G. ROLAND LOVE Dallas Independence Title Company · companies are prohibited from utilizing any other title insurance forms. B. Texas Title Insurance Coverage. Prior to the issuance

TITLE & SURVEY OBJECTION LETTER, INSTRUCTION LETTER:

GUIDELINES AND SOLUTIONS

G. ROLAND LOVE, Dallas

Independence Title Company

Texas Land Title Institute December 6, 2019

San Antonio

CHAPTER W

Board Certified in Commercial, Farm and Ranch, and Residential Real Estate Law by the Texas Board of Legal Specialization, and admitted to the U.S. Patent and Trademark Office.

Currently Vice President, Business Alliances and Field Operations, Independence Title Company

Representative Experience

• Past President of Texas region of a large title agency, including

homebuilder, retail and fee attorney operations, encompassing financial planning and monitoring operations, employment issues, acquisitions and mergers, business development, coordination with home builder and lender, and daily problem solving and closing deals.

• Shareholder and Attorney, Winstead PC

• Real Estate curative matters

• Title and real property disputes

• Title insurance coverage

• Regulatory matters before the Texas Department of Insurance

• Extensive appellate practice throughout the state

• Experience in all aspects of title industry, including entities,

escrow, title insurance and RESPA

• Intellectual Property litigation and licensing

Professional & Community Involvement

• AIDS Interfaith Network (AIN) (Advisory Committee)

• College of the State Bar of Texas (Fellow)

• Consumer Credit Counseling Service of Greater Dallas (Now Transformance) - (Board of Trustees)

• Dallas Bar Association (Certified Mediator; Past Chair, Legal Ethics Committee and Law in the Schools Committee)

• Dallas Bar Foundation (Life Patron Fellow)

• American College of Real Estate Lawyers (Fellow)

• Dallas Inter Soccer Club (Director and Manager)

• Dallas Volunteer Attorney Program – Lawyers for Affordable Housing (Mentor)

• Episcopal School of Dallas (Director)

• North Texas Housing Coalition (Director)

• Park Cities YMCA (Board of Directors; Sports Committee)

• St. Michael's School (Vice President, Board of Trustees)

• State Bar of Texas (Real Estate, Probate & Trust Law Section, Council Member and Chair 2016-2017)

• State Bar of Texas (Special Prosecutor)

• State Bar of Texas Title Examination Standards Board

• State Bar Board of Legal Specialization (Examiner)

• Tarrant County Bar Foundation (Fellow)

• Texas Bar Foundation (Life Fellow)

• Texas Bar CLE, Advanced Real Estate Drafting Course (Chair)

• Texas Land Title Association (Chair, Legislative Committee; Chair, Title Insurance: A Primer For Lawyers; Past Chair, Defense Counsel Committee; Director and Vice-Chair,

PAC; Instructor)

G. Roland Love

Dallas c: 214.202.1959 e: [email protected]

Southern Methodist University, Dedman School of Law • J.D., 1977

• Editor, Southwestern Law Journal

• Thomas P. McElroy Award, Texas Civil Practice

• Texas Bar Foundation Outstanding Law Review Article Award

Texas A&M University • B.S., Electrical Engineering,

1974

• summa cum laude

• College of Engineering Outstanding Senior Award

• Department of Electrical Engineering Bolton Award

• National I.E.E.E. Outstanding Student Paper

• Texas Land Title Institute (Chair - 17 Years)

• Texas Land Title PAC (Vice-chair, Board of Trustees)

• Texas Real Estate Commission (Instructor)

• The 500, Inc. (Director)

• United Way – Tocqueville Society (Member); Advocacy Committee (Chair 2017)

• YMCA Indian Guides Program (Nation Chief)

• YMCA Partners with Youth Sustaining Campaign (Chair)

• YMCA Youth Sports Program (Director and Coach)

Awards & Recognition

• AIN – Crystal Hope Award

• Best Lawyers in America

• Dallas Inter Soccer Club - Volunteer of the Year

• Texas Bar Foundation Outstanding Law Review Article Award

• Texas Land Title Association Title Person of the Year (2018)

• Texas Land Title Association Peggy Hayes Teaching Excellence Award

• Texas Land Title Association President's Award (2005, 2014)

• Texas Land Title Association Professional Excellence Award

• Texas Land Title Association Special Certificate of Appreciation (2013)

• Texas Super Lawyers, Real Estate, Commercial Litigation, Texas Monthly, 2005-2013

• United Way – Advocate Award (2018)

Admitted to Practice

• Texas, 1977

• U.S. Patent and Trademark Office

• U.S. District Courts for the Northern, Southern, Eastern and Western Districts of Texas

• U.S. Court of Appeals, Fifth Circuit

• U.S. Court of Appeals, Eleventh Circuit

• U.S. Supreme Court

Personal Interests

Tennis, skiing, fishing and sailing; active as a community volunteer with a number of organizations focusing on individual financial counseling, housing, education, and children.

