This hub is for those surveyors who perform surveys according to the ALTA/NSPS Standard Details. As we know, these are typically used for most commercial property surveys.
An exception in the title insurance policy that may either be:
To avoid any unknown risks that a general survey exception carves out of a title insurance policy, a land survey is usually prepared or updated when purchasing title insurance. If the owner's or lender's policy must be issued without a general survey exception, generally a title insurance company must be furnished with an ALTA/NSPS land title survey that shows all existing improvements and is no more than six months old. An older survey may be updated by a surveyor if the title insurance company requires a current survey.
- A general survey exception. This is an exception that the title insurance company includes in a policy if there is no satisfactory survey of the real property described in the policy. The general survey exception excepts from the policy any state of facts that an accurate survey and inspection of the land would show.
- An exception with a detailed survey reading. This is an exception that the title insurance company includes if there is a current and satisfactory survey of the property described in the policy. The title insurance company reviews the survey and lists any specific encroachments or other problematic survey matters as exceptions to the policy.
Let’s explore what this means to you, the landowner, or purchaser of the property. A recent client was spending $850,000 on a 5 acre parcel of land with a metal building on it. To me, that’s a lot of money. If you’re going to purchase a “Title Insurance Policy” you should understand it. Though, frankly, this is what you hire an Attorney for. THEY should be explaining this, or at least looking out for your interest.
“...no satisfactory survey of the real property…”
If there is NO survey done of the property, then the Title Insurance company will use this general exception. They except or remove “from the policy any state of facts that an accurate survey and inspection of the land would show.” This means that any property line disputes, legal description problems, any encroachments, a zoning issue, any lack of parking for the intended use, an easement for a needed utility is missing, or other matters. Any number of issues that a Land Surveyor would have found, if you hired a surveyor.
So, if they “except,” or remove this from the policy, you are NOT insured for it. You, in essence are insuring yourself against anything a surveyor might find.
From Shannon Skinner’s well written “A Practical Guide to Title Review” a couple of relevant points are:
After conveying that “much of a real estate lawyer’s effort in closing the transaction is directed to reviewing the state of title,” she follows by saying “Conducting a comprehensive title review is impossible without a current survey of the property.” (emphasis added)
In another place, she says “Obtaining extended coverage, even if available without a survey (as it sometimes is for lenders on a risk-underwritten basis) most certainly does not eliminate the need for careful review of a complete and current survey of the property.”
I certainly agree with Ms Skinner. A “comprehensive” review should be done. If I’m paying $850,000 for 5 acres of land, you better believe I want a comprehensive review from my attorney, AND I want my Title Insurance policy to cover anything that might come up. So, I’m getting a survey EVERY time.
Of course, I’m a surveyor. You may think that my advice is coming from a position of knowing that I make money from the survey. Well, I do make some money if I do the survey. But I don’t do surveyors for everyone. And, my advice is based on my experience from over 30 years working with land and the development and use of it. So, as the commercial says, “I’ve seen a few things.”
Essentially, the title company puts the risk of not surveying the property on the insured. The property owner can limit this risk by either obtaining a survey or arranging for the removal of the survey exception.
I'll let Mr. Schmeeckle summarize my article - "Whether you are working with a realtor or purchasing a for sale by owner property, it is important to understand your title insurance policy and the exceptions to coverage. Review your title insurance terms and exceptions to ensure your property is protected. If you have questions about your title insurance policy and what it covers, make sure you call your attorney." And, I'll add, call your Surveyor.