and provisions thereof and of any prior endorsements thereto. Except to the extent expressly stated, this Endorsement neither modifies any of the terms and provisions of the policy and any prior endorsements, nor does it extend the effective date of the policy and prior endorsements, nor does it increase the face amount thereof. Signed under seal for the Company, but this Endorsement is to be valid only when it bears an authorized countersignature, dated 28 August, Countersigned: Authorized Countersignature Stewart Title Guaranty Company Toronto, Ontario, Canada