Title Insurance and Land Surveys

Issue:

Concerning title insurance, when is a land survey required?

An order for title insurance is derived from a purchase agreement between a seller and its buyer. Embedded within the purchase agreement is a section concerning title insurance. This section dictates the type of policy the seller is required to provide its buyer.

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Generally speaking, there are three policy choices for the parties to negotiate: 1) an Owner’s Policy with standard exceptions; 2) an Owner’s Policy without standard exceptions; and 3) an Owner’s Policy with expanded coverage.

The title agency, upon receipt of the order, reviews the purchase agreement to ascertain which type of policy is being requested. Subsequently, the title examiner designs the commitment based on such request.

Regardless of the policy type chosen, confusion often arises when the customer reviews the commitment and learns that a survey will be required as a condition to issuing coverage. Why does the title agency need a survey?

To resolve this confusion, the customer must understand the basic premise of each of the choices offered in its purchase agreement.

Rule:

A standard Owner’s Policy takes exception to matters of survey. This is a broad exception, as it includes all matters that an accurate survey would disclose, such as gaps in the legal description, or a legal description that may overlap with neighboring lands.

Now, that being understood, I will discuss the policy choices, in order, to help the reader understand why a survey is or is not being required.

Application:

Owner’s Policy with standard exceptions – –

If the purchase agreement requests an Owner’s Policy “with” standard exceptions, a survey will not be required. The policy to be issued will contain the generic exception to matters of survey, as discussed above.

Owner’s Policy without standard exceptions – –

If the purchase agreement requests an Owner’s Policy “without” standard exceptions, a survey will be required. The policy to be issued will remove the standard exception as to matters of survey, however, the policy will take exception to any adverse matters reflected in the survey.

Owner’s Policy with expanded coverage – –

If the purchase agreement requests an Owner’s Policy with “expanded” coverage, a survey will not be required. The policy to be issued will contain full coverage as to matters of survey. This expanded coverage policy is labeled as Fidelity’s Homeowner Policy.

**Caveat: The availability of Homeowner Policy coverage is limited. It can only be offered on residences qualifying as 1-4 family. Vacant land and commercial property does not qualify for this coverage.

Note: There are differing survey products. One is commonly referred to as a “stake survey,” while the other is commonly referred to as a “mortgage survey.” Stake surveys are more thorough and more expensive, and are typically required for vacant land, or land under construction. Conversely, mortgage surveys are less thorough and less expensive, and are typically required for platted land (lots within a Subdivision). You should check with the title agency for direction on which survey will suffice.

Conclusion:

Land surveys are used for various reasons. The focus of this writing is in helping the customer understand why a survey is or is not being required.

Remember, the analysis starts with the purchase agreement itself, which discloses the type of policy being ordered. The commitment is drafted from this command.

Happy Holidays!

Dave Phillips
Examiner
State Street Title Agency