Written by Paula M. Zwiren, JD, MBA
It is a common misconception that title insurance companies insures the survey. In fact, title companies use the survey as a source of information to evaluate various risks and determine if we will insure the property without any exception.
There is a lengthy standard exception to title, that can be explained as, “when looking at the property, if you can see the problem, right, encroachment, etc., then the title insurance policy will generally not insure over it.” When a title commitment is prepared, the public records are examined; however, a physical examination of the property can also be very revealing. Therefore, when the title company receives a survey, prepared by a licensed surveyor, which sets forth the boundaries, improvements and various other items, the lengthy standard exception on the title insurance will be narrowed down to list specifically what will and will not be covered. For example, if the survey shows a shared driveway, the survey endorsement to title will show an exception to the policy indicating to the buyer that the title policy is not covering for loss related to that shared driveway. The buyer is then in a position to determine how they wish to proceed forward with respect to that particular issue.
The survey is also used as a tool to evaluate risk when title is asked to provide certain additional insurance, most commonly by the ALTA 9 endorsement series. Many of the ALTA 9 endorsements insure against loss by enforced removal of an encroachment, so the relevant information on the survey is necessary to set it out with specificity.
Surveys are also great tools for the buyer to understand the property. Sometimes the shape of the property on the survey is not how it looks in 3D from the observer’s point of view. For example, on two properties adjacent to unused railroad owned property, the actual boundary of the property being purchased was very different than how it looked.
On one property, there was an entire driveway and about 30 percent of a house encroaching on the adjacent railroad property. The seller was able to obtain an easement from the railroad and the buyer closed without further issue. On the other property, the seller had built concrete sidewalks on the railroad property, which led to sheds on the seller’s property. The buyer was planning to turn those concrete sidewalks into a driveway and the sheds into a nice garage. Once the buyer realized they would not be able to make those changes, he cancelled the transaction and pursued a different home. ♦
If you would like to share an interesting survey story, I'd love to hear about them and learn from your experience.
-Paula M. Zwiren