This fact sheet is for information only. It is recommended that you get legal advice about your situation.
Jan is purchasing a house, and she gets a conveyancer to help her with the process. The conveyancer suggests Jan buys title insurance to “help protect your house”. Jan is not sure what title insurance is or whether she needs it.
What is title insurance?
In Australia, “title insurance” refers to a type of policy offered by two American insurers to cover purchasers, lenders and home owners against a grab-bag of risks relating to:
- illegal/unapproved building works;
- unpaid rates and taxes;
- fraud and forgery;
- dealings with the property by third parties after exchange but before the incoming purchaser settles and is registered on title, and
- various other matters.
This fact sheet does not cover title insurance offered to lenders/mortgagees.
What isn’t covered by title insurance?
Like all insurance policies, title insurance policies will contain a number of exclusions. You will need to read these carefully and take advice about their meaning before deciding whether title insurance is for you.
It is especially important to understand that title insurance policies do NOT provide cover in respect of destruction of or damage to a building on your land – title insurance is not the same as, or a substitute for, home building or home contents insurance.
Common exclusions (i.e. things NOT covered) in the policies we have seen include:
- dilapidation or pest infestation of buildings;
- buildings that fail to comply with proper building standards e.g. the Building Code of Australia;
- environmental contamination;
- things that are known to you at the date your purchase of the land settles (for example, it is already contained in the contract of sale as a known issue).
Do I need title insurance?
You need to think carefully about whether you really need title insurance. Some of the protections you are paying for when you buy title insurance may already be contained in the legislation setting up the Torrens system in your State or Territory.
In Australia, almost all land is subject to the Torrens system of land registration. Your title to land is obtained on registration of your interest with the Registrar of Titles in your State or Territory. The state guarantees the validity of your certificate of title, and administers a compensation fund for people who, without fault of their own, have lost an interest in land because of the operation of the Torrens system which is some of the risks Title insurance says it covers.
In addition, one focus of title insurance policies is on “defects” (such as illegal building works or unpaid rates or land tax) that:
- would have been disclosed if proper enquiries had been made (for example of the local council or revenue authority), or
- were not disclosed despite proper enquiries because a mistake was made (by the council or revenue authority, or your solicitor or conveyancer).
One alternative to title insurance would be to use your conveyancer or solicitor to make the proper enquiries, e.g. by getting a building report from the local council (to confirm whether there are any illegal/unapproved buildings on the land) or a survey report (to confirm whether there is anything on your land encroaching on your neighbour’s land, or vice versa).
If your solicitor or conveyancer fails to make the proper inquiries you may be able to claim damages, and call on your conveyancer/lawyer’s professional indemnity insurance policies in the event they fail to perform the searches correctly. Check with you conveyancer or solicitor how the cost of doing these searches compares with the cost of title insurance, and whether they have professional indemnity insurance to cover this sort of work.
You should ask the lawyer or conveyancer assisting you with the purchase to explain the advantages and disadvantages of title insurance for you (and also to tell you about any arrangement they have with the insurer whose title insurance they are recommending).
What do I do if I have a problem with my title insurance?
- Read your product disclosure statement and policy schedule.
- If your problem is that your claim has been denied, request written reasons for the denial.
- If you want to challenge a decision made by your title insurer, or make a complaint about the way your claim is being handled, contact their internal dispute resolution (IDR) section:
|First American Title (trading as “First Title”)||Stewart Title Limited|
|Ph||02 8235 4401||02 9081 6200|
|Post||Ms Narmin Audish
First American Title Insurance Company of Australia Pty Limited
Level 10, 309 George St
Sydney NSW 2000
|Ms Claudia Argandona
Stewart Title Limited
Level 5, 54 Miller Street
North Sydney NSW 2060
- Both First Title and Stewart are now members of the Australian Financial Complaints Authority (AFCA). If your complaint is not resolved to your satisfaction within 45 days, you can lodge a dispute in writing with AFCA (www.afca.org.au / Phone: 1800 931 678). AFCA is independent and free for consumers.
Be aware that AFCA may decide it does not have the authority to make a decision about your complaint. Under its Terms of Reference (the rules that govern AFCA), AFCA can only deal with disputes about certain types of insurance. It appears that title insurance is not one of the types of insurance covered. However, we are aware of a number of cases where the insurer has agreed that AFCA can consider the dispute, even though it is technically outside the category of insurance AFCA usually considers. If the insurer cannot resolve your complaint internally, you should ask the IDR department to agree in writing that AFCA can resolve the dispute. You may be able to support your request by pointing the insurer to your PDS – all of the policies we have seen contain a representation that the consumer (you) can take their complaint to AFCA.
If AFCA does not have jurisdiction to deal with your dispute, get legal advice about what to do next.
NEED SOME MORE HELP?
See Fact sheet: Getting help for a list of additional resources.
Last updated: October 2018.