LEGAL CORNER: Real Property Surveys: What Do They Tell Us?
John Dolgetta, Esq. | October 2015
A survey of real property is a critical component in acquiring real estate. Surveys provide specific boundary lines of the property, a depiction of the improvements, the existence of encroachments and easements, the acreage, the presence of wetlands and/or other environmental issues, which may be present on or affect the land, as well as an abundance of other critical information.
A survey is commonly defined as a drawing that depicts the mathematical courses and distances (and GPS coordinates), as well as the physical features of a parcel of real property. It is based upon information contained in prior deeds of record, recorded covenants, restrictions and easements as well as other data based on an actual field survey prepared by a licensed surveyor. There are many types of surveys, such as: (1) perimeter surveys, (2) “as built” surveys (used is new construction), (3) boundary surveys, (4) foundation surveys (used in new construction), (5) topographical surveys, which depict the physical and topographical features of a parcel of land, such as elevations, geographical formations, wetlands, etc.), and (6) ALTA and Land Title surveys, which are required by certain lenders and title companies.
Surveys and Other Important Due Diligence Tools
Real estate professionals, specifically attorneys and real estate agents, should request from their seller clients and/ or attempt to locate on behalf of their purchaser or developer clients, three important items initially: (1) the copy of the deed (or prior deeds), (2) a copy of the title report and/or title policy issued to the prior owner (i. e., the seller) and (3) a copy of the most recent survey of the property. These are invaluable tools in assisting: (a) the seller’s real estate agent with marketing the property, (b) the buyer’s real estate agent with providing key information, (c) the buyer or buyer’s attorney with receiving important information, (d) the seller’s attorney with preparing contracts and being informed of potential issues affecting the property, (e) the lender in approving the loan, and (f) the title company in conducting a title search and issuing a title insurance policy to the purchaser.
While this article will focus primarily on the importance of the survey, it is also important to obtain copies of these other documents (i. e., the current deed and the latest title policy and/or title report, if available), at the initial stages of a real estate transaction.
An Important Tool
The deed to a property provides several key pieces of information that can be used by the real estate agent to ensure that a property listing entered into the multiple listing service is accurate and that a memorandum of sale is prepared properly. The most common error on a memorandum of sale is that the name of the owner is incorrect. The real estate attorney should request a copy of the deed from the seller prior to the preparation of contracts. In the event the client does not have or cannot locate the deed, a copy may be obtained at the County Clerk’s office of the county in which the property is located or from a title company, which will usually provide a copy of same to other real estate professionals as a courtesy.
Among other information, a deed may contain the following: (a) the correct names of the owner of the real property, (b) the address of the property, (c) the tax map number of the property, (d) the legal description (also known as the “metes and bounds” description or lot designated on a filed map (which is also another form of survey prepared in connection with a subdivision), (e) reservations of rights by a prior owner (e. g., reservation of a life estate), and (f) specific restrictions, easements and/or covenants that may affect the land. One example of a common issue that comes up involves the seller forgetting to mention (or does not know that he should mention) to the real estate agent and his attorney that while the seller owns the property, the seller’s parents have reserved a life estate in the property that would require that the parents also be named as a party to the transaction, be included on any exclusive listing agreement, other real property disclosure forms (Section 443 Disclosures), lead paint disclosures and ultimately be named in the contract of sale.
The Title Policy and Title Report: Another Invaluable Resource
The owner’s title insurance policy should be requested from a seller at initial contact. As for the buyer’s representatives (i. e., buyer’s agent and buyer’s counsel), they should request this information from opposing counsel or seller’s and/or listing agent as early as possible.
Title Insurance Policy
Like the deed, the title insurance policy provides: (a) the exact name of the current owner, (b) the property description, which should match the property description contained in the deed, (c) covenants, easements and restrictions that may affect the property and (d) reservations of interest in the property (e. g., reservation of a life estate or a right of access). Other important schedules (terms) that are included in the title insurance policy and title report are the “Survey Reading” and the “Survey Inspection.” The information contained in these schedules, provide the parties to a real estate transaction with crucial information on issues that may affect marketability.
The Title Report
The title report or title search is the document prepared by the title insurance company or an agent of a title insurance company which researches and provides a detailed report of both title and non-title issues relating to a parcel of real property. In our geographic area, the buyer’s attorney customarily orders the title search once a contract of sale is executed or soon after a buyer has obtained a mortgage commitment from a lender.
This document provides the parties with a full title and lien search of the property. The title search contains information such as: (a) prior owner information, (b) copies of the current and/or prior deeds, (b) a detailed list of existing liens affecting the property (e. g., existing mortgages, tax liens, real property taxes, judgments, etc.), (c) a list of covenants, restrictions, easements and other agreements that are “of record” (meaning filed with the County Clerk), and (d) survey exceptions (discussed below), etc. One important difference between the title insurance policy and the title report, and why is it is a good idea to try to obtain a copy of full title search in addition to the title policy, is that the title report usually contains full copies of easements, covenants and restrictions and other documents. If provided, these documents should be reviewed in advance of closing.
As part of the title search, copies of the existing certificates of occupancy, any violations that affect the premises, bankruptcy searches and other informational searches are provided which are not “title” issues but which may affect the marketability of the property.