Title & Survey Objection Letter, Instruction Letter: Guidelines and Solutions Chapter W

i

TABLE OF CONTENTS

I. INTRODUCTION. ........................................................................................................................................................... 1

II. OVERVIEW OF TEXAS TITLE INSURANCE. ......................................................................................................... 1 A. Regulatory. ................................................................................................................................................. 1 B. Texas Title Insurance Coverage. ................................................................................................................ 2 C. Endorsements ............................................................................................................................................. 2

III. TITLE AND SURVEY REVIEW. ................................................................................................................................. 2 A. In General. .................................................................................................................................................. 2 B. Materials for Title and Survey Review. ..................................................................................................... 2 C. Review of the Commitment. ...................................................................................................................... 2

1. Schedule A – Commitment. ............................................................................................................... 2 2. Schedule B – Exceptions from Coverage. .......................................................................................... 3 3. Schedule C – Curative Matters. .......................................................................................................... 6 4. Schedule D - Disclosures. .................................................................................................................. 6 5. Express Insurance. .............................................................................................................................. 7 6. Arbitration. ......................................................................................................................................... 7 7. Title Update. ....................................................................................................................................... 7

D. Review of the Survey. ................................................................................................................................ 7 E. General Information. .................................................................................................................................. 7

1. Certification. ....................................................................................................................................... 8 2. Property Description. .......................................................................................................................... 9 3. Exceptions to Title. ........................................................................................................................... 10 4. Building Lines and Set-Back Lines. ................................................................................................. 11 5. Streets and Rights-of-Way. .............................................................................................................. 11 6. Structures and Improvements. .......................................................................................................... 11 7. Encroachments. ................................................................................................................................ 12 8. Utilities. ............................................................................................................................................ 12 9. Flood Zone Information. .................................................................................................................. 12 10. Other Items to Consider. ................................................................................................................... 13 11. ALTA/NSPS Land Title Surveys and Standards. ............................................................................. 13 12. Purpose. ............................................................................................................................................ 13 13. Request for Survey. .......................................................................................................................... 13 14. Surveying Standards and Standards of Care. .................................................................................... 13 15. Records Research. ............................................................................................................................ 14 16. Fieldwork. ........................................................................................................................................ 14 17. Plat or Map. ...................................................................................................................................... 15 18. Certification. ..................................................................................................................................... 15 19. Deliverables. ..................................................................................................................................... 16 20. Table A. ............................................................................................................................................ 16

F. Conclusion................................................................................................................................................ 18

IV. OTHER TITLE, SURVEY AND PROPERTY ISSUES. ........................................................................................... 18 A. Insured Closing Letters. ........................................................................................................................... 18 B. Pro Forma Policy. ..................................................................................................................................... 18 C. Taxes. ....................................................................................................................................................... 18

1. Tax Certificates. ............................................................................................................................... 18 2. Roll-Back Taxes. .............................................................................................................................. 18

D. Zoning Letters/Zoning Ordinances. ......................................................................................................... 18 E. Matters Known to the Insured. ................................................................................................................. 18

V. SAMPLE OBJECTIONS AND SOME PRACTICAL RESPONSES....................................................................... 19

VI. INSTRUCTION LETTER. ............................................................................................................................................ 21


ii

VII. CONCLUSION: ............................................................................................................................................................. 22

APPENDICES .............................................................................................................................................................................. 23

Appendix 1 Promulgated Form of Commitment T-7 ................................................................................... 23

Appendix 2. Title Commitment and Exception Document Review Checklist .............................................. 29

Appendix 3. Common Endorsements ............................................................................................................ 33

Appendix 4. Texas Endorsement Guide ........................................................................................................ 35

Appendix 5. Texas Affirmative Coverage ..................................................................................................... 45

Appendix 6. Survey Checklist ....................................................................................................................... 47

Appendix 7. Property Descriptions ............................................................................................................... 51

Appendix 8. Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys ...................... 55

Appendix 9. Certificate Forms ...................................................................................................................... 69

Appendix 10. Insured Closing Letters ............................................................................................................. 77

Appendix 11. Sample Title/Survey Review Memorandum............................................................................. 85

