New ALTA Land Survey Requirements Affecting Your Next Loan TransactionAdded by Sarah Reed in Articles & Publications, Banking Law on August 18, 2016
The 2016 ALTA/NSPS Minimum Standard Detail Requirements (“Standards”) went into effect February 23, 2016 to update the 2011 ALTA/ACSM Land Title Survey requirements. The ALTA/NSPS group has adopted changes to the listing of items to be included in a standard survey (formerly known as an “ALTA/ACSM” survey). The ALTA/NSPS survey standards are the joint work product of the American Land Title Association and the National Society of Professional Surveyors. A survey that meets the new Standards is referred to as an “ALTA/NSPS Land Title Survey.” The Standards have been updated in some ways that should be useful to lenders and real estate professionals and will modify what will appear on a typical survey. Most of these changes are designed to create a more easily understood plat and avoid potential miscommunication among surveyors, title companies, lenders and borrowers. However, the obligations that arise from these changes and any related cost, are generally the responsibility of the surveyor’s client and not the responsibility of the title insurance company or the surveyor. The significant changes are discussed below.
- SECTION 4, RECORDS RESEARCH. This requirement has been updated to list the title-related documents that must be provided to the surveyor, which include: (i) the most recent title commitment or title evidence satisfactory to the title insurance company; (ii) public records that impart constructive notice that benefit or burden the property, such as adjoiners, easements, servitudes, and covenants; and (iii) unrecorded documents affecting the property and survey, if desired by the lender.
- ITEM 6, ZONING INFORMATION TO BE PROVIDED BY CLIENT. Zoning information is now required to be provided by the surveyor’s client, and not the insurer (title company). The surveyor’s client is now expected to provide: (i) a zoning report or letter, (ii) a list of the applicable zoning classification(s), (iii) setback requirements, (iv) height and floor space area restrictions, and (v) parking requirements. Clients can hire a consultant to provide the information, but it is no longer the responsibility of the title insurer. This change encourages clients to hire zoning consultants and relieves the surveyor of any obligation to perform zoning-related research.
- ITEM 9, PARKING AREAS. The new Standards no longer require the surveyor to show striping of parking spaces within a parking structure. The surveyor is still required to show striping of clearly identifiable parking spaces on surface parking areas and lots. However, the surveyor is required to show the number and type of clearly identifiable parking spaces on surface parking areas, lots and in parking structures.
- ITEM 11, LOCATION OF UTILITIES. The former 2011 Table A made it optional for the surveyor to plot surface indications of underground utilities such as manholes, utility poles, vents, and pedestals. The surveyor is now responsible for attempting to identify underground utilities and must indicate observed utility features. The surveyor will attempt to locate utility plans or make an 811 utility locating request. If the surveyor is relying on a private utility locating service, which are deemed by ALTA/NSPS to be the least reliable source, then the surveyor will note such on the survey. Additionally, railroad features, including tracks, spurs, and sidings have been removed from the list of items to be shown.
- ITEM 13, NAMES OF ADJOINING OWNERS BASED ON CURRENT TAX RECORDS. The former Table A required the surveyor to show the names of adjoining land owners based on the land records. The new Standards now provide that the surveyor show the adjoining land owners based upon the property tax records, which tend to be less accurate than the land records. However, if the name of the record owner is important, the parties should ask the title company to furnish the information to the surveyor.
- ITEM 18, DELINEATION OF WETLANDS. The surveyor is now required to show the location of the wetlands only if they are delineated on the property by a qualified specialist hired by the surveyor’s client. Essentially, this change places the duty on the client to hire a specialist to make the determination and mark the wetland areas on the property. The surveyor’s duty is to show on the survey only what the specialist marked on the property as the wetlands and as physically observed by the surveyor. If a specialist’s flagging of wetlands on the property has not been conducted at the time the surveyor does their field work, a note stating that no flags were observed must be noted on the survey. The revisions encourage clients to hire environmental consultants to mark the delineations of wetlands, as the surveyor is no longer responsible to determine the location of wetlands.
- ITEM 18, NO NEED TO SHOW CERTAIN ENVIRONMENTAL AREAS ON THE SURVEY. The former 2011 Table A required the surveyor to show any solid waste dump, sump or sanitary landfill on the survey. Those requirements have been deleted. Instead, a new requirement is added to Item 8 requiring that the surveyor show “substantial areas of refuse.” The duty to identify solid waste dumps, sumps, or sanitary landfills is now with the environmental assessment firms that perform the Phase I environmental assessments, and are not part of the ALTA/NSPS Land Title Survey.
- ITEM 19, OFF-SITE EASEMENTS OR SERVITUDES. If there are plottable off-site (i.e., appurtenant) easements or servitudes, the surveyor is required to depict them only if they are disclosed in documents provided or obtained as a part of the survey pursuant to Sections 5 and 6 of the Standards. The client is responsible for obtaining permissions from the off-site land owners/tenants/etc. for the surveyor to have access to do the survey work on the offsite easements or servitudes. However, the 2016 Standards no longer require that the surveyor place monuments at the major corners of the off-site easement or servitude.
- ITEM 20, PROFESSIONAL LIABILITY INSURANCE. This standard now provides that the surveyor will NOT put on the survey what professional liability insurance the surveyor may carry, including the amount of coverage. Lenders should separately verify for themselves what professional liability insurance the surveyor carries.
- HANDLING OF LEGAL DESCRIPTIONS AND CERTIFICATION. If the surveyor prepares a new legal description, the new Standards require the surveyor to provide an explanation on why it was prepared, and how the legal described in the new description relates to the legal described in the legal description of record.
Overall, the updated requirements may increase transaction costs to lenders by encouraging the use of specialized consultants, such as zoning and environmental specialists, while relieving surveyors of certain obligations. It is important for lenders to understand the updated requirements to ensure surveys are accurately prepared and all parties’ expectations are satisfied. Lenders will need to be mindful of these new changes when reviewing title commitments and policies, drafting loan commitments, and preparing closing instructions. Lenders should update their forms to incorporate the new Standards and review surveys carefully for compliance with the new Standards. Depending upon what is depicted by the survey, the lender may seek endorsements from the title insurance company providing additional coverage for issues that be shown on the survey. The lender’s attorney can help ensure compliance with these new Standards and assist the lender in obtaining the necessary title insurance coverage for any issues shown on the survey.
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