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Commercial Title Insurance: A $150 Million Market (a recent article by Julius Melnitzer published in Lexpert)

9674Lang Michener’s expertise in title insurance often results in Bruce McKenna being interviewed and quoted on articles on the topic. Recently, a major article was published by Julius Melnitzer in Lexpert magazine in which Bruce was quoted extensively.  Click on "Read More" for Bruce’s story about the article.

In May of this year I spoke to Julius Melnitzer, who was in the process of writing an article about Commercial Title Insurance in Canada for the July/August issue of Lexpert magazine (click here). I was able to provide him with a copy of the extensive material I had prepared on commercial title insurance and endorsements for the April 22, 2004 Real Estate Law Summit (click here), to describe to him a number of commercial title insured transactions that Lang Michener LLP has been, involved with including the recent acquisition of Rogers Centre. Julius Melnitzer refers to the material I sent him :

“The speaking notes for Bruce McKenna's recent presentation on commercial title insurance at a Law Society of Upper Canada seminar runs some 22 pages and his written material on the subject covers almost 70 pages. "Commercial title insurance is a challenge for lawyers, "McKenna says. "Educating themselves takes a lot of time and energy."”

While title insurance remains an important part of my practice and I regularly give advice to lawyers, both inside and outside Lang Michener LLP, to insureds and to financial institutions regarding title insurance coverage and endorsements, it is not something Lang Michener LLP always recommends to its clients. After my discussion with Julius he wrote:

“In other words, commercial title insurance or not, there is always an important role for lawyers in commercial real estate deals. For example, while there's rarely a reason not to buy title insurance on a residential property, commercial title insurance isn't always appropriate. As Bruce McKenna explains, "Title insurance doesn't always have advantages and may add expense in single property, straightforward commercial transaction."

This means that lawyers have a greater role in determining whether commercial title insurance is appropriate than they do in residential transactions. In a very competitive environment, they can help select the appropriate insurer. They continue to be responsible for the transactional aspects of an acquisition or financing. And finally, because commercial title insurance is far more complex than its residential counterpart, a lawyer must understand and explain the policy and the exclusions and ensure that the client obtains the correct endorsement, which will allow use of the property for its intended purposes. "The lawyer has a fundamental role to ensure that the client takes advantage of title insurance in the most effective way possible," McKenna says.

Julius quoted me again when talking about the reasons why lenders often prefer title insurance to lawyer’s opinion:

“From a lender's perspective it is important that the title insurance coverage in the loan policy insures the mortgage itself, not the lender. "In other words, the policy runs with the loan and remains in place as long as the loan is outstanding, "explains Bruce McKenna of Lang Michener LLP. That's a major advantage over lawyer's opinion to a lender, which is not transferable.”

Finally, in dealing with some of the large transactions Lang Michener LLP has handled where we have found title insurance to be advantageous for our client, the article again leaned on our experience:

“More and more buyers and lenders are beginning to appreciate the fact that title insurance facilitates future dealings and refinancings involving the insured property, particularly when the arrangement is complicated or unconventional. "Once you get into the title insurance regime it's easy to do subsequent transactions involving the same property, "McKenna explains. When Toronto's Rogers Centre was sold from public to private interests for $300 million, lawyers turned to First Canadian Title for help after uncovering a very complex title involving a large number of rights and easements around the property. Title insurance is particularly useful in transactions spanning several provinces and involving multiple properties. From the insurer's perspective the underwriter can spread the risk over the full range of properties.


In the Wendy's/Tim Horton's merger, 660 of the 1200 sites involved were either freeholds or significant leaseholds. "The standard of due diligence accepted by First Canadian, who underwrote the risk, proved far less costly than full title opinions," recalls McKenna, who represented Wendy's.


And apart from the obvious cost savings achieved by avoiding a multiplicity of full title searches, title insurers also provide what is known as "gap insurance" to facilitate closings. As McKenna explains, "If you have a multi-jurisdictional transaction everybody can get around one boardroom table and exchange the necessary documents. Then gap insurance covers the delay from closing to registration in the various jurisdictions, making it possible to complete a transaction instantly without cumbersome escrow arrangements."”

Lang Michener continues to play a leading role in title insured transactions in Canada which results in us being referred to and consulted by both clients and writers. I recently gave another interview to a writer for another Canadian legal publication and will put excerpts here if they seem interesting.

Bruce McKenna


August 4, 2005 in Title Insurance | Permalink

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