In buying commercial property, whether vacant or improved, Buyers and their lenders usually require an ALTA/NSPS Land Title Survey (“ALTA Survey”). An ALTA Survey combines a boundary survey by graphically showing and describing the physical outline of the land with the location of improvements, possible encroachments, easements, utilities, and research as to the title exceptions of record. ALTA Surveys provide important information necessary for producing a title insurance policy for a Buyer and their Lender as well as showing any potential issues with the land and the improvements.
The production of an ALTA Survey is subject to strict “minimum standard detail requirements” established by the American Land Title Association (“ALTA”) and the National Society of Professional Surveyors (“NSPS”). The requirements not only identify the items that must appear on an ALTA Survey but may refer to and include items listed on an optional “Table A”. Table A items can be costly and time consuming so the surveyor should only be instructed to perform items necessary for obtaining a loan or purchasing the land.
It should be noted that most lenders in a commercial transaction require an ALTA Survey or at least require the title insurer to insure over the survey matters as they exist on the ground. Obtaining an ALTA Survey is standard due diligence in a commercial transaction.
The ALTA Survey must be certified to the parties to a transaction, buyer, seller, lender and title insurer, so that if an issue arises, the parties can point to the surveyor for explanation as well as possible liability. The ALTA Survey should be carefully examined by the parties and their counsel to determine the risks, if any, in proceeding with the transaction.
The review of an ALTA Survey is a methodical process with several key points of interest, including:
- Legal Description – the legal description should always be double checked against the title commitment.
- Certification – each party to the transaction should be named in the surveyor certificate, including the title insurer.
- Title Exceptions – each title exception in Schedule B of the commitment for title insurance should be listed on the ALTA Survey and the location of every “plottable” item should be graphically noted thereon. Some items are vague or “blanket” exceptions that cannot be shown. Blanket items should be noted as such on the ALTA Survey.
- Encroachments – possible encroachments must be located and reviewed for a determination as to whether to continue with the transaction. Encroachments can consist of fences offline, buildings existing into or from an adjoining parcel, roads, and utility easements running under or through buildings.
- Gaps and Gores – gaps and gores include overlaps of boundary lines with adjacent parcels and open areas within or between parcels and should be carefully examined.
- Access – access to a public road is of utmost importance and should be clearly depicted on the ALTA Survey.
The above list is not intended to be all-inclusive, but is intended to emphasize the complexity of an ALTA Survey.
Without an ALTA Survey, the parties do not have knowledge of what exists on the ground. ALTA Surveys play an important role in keeping commercial transactions on schedule, while also eliminating risks. The cost of an ALTA Survey can be expensive, but it can be much more expensive not to obtain one in your transaction.