By: Eric C. Jones, Division Manager and Chief Operating Officer
First American Professional Land Services
On February 23, 2011 the 2011 ALTA/ACSM Land Title Survey Standards (ALTA Survey) went into effect, the first update to the standards since 2005. There are two distinct macro areas of concern that are often confused when it comes to ALTA Survey standards. First, are the standards themselves that make up the requirements that must be adhered to for a survey to be considered an ALTA Survey. Next, are the Table A items, which are optional. In addition to the ALTA proposed Table A Items additional Table A items may be added as agreed upon between the surveyor and the party commissioning the survey. The important distinction to remember is the difference between requirements and options or Table A Items.
2011 ALTA Survey Purpose:
In order to better understand the requirements of an ALTA Survey it is important to understand the primary purpose of the ALTA Survey. Simply stated the purpose of a 2011 ALTA/ACSM Survey is to remove the “Survey Exception Language” from the Title Insurance policy for both Owner’s and Lender’s Title insurance coverage, what is also commonly referred to as providing Extended Coverage. From a pragmatic point of view the extent that the standards can be deviated from is purely dependant on the willingness of the Title Insurer to provide the insurance coverage required by the buyer and/or lender for the real property transaction. The fact that many ALTA Surveys are used as a Title Insurance Underwriting tool on subsequent transactions enhances the credence of making certain the standards are adhered to on the current transaction.
What one Underwriter may not accept for writing a policy today not be what is required by another Underwriter on a future transaction involving the same property, even from the same company. Making certain that the ALTA Survey is done in accordance with the standards greatly extends the value of the due diligence work performed today by increasing its acceptability to be used in future transactions. This does not mean that the parties may not convince the current Underwriter to use an instrument that deviates from the ALTA Standards to provide the same coverage as it would if a Standard ALTA Survey were provided. This is up to each Underwriter or Underwriting Office who must weigh many other due diligence matters within a given transaction.
Many of the standards provide guidance and clarification for the level of detail, accuracy and type of information the Surveyor needs to provide, while others provide clarification with little controversy or need for discussion. One area that has spurred many heated debates particularly among Lenders and Lenders Counsel falls in Section 7 Standard Certification for all ALTA/ACSM Land Title Surveys:
Certification - The plat or map of an ALTA/ACSM Land Title Survey shall bear only the following certification, unaltered, except as may be required pursuant to Section 3.B. above:
To (name of insured, if known), (name of lender, if known), (name of insurer, if known), (names of others as negotiated with the client):
This is to certify that this map or plat and the survey on which it is based were made in accordance with the 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted by ALTA and NSPS, and includes Items of Table A thereof. The field work was completed on ___________.
Date of Plat or Map:_____ (Surveyor’s signature, printed name and seal with Registration/License Number)
The significant change from 2005 to 2011 is not in the certification language but that the specific certification language is no longer suggested it is required and unaltered. The question frequently asked here when presenting a client with this information is, “how can we get around this?” The most direct answer is that for the survey to truly adhere to the ALTA Survey Standards it must have the prescribed certification language.
Many surveyors will argue that the State Board, the issuer of their license, will penalize them for not maintaining a certain level or professionalism calling a Survey an ALTA 2011 Survey without adhering to the prescribed standards. It is likely that if you shop around you will find a Surveyor who will certify to most any language you desire. Similarly it is highly probably that you will find an underwriter somewhere who will provide extended coverage without an ALTA compliant survey. Keep in mind that ALTA is a voluntary organization and as such does not have the power or desire to police whether or not their members (Title Companies) require that all surveys meet the standards. The question remains what happens if and when you change Lenders or Underwriters. The whole purpose of the standards is to make certain that everyone agrees to what is acceptable for a Title Insurance transaction regardlesss of Insurer or Lender.
In Section 4 of the ALTA Survey Standards regarding record research it is clearly stated that, “the Surveyor will be provided with appropriate data which can be relied upon in preparation of the survey”.
Records Research - It is recognized that for the performance of an ALTA/ACSM Land Title Survey, the surveyor will be provided with appropriate data which can be relied upon in the preparation of the survey. The request for an ALTA/ACSM Land Title Survey shall set forth the current record description of the property to be surveyed or, in the case of an original survey, the current record description of the parent parcel that contains the property to be surveyed. Complete copies of the most recent title commitment, the current record description of the property to be surveyed (or, in the case of an original survey, the parent parcel), the current record descriptions of adjoiners,…
What is not stated in Section 4 is who will provide the research data to the Surveyor. Some of the data such as the most recent title commitment will clearly come from the Title Insurer; however, the source may not be as clear for other data like the current record descriptions of adjoiners. The language seems to infer that it is the Title Company that will provide this data, but the language is ambiguous. A classic example is a golf course that may have well over a hundred adjoiners. There is a significant amount of work involved in searching all of the adjoiner data. The biggest concern with this issue is getting several weeks into a transaction without there being an agreement of who is going to provide the Record Research information and at what cost. No one wants to see a transaction get delayed if these types of issues aren’t addressed and agreed to very early on in the process the potential for delays increases exponentially.
