Here in Ontario, the province keeps records on every piece of property. When a Lawyer or Realtor reviews these documents we call that a Title Search. Included in every standard Agreement of Purchase and Sale is the provision for a Lawyer to do a Title Search. During this process the Lawyer will discover and confirm the Owners Names, Lot Size, Legal Description including, and any other information registered against the property such as liens and mortgages.
Some issues can be discovered during that Title Search process that may need to be resolved prior to closing. A classic example is when a Seller accepts less money on the sale of the home than the money owed on the property (Mortgages plus unpaid taxes). In that case, if the Seller does not have the funds to cover the short fall at closing, you may not be able to close. Other issues that can crop are easements and Restrictive Covenants. Easements are a right granted over a property in the benefit of another person or property. It usually grants access to the property and can have a significant impact on the value of the property. A home with an easement to run a sewer line directly under the middle of your property may limit what you can build on it. Often builders put short term easements that expire after a period of time granting access over you new home. Building a fence too soon, may cause it to have to be taken down at the owners expense if your not careful. A restrictive covenant also limits what you can do on your own land. For example, some townhome complexes can only have white window coverings even though the properties are not condominiums. Builder again may put restrictive covenants on properties to ensure the community meet their marking plan.
The sooner these issues are discovered, the better position you will be when purchasing and selling your home. While some consider a title search an expensive proposition, especially for complicated titles, it can be much more expensive not doing them. Once money has exchanged hands and the deed is granted to the buyer, the buyer will be bound by what is registered on title. To avoid lawsuits, Sellers will also want to disclose what is registered on title early.