For those of you who read our commentary regularly, you’ll see that we span the commentariat world from musings of perhaps little practical utility but great import (at least to us) to the more mundane. Today, mundane. Let’s talk title policies and survey standards. There’s good news here and often good news doesn’t travel fast enough, so here we go.
Title policies “insure over” information that a survey would discern. It’s precious little good to have a title policy yet find out there’s a missile silo just behind the setback line owned by the US Government. So title companies require a survey and will generally insure over any nasty surprises the survey would have uncovered.
The minimum standards by which surveys are conducted have been recently revised in the ALTA/NSPS Land Title Survey Standards (the “Standards”). And while news regarding survey regulations doesn’t tend to headline the front page, navigating these new standards successfully may keep some extra money in your pocket—a good argument to pay attention. Until recently, a title and survey purchaser would need to pay extra for the surveyor to document utilities that they saw in the field with their own two eyeballs. This mind-blowing request was referred to as the Optional Table A Item 11(a) election. Without it, the surveyor would only document utilities on a particular site if they were already evidenced by an easement or other property document. Suffice it to say, borrowers that bought the policies and lenders that relied on them required the surveyor to document utilities they found on the site via “observed evidence,” and were more than happy to pay the extra cost to do so.
Now, under the new Standards, the “observed evidence” standard is a minimum requirement by which all surveys must be performed. No longer must the purchaser of a policy elect the Optional Item 11 at additional costs to make the surveyor open their eyes. This sounds like good news and it is. Lenders get the same coverage at no additional cost; however, the absence of Item 11 on survey certifications has caused some hesitation. Lenders are afraid they aren’t getting the same protections they once got, but we’re here to tell you to rest assured. You’re well protected. The problem with electing Item 11 under the new Standards is that it basically sends the surveyor on a detailed and expensive witch-hunt for utilities. A witch-hunt that even the most conservative lenders didn’t require in the past (unless the property was undergoing ground-up construction). So all you title and survey paralegals and all you inside risk management officers, stop asking for Item 11 unless you have a particularly good reason to do so. You now get all the coverage under the old Item 11(a) automatically. Good news sometimes doesn’t travel fast enough, but I guess that’s what we’re here for.