Table A are optional items that are to be included with the survey as agreed to by the Surveyor and the parties commissioning the survey. Some of the changes to Table A are relatively straight forward, such as Table A Item 2 which was changed from providing a vicinity map to providing the address of the property. The vicinity map has become relatively standard in the survey industry therefore it makes sense that it was moved from Table A to becoming a standard requirement. The address may seem very important to some, but from a Title Insurer and Surveyor perspective the legal description is critical and the property address is not particularly interesting, except the address’s relevance to municipal zoning matters, fraud protection and discrepancies.
Table A Item 6 (a) & (b) calls for the Surveyor to place specific zoning information on the survey, (a) zoning classification or (b) zoning classification, building set back requirements, height and floor space area restrictions, respectively. The area of concern regarding Item 6 is that it states, “as provided by the insurer”. This language is likely included because Title Insurers have specific zoning endorsements they write with the exception of states where zoning endorsements are prohibited such as Texas and Florida. That said, many of the Title Insurance Representatives I have spoken to are not accustomed to or equipped to provide this information to the Surveyor. It should also be noted that ALTA does not say the Title Insurer is obligated to provide the information free of charge. The Insurer can simply decline to provide the information.
Often zoning research companies, such as First American Commercial Due Diligence Services, are contracted to perform this research. Zoning information is very important to many clients and it is imperative that the provider of this data and cost are clearly indentified early on in the project. Again the biggest concern with this issue is getting weeks into a transaction that now becomes delayed; has new undisclosed fees; or worse yet a Surveyor place a note on the face of the survey “not provided by title” rather than providing the parties to the transaction the requested due diligence.
Another area of interest is Table A Item 11 (a) & (b). 11 (a) calls for the Surveyor to locate and depict above ground utilities and 11 (b) calls for the surveyor to locate and depict above and below ground utilities. The language for both above and below ground utilities uses the important qualifying word observable. Simply said even though the client may want to know the details of how below ground utilities run across the subject property the Surveyor can only depict what they can either directly observer or have other documentation to attest to the specific location. The third option of course is to excavate in order directly observe what is underground, a very costly and time consuming proposition.
Table A item 20 (a) & (b) are two other items that could potential add significant unnecessary cost to a survey. Item 20 (a) calls for the Surveyor to specifically locate improvements within any offsite easements or servitudes benefiting the property. Item 20 (b) calls for the Surveyor to place monuments or witness to the corners of any offsite easements or servitudes benefiting the property. Each of these options could add significant costs to the survey and may be unnecessary.
Consider what Table A Item 20 (a) is asking of the Surveyor in the context of a subject property such as a fast food restaurant located on a pad site at the corner of a shopping plaza. Many of the shopping plaza roads may feed the pad site thereby benefiting the subject property. Table A Item 20 (a) tells the surveyor to locate all of the improvements that belong to the properties that these roads traverse. In essence the surveyor is now required to survey and access the subject property and the entire shopping plaza. There are a few instances where this may be necessary, for example if the subject property had specific rights to the parking areas in and around the offsite improvements, but otherwise it is likely that this is costly and unnecessary surveying.
If you are concerned about E&O insurance, you should forget about E&O and take a better look at the firm that is providing your due diligence work!
A similar concern exists with Table A Item 20 (b) which in this instance we are requesting that the Surveyor either place or witness all of the major corners of the roads through the shopping plaza that are feeding our subject property. Again this may be surveying that is expensive and unnecessary. Furthermore the property owner of the shopping plaza may not appreciate having the fast food restaurant’s Surveyor place monuments on each of the corners of the shopping plaza owner’s road. Both of these cases are examples where setting the right requirements up-front and working with a Surveyor who will help you understand what truly needs to be surveyed up-front to help you avoid costly and possibly unnecessary due diligence work.
First American Commercial Due Diligences Services offers our own Table A item that we have numbered “24” (the ALTA published options end at 21) that calls for the surveyor to simply graphically depict offsite easements or servitudes as described in the title commitment that benefit the subject property. We believe that in most instances this provides the information the parties to the transaction need concerning easements or servitudes that benefit the subject property without adding significant cost, time or unnecessary surveying to the due diligence work.
Table A Item 21 calls for the Surveyor to provide Professional Liability Insurance often referred to as E&O (Errors & Omissions) Insurance. Interestingly the amount of insurance is left blank. First American Commercial Due Diligence Service has carried E&O Insurance for years; however, the E&O insurance really protects the Surveyor not the client. If you are working with a firm that does not have E&O insurance you may want to look at the financial security of that firm as a whole. That said the E&O insurance really means is that if there is an issue you will most likely have to work the issue with E&O provider’s attorneys rather than the Surveyor. Other questions to consider might be:
- Does the policy have a tail or is it good only until the transaction is done; and what defines what is done?
- What happens if the surveyor goes out of business or doesn’t keep the policy instated?
- If you are concerned about E&O Insurance, you should forget about E&O and take a better look at the firm that is providing your due diligence work!
- What is the financial strength of the survey firm?
- Can they suffer a claim or would a claim essentially put them out of business?
- Finally you may want to consider if the firm has General Liability Insurance that protects their workers and your property when they are conducting the survey on-site.
A word about claims:
In the world of survey or at least as it pertains to ALTA Surveys there are really only two types of claims. The first are those claims that are covered by the Title Insurance Policy and the second are those claims that are not covered as part of the Title Policy. Remember the whole reason why the ALTA Survey was commissioned in the first place was to provide Extended Title Coverage. In the case of a claim that was covered by Title the owner or lender files a claim with the Title Company and then it is either paid or denied regardless of whether or not the claim resulted from an issue that should have or have not been identified in the survey. If the Title Company finds that the claim arose from a survey matter that Title Company would be obligated to pay the claim to the buyer or lender and then go after the Surveyor or the Surveyor’s E&O provider to recoup the monies the Title Company paid out on the claim.
There are instances when the Title Company may deny a claim but the property owner may still have recourse with the Surveyor. For example an Agricultural Firm buys a section of farmland including extended title coverage. The Surveyor produces a survey that includes both the farmland that is part of the legal description and part of the Title Insurance, as well as some additional land that the surveyor mistakenly included as part of the survey or acquisition. The transaction closes and the Agricultural Company begins farming the entire piece of land depicted in the survey. They soon find out that the owner of the piece they are farming the Surveyor depicted but Title did not insure is owned by someone else who wants to be reimbursed for the farming of their land. The Agricultural Company immediately files a claim with the Title Company. The Title Company immediately denies the claim stating they did not write a Policy for the land in question. The Agricultural Company most likely has a legitimate claim against the Surveyor:
- Does the Surveyor have the financial strength to suffer the claim?
- Did the Surveyor have E&O insurance at the time they completed the project?
- Did the E&O Insurance have a tail?
- Does the Surveyor still use the same E&O provider?
Arguably if question one above is true it does not really matter what the answer to the remaining questions are, except whether or not will you be dealing with the Surveyor or the E&O Provider’s attorneys. The bottom line is regardless of the size of your project or who you are using for underwriting you need to know that you are not only going to get quality work, but that the work will be backed by a firm that has the financial means to suffer a claim should one arise.
One of the key considerations for both the ALTA Survey Requirements and optional Table A items is to consider the purpose of the ALTA Survey which is to satisfy Title Underwriting needs to provide Extended Coverage. In consideration of this it is very important to adhere to the 2011 ALTA Survey Standards, including certification language, to make certain that the value of the due diligence work cannot only be extracted from the current transaction but from future transactions regardless of Underwriter or Lender. As early on in the project as possible it is essential that all parties to the transaction including the Surveyor, Title Company, Lender, etc… clearly communicate and understand who is responsible to provide what. Communication is the key to avoid delays because of missing research data such as adjoiners or zoning information. Communication is also the key to make certain that the right amount of surveying is being done to satisfy the needs of all parties to the transaction. Working with an excellent survey firm will insure they advise you properly upfront to avoid unnecessary charges; provide quality work; and have the financial backing necessary to suffer a claim that may fall outside of what is provided by the Title Insurer.
There are a number of changes that are part of the ALTA 2011 Standards and optional Table A items that you need to be aware of. From very specific requirements and language that must be used in the Certification to optional items that can double or quadruple the cost of the due diligence work. Understanding these changes is critical.
- Did you know that one of the new ALTA/ACSM Table A items calls for the surveyor to have professional liability insurance? More importantly what doesn’t it say…
- Does the policy have a tail?
- Is it good only until the transaction is done?
- What happens if the surveyor goes out of business or doesn’t keep the policy instated?
- If you are concerned about E&O insurance, you should forget about E&O and take a better look at the firm that is providing your due diligence work!