Appendix 12. Sample Objections .................................................................................................................... 93

Appendix 13. Hypothetical Transaction Commitment .................................................................................. 105

Appendix 14. Form of Purchaser's Title/Survey Objection Letter ................................................................ 119

Appendix 15. Form of Lender's Title/Survey Objection Letter ..................................................................... 125

Appendix 16. Instruction Letters ................................................................................................................... 141


1

TITLE & SURVEY OBJECTION

LETTER, INSTRUCTION LETTER:

GUIDELINES AND SOLUTIONS

I. INTRODUCTION.

The title commitment and survey are typically

products of a purchase and sale agreement or a lending

transaction – often both. The purchaser and lender will

be provided with these with a limited time to review and

object. This paper addresses many of the common

concerns found in a title commitment or survey and

objections and solutions. In addition, as part of the

closing, an instruction letter is appropriate to set out the

final closing and title policy requirements, together with

any deliverables and funding. Of course, there are times

when only a title commitment and/or survey is being

reviewed, and the materials herein should be helpful.

The obvious, but still often overlooked, initial issue

is to be sure that the time frame for review and objection

only begins when both the title commitment and survey

have been received. Counsel should be sure that the time

allotted is sufficient. And, if delivery of the title

exception documents is important, be sure that is part of

the time equation. If there is an existing survey to be

used, there should be a time limit to provide it and gain

approval as to its quality. If the title insurance

underwriter or a party does not approve the survey, there

needs to be a contractual provision as to a time period to

obtain and provide a new survey, and who pays for it.

The title review period should not begin until all of the

needed items have been provided, Finally, the

agreement should address any time or obligation on the

seller or borrower to cure and what happens if that does

not happen.

Some additional title review considerations include

allowing the title review to include all matters of record

and matters shown on the survey. Physical and

operational issues should be a part of a separate

feasibility due diligence period. The agreement should

also be written such that an objection letter extends the

time to terminate the agreement.

Upon receipt, be sure the title commitment is

complete, including the jacket and schedules A, B, C,

and D, and it is signed. In addition, make sure Schedule

A correctly identifies the parties, the dollar amounts,

and the real property and estate involved. A

commitment is only binding for 90 days, so periodic

updates and reissuance may be appropriate.

Likewise, the survey needs to be in final form. Has

it been signed and properly certified? Is it dated? Is it

the correct property? The surveyed property and the title

searched estate should match.

Also, immediately check through the documents

provided. Are they complete? Are they legible? The

review period should not commence until legible copies

are in hand, or at a minimum the review period should

be extended as to that document and its effect.

Assuming one now has the title commitment,

survey, exception documents, and maybe a UCC search,

if relevant, all in hand, the review process can begin. Be

sure the survey reflects the location of all encumbrances

shown in Schedule B and C as may be applicable.

In comparison to every other state in the union, all

of which utilize the American Land Title Association

("ALTA") system of title insurance and insuring forms,

the Texas title insurance industry is highly regulated

with respect to forms and premiums. Thus, a Texas title

company cannot provide any discounts, rate reductions,

nor any commitment or policy form changes except as

expressly promulgated or approved by the Texas

Insurance Commissioner. However, a good

understanding of the title commitment/policy and the

survey can greatly expand coverage and protection for

the purchaser and/or the purchaser's lender. Moreover,

as an important part of the due diligence process, it is

generally the responsibility of the purchaser's and/or the

lender's attorney to (i) review the title commitment and

the survey in detail; (ii) provide appropriate objections

and comments thereto pursuant to the client's objectives,

often in the form of a written title and survey objection

letter; and (iii) work with the title company, the surveyor

and the seller to ensure that the client receives the

maximum coverage and protection (subject, of course,

to various cost considerations) that is available under

Texas law.

II. OVERVIEW OF TEXAS TITLE

INSURANCE.

These materials are clearly not intended to serve as

an exhaustive review of the title and survey issues to be

considered in connection with the acquisition of real

property; however, a general review of the basic

framework of Texas title insurance and some related

ALTA comparisons should be instructive to attorneys in

the context of reviewing title and survey and preparing

effective objection letters.

A. Regulatory.

Texas title insurance is regulated by Title XI of the

Texas Insurance Code. Pursuant to Section 2551.003,

the Texas Department of Insurance promulgates the

Basic Manual of Rules, Rates and Forms for the Writing

of Title Insurance in the State of Texas (the "Basic

Manual"). The issuance of commitments and title

policies by Texas title insurance companies is

completely regulated and controlled by the Basic

Manual. The Basic Manual, which is periodically

amended includes, among other things, (i) Procedural

Rules, (ii) Rate Rules, (iii) the forms of commitments,

policies, coverage and endorsements, (iv) claim

procedures, and (v) the bulletins issued by the Texas

Department of Insurance. As noted, Texas title


2

companies are prohibited from utilizing any other title

insurance forms.

B. Texas Title Insurance Coverage.

Prior to the issuance and delivery of a title

insurance policy, the title company issues a

Commitment For Title Insurance (the "Commitment").

As provided in Procedural Rule P-18 of the Manual, the

title company is required to issue and deliver the

Commitment to proposed insureds in the approved

form. P-18 provides additional requirements and

obligations of the title company pertaining to issuance,

delivery and expiration information. For all

contemplated transactions, the liability and obligations

under the Commitment end ninety (90) days after the

effective date, or when the contemplated Policy is

issued. In no event should the Commitment be used in

lieu of a policy, as it provides no coverage, but in

appropriate situations a T-13 Interim Construction Loan

Binder may make sense. Therefore, during the review

period, make sure the Commitment's effective date is

updated. The promulgated form of Commitment

(Form T-7) is attached hereto as Appendix 1. The

Commitment, easily the most important document in a

typical review of title and survey, will relate to the

issuance of a specific form of title insurance policy (a

"Policy"). It is important to note that although the form

of Policy differs depending on the party and/or the type

of transaction being insured, there is only one form of

Commitment and each party to the transaction (i.e., both

the purchaser and the lender) will receive identical

Commitments. The primary promulgated forms of title

insurance policies include: (i) the Owner's Policy of

Title Insurance (Form T-1) ("Owner's Policy"); (ii) the

Residential Owner's Policy of Title Insurance (Form T-

1R), applicable to single- family residential properties;

(iii) the Loan Policy of Title Insurance (Form T-2)

("Loan Policy"); (iv) the Texas Short Form Residential

Loan Policy of Title Insurance and Addendum (Form T-

2R); and (v) the Loan Title Policy Binder on Interim

Construction Loan (Form T-13). For further reference,

all forms and rules can be found on the Texas

Department of Insurance's website at:

www.tdi.state.tx.us/title/titleman or on the Texas Land

Title Association's website at www.TLTA.com.

C. Endorsements

Owner and Loan Policies may also be endorsed

with permitted endorsements promulgated by the Texas

Department of Insurance. Of course, an endorsement

overrides exceptions and exclusions to coverage and

may provide specific coverage where not otherwise

available. Endorsements are discussed in more detail

later in this paper in dealing with and addressing

Schedule B and Schedule C exceptions and protecting

the borrower or lender.

III. TITLE AND SURVEY REVIEW.

A. In General.

Unlike a homeowner's, fire and extended coverage,

or life insurance policy, a title insurance policy is, for

the most part, the final (product) policy to be issued in

strict compliance with the commitment. In other words,

the coverage will not be reviewed and available for

updates and/or revisions on an annual basis. In this

regard, the review period allows the insured(s) the

opportunity to obtain the maximum coverage and

protection of the investment or collateral. However,

sometimes the importance of the Commitment and the

review thereof, is overlooked within the overall scope of

the purchase and/or loan transaction. The review, and

objection(s) if warranted, truly deserve the same level

attention to detail as the other important components of

a real estate transaction, such as the physical, financial,

and environmental due diligence. Utilized properly,

review of the commitment and survey can provide

protection and save costs through the period of

ownership or life of the loan. The period prior to closing

is really the only opportunity to achieve this.

B. Materials for Title and Survey Review.

As noted, prior to proceeding with the title and

survey review, it is very helpful to have the following:

(i) a complete, current Commitment issued subsequent

to the title company's review of the survey; (ii) a current

survey, that includes the surveyor's review of a current

Commitment; (iii) complete copies of the documents

listed as exceptions or curative matters in the

Commitment; (iv) a legible, complete copy of the plat

of the property if the property is platted; and (v) all

zoning information applicable to the property including

the zoning map and zoning ordinance.

C. Review of the Commitment.

The Commitment must include the following: (i)

jacket or cover page; (ii) Texas Title Insurance

Information Form; (iii) Bilingual Notice; (iv) Deletion

of Arbitration Provision; (v) Schedule A;(vi) Schedule

B; (vii) Schedule C; and (viii) Schedule D. Some

important information that an attorney needs to know in

order to conduct a proper and complete review of a

Commitment and the associated title exception

documents is discussed below. See Appendix 2 for a

Title Commitment and Exception Document Review

Checklist.

1. Schedule A – Commitment.

Generally described, Schedule A identifies the

Commitment by number and sets forth the effective

date, the GF (or guaranty file) number, the issue date,

the type of Policy to be issued pursuant to the

Commitment, the name of the proposed insured, the

interest in the land covered by the Commitment (i.e., fee

simple, leasehold, life estate, etc.), who owns record title

http://www.tdi.state.tx.us/title/titleman

http://www.tlta.com/


3

to the land covered by the Commitment, and the legal

description of the land covered by the Commitment. The

Commitment is not valid unless your name and the

policy amount are shown in Schedule A, and an

authorized representative of the title company has

countersigned.

a. Effective Date.

A Commitment is effective only through the date

that the title plant is posted. This will typically be seven

to ten (7-10) days earlier than the date on which the

Commitment is issued. The difference between the

effective date and the "issued on" date is a result of the

lag time for the indexing or posting of documents which

have been recorded and the capture of this information

by the title company's records (plant). This "gap period"

is insured at closing to the insured party(ies) through the

date of recording of the title documents in connection

with the transaction. However, any matter filed after the

effective date of the Commitment but before the Policy

date may become an Exception in Schedule B if not also

addressed. See Schedule C, paragraph 4.

b. Policy Amount.

Whether representing a purchaser or a lender,

ensure that the insured dollar amount is correctly

reflected on the Commitment and is representative of

the contemplated transaction(s). For instance, Texas

title regulations allow issuance of a Loan Policy, in an

amount not to exceed 125% of the original principal

loan amount, to cover interest on a debt, such as a

variable rate mortgage. See Texas Title Insurance

Manual, Section III, R-4. The regulations also allow

issuance of an Owner's Policy to include the cost of

immediately contemplated improvements. See Texas

Title Insurance Manual, Section III, R-3(B)(3). These

are just two examples showing the relevance of

verifying the information.

c. Proposed Insured.

Whether representing a purchaser or a lender,

ensure that the name of the purchaser and/or lender are

correctly identified on the Commitment.

d. Legal Interest.

In addition to ensuring that the Commitment

accurately reflects the estate being conveyed, ensure

that any easement which benefits the property and is

created as a part of the transaction is properly described

(in Schedule A.2) and insured as a part of the legal

description (in Schedule A.4). Likewise, review the

exception documents carefully to determine whether or

not they include any easements benefiting the property

which should be described and insured as a part of the

legal description.

e. Record Owner.

If representing a purchaser, ensure that the name of

the record owner of the property is the same as the name

of the seller in the contract for sale. If representing a

lender, require that the borrower be the owner in fee

prior to or at closing of the loan.

f. Property Covered by the Commitment; Legal

Description.

In all cases, ensure that all of the property being

purchased is included in the Commitment and check to

ensure that the legal description is correct (i.e., it should

match the legal description on the survey and the legal

description in the contract and/or the deed of trust – if

there is any variance, the differences need to be resolved

prior to closing). Also, ensure that the property does not

consist of a portion of a legally platted lot. If the

property is inside the city limits, the property may have

to be replatted into a legal lot before a building permit

may be obtained. Of key importance is that the new lot

will have to comply with all of the City's current codes

and ordinances.

2. Schedule B – Exceptions from Coverage.

Schedule B describes the exceptions from

coverage. The exceptions will include the eight

preprinted "standard exceptions" and will also include

all other matters identified as affecting the insurance

coverage of the Policy. The eight standard exceptions

are restrictive covenants, (ii) survey, (iii) homestead and

community property, (iv) stream and water rights issues,

(v) taxes and assessments, (vi) documents creating the

insureds' interest in the land, (vii) construction, and

(viii) subordinate liens and leases (each of the standard

exceptions are discussed in more detail below). Because

Schedule B reflects the various exceptions to coverage

(in addition to the preprinted standard exceptions) that

the title company will take when issuing the final Policy,

it is of the utmost importance that the attorney for the

purchaser or the lender carefully review each of the

documents listed as exceptions so that the effect of the

document/exception (if any) may be addressed with the

client upfront. Preventing surprise and assuring an

informed purchaser or lender is one of the most

important reasons for conducting sufficient due

diligence.

a. Schedule B.1 – Restrictive Covenants.

Procedural Rule P-4 governs revisions to the

exception for restrictive covenants. The title company

may make the insuring decision to delete the reference

to a restrictive covenants altogether if (i) the restrictive

covenant is void and unenforceable by statute; (ii) it has

been effectively released; (iii) it has been cancelled by

final judgment; or (iv) it has been consistently violated

