A testimonial on Title Insurance by Warren Denny, Accredited Specialist in Property Law:
“Like many of you, I had always assumed that in Queensland title insurance might be less relevant because we have Torrens title and the protection offered by the fidelity fund.
I was recently invited to attend a presentation by First Title on its Home Owner’s Gold Title Insurance Policy.
To my surprise, I found this insurance policy covered much more, including claims made by a Buyer for damages resulting from an inaccurate prescribed certificate in a Seller Disclosure Statement.
Following the introduction of Seller Disclosure, I now recommend that Buyers take out the Home Owner’s Gold Title Insurance policy offered by First Title .”
The Property Law Act 2023 (PLA) requires a Seller to provide a Buyer with a Seller Disclosure Statement which includes information about the property and a copy of various searches and prescribed certificates before entering into a contract.
Conveyancing practice changes for a Seller’s lawyer
Our search providers responded quickly to this change by introducing a product called ‘Seller Disclosure’. The Seller’s lawyer starts the process by asking the Seller some relevant questions, such as whether a notice from a local authority requiring work to be done has been received, completing the answers in the draft Form 2 Seller Disclosure which pops up in the order form and ordering the relevant prescribed certificates.
A Seller Disclosure Statement should be provided quickly. Its preparation could involve legal work and if so, should be performed by a lawyer who is entitled to charge a professional fee for the time taken to prepare the Seller Disclosure plus recover from the Seller the cost charged by the relevant search provider for the prescribed certificates.
Conveyancing practice changes for a Buyer’s lawyer
Queensland has always had a “Buyer Beware” conveyancing system, where contracts have been signed on a car bonnet following which the Buyer engages a lawyer to conduct searches of the property and advise the buyer on the search results.
The searches often identify post-contract issues, such as illegal building works however, under the standard contract a Buyer may not have a right to claim compensation from the Seller.
A Buyer’s lawyer now receives the contract and a Seller Disclosure Statement which includes many of the searches that the Buyer’s lawyer would previously have conducted after receiving a signed contract.
It does not make sense to conduct those searches again, however there are problems with this approach.
The first problem is that, because the searches are not ordered by the Buyer’s lawyer, the Buyer cannot rely on them and the second problem is that, under section 104 of the PLA, the Buyer’s remedy is limited to termination of the contract if a statement or prescribed certificate is inaccurate in a material way.
Can First Title’s Home Owners Gold Title Insurance Policy (Purchase Insurance) assist in solving the Buyer’s dilemma ?
Purchase Insurance covers the Buyer for:
- an error in a prescribed certificate attached to a seller disclosure statement;
- an error in calculating settlement adjustments;
- claims made by third parties for an encumbrance over the property that is not disclosed in a contract or on a public record;
- an order requiring rectification or demolition of existing Improvements that do not have the required approval for lawful use;
- an encroachment that would have been discovered if a surveyor had carried out a check survey; and
- fraudulent and mistaken dealings with the title.
What is the value proposition for the Buyer?
The cost for a Buyer to obtain the prescribed certificates included in a Seller Disclosure varies from about $700 to $2000 depending on the nature of the property, the search provider and the recommendations of the Seller’s lawyer.
Premiums for Purchase Insurance start from $425 for a residential property valued at under $500,000 and increase to $1900 for a residential property valued at $2 million. Premiums for residential properties valued over $2 million are provided on application.
The value proposition is very clear. The risk of errors in the prescribed certificates and many other conveyancing risks can now be covered by Purchase Insurance at a cost which is usually less than the cost a Buyer would outlay to verify the accuracy of the prescribed certificates.
What is the benefit for the Buyer’s lawyer ?
Purchase Insurance responds to compensate a Buyer where the Buyer’s lawyer has made an innocent mistake in calculating settlement adjustments or fails to advise a Buyer about a potential encroachment or building work that is illegal.
Another benefit is that the insurance cover continues for the whole time that the Buyer owns the property. A claim such as failure of a Buyer’s lawyer to identify unlawful building works is often only discovered when the Buyer attempts to sell the property. Purchase Insurance covers this risk.
Components of the Seller Disclosure covered by Purchase Insurance
The table below sets out the Seller Disclosure obligations under the PLA and the risk of inaccurate prescribed certificates covered by Purchase Insurance.
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