The Survey: A ‘Snapshot of the Property
The survey provides a “snapshot” of the property at a certain point in time and can tell us a lot about the property. For the listing agent, a request should be made at the first substantive contact with the seller and for the seller’s real estate counsel at the initial client meeting.
The seller’s agent can use the survey to determine whether there are certain improvements (e. g., decks, sheds, fences, additions, pools, patios, etc.) that may currently exist at the property but are not reflected on the survey. This should be a red flag and will assist the real estate professional in addressing the need for certificates of occupancy.
Reviewing the survey provides a good opportunity to inform the seller that there may be negative consequences, such as a potential default under the contract (i. e., misrepresenting that no improvements have been made to the property or the premises or causing a delay in the event the purchaser or the lender requires that a certificate of occupancy be obtained). A buyer’s agent and buyer’s attorney can use the survey, if it is made available to them, to ensure that issues are addressed early on. Sometimes the building department of the town in which the property is located will have a copy of the survey in its records.
As mentioned, a survey can also shed light on other important factors such as the existence of recorded and non-recorded easements, rights of way, covenants, restrictions, paths, common driveways and other matters. One example of an issue that arose on a particular transaction was the existence of a common driveway that was not revealed to the real estate agent by the seller of a property. There was no mention of the shared driveway or maintenance obligations in the listing. The contract was prepared and forwarded to the buyer’s attorney for review. The buyer, the buyer’s agent and the buyer’s attorney were unaware of this easement. In the normal course of events, the buyer’s attorney requested a copy of the survey, deed and title policy and discovered the existence of the common driveway easement. Luckily for the buyer, this discovery prompted a further inquiry into the particulars of the common driveway and maintenance obligations. It was eventually discovered that there were major issues between the seller and adjoining property owner regarding the terms of the maintenance agreement. The buyer was able to cancel the transaction prior to signing the contract. If the buyer had signed the contract, the buyer would have been obligated to take title to the property subject to the recorded driveway easement since all contracts provide that a buyer takes “subject to” all easements, covenants, restrictions and other matters that are “of record.”
A survey may also show that there exist “unrecorded” easements and rights of way, or that an adjoining neighbor’s fence, shed, deck, addition, pool or other improvement encroaches upon the property. Advance knowledge of this information is critical as it can avoid costly litigation with an adjoining property owner over adverse possession rights and other rights.
A survey can also reveal if additions and other improvements are built within the zoning setback requirements of the town. A survey not only provides the boundary (“metes and bounds”) description, but many times it also provides the distances of improvements from various points on the survey to the boundary lines of the property. These measurements are useful in determining if a deck, which may have been built illegally, is built within the setback requirements or not. If, for example, an improvement is not built within the zoning setback requirements of the town, a homeowner would be required to obtain zoning board approval and a variance, which could be expensive and may be denied by the zoning board. If the application is denied, the town and zoning board will require the removal of the structure. So a buyer who believed he or she was buying a home with a deck (or other improvement) may be forced to purchase a home without that improvement.
Title Issues Relating To the Survey
A title company may also require a survey in order to insure title to the premises. If an existing survey is available and contains certain specific information, such as the surveyor’s certification, the date of the survey, the surveyor’s seal and the North arrow, a title company will sometimes accept an existing survey (with respect to residential properties only) for purposes of providing title insurance coverage. If the survey is not acceptable, then the title company will require that a new survey be obtained.
The Survey Reading and Survey Inspection
Two important elements of the title search are the “Survey Reading” and the “Survey Inspection.” If there is no survey, the title company will provide the following exception to its title insurance policy: “The Policy will except the exact location, courses, distances and dimensions of the described premises in the absence of an acceptable survey of the Premises.”’
It is not recommended that a purchaser buy a property with a survey exception. Even when the title company is provided with an existing survey or a new survey, the title company may provide exceptions to coverage once it reviews a survey.
When the title company reviews an existing or new survey and prepares a list of items that exist on the premises, such as sheds, fences, decks additions and other encroachments, this is called a “Survey Reading.” The title company will not provide title insurance coverage or may provide limited coverage (also called affirmative coverage) on any such exceptions.
A title company, once it has a survey in its possession, will also conduct a “Survey Inspection.” The title company actually sends someone out to the premises to compare the survey to the actual state of facts as they exist at the premises. Therefore, if the personal inspection reveals that there exists an improvement, encroachment or other issue affecting the premises, it would be added as an additional exception to the coverage. While the Survey Inspection is usually conducted well after contracts have been signed, if a buyer or buyer’s agent has access to a survey prior to signing the contract, it can prove to be an invaluable tool because a “survey inspection” can be done before issues arise.
When parties are involved in a real estate transaction, it is important for them to have as much information about the property as early as possible in the process. There is so much information that can be revealed by simply having a few documents at one’s disposal. While the list of documents detailed in this article is not exhaustive by any means, it is evident that the survey, deed and title policy/title search contain information that can be the difference between an easy and pleasant real estate transaction and one wrought with problems.
Legal Column author John Dolgetta, Esq. is the principal of the law firm of Dolgetta Law, PLLC, which recently acquired the law practice of Board Counsel, Edward I. Sumber. Mr. Sumber remains “of counsel” to John’s firm and will continue his forty-one year history of representing our Association and its predecessor entities. For information about Dolgetta Law, PLLC, John Dolgetta, Esq. and Edward I. Sumber, Esq., please visit http://www.dolgettalaw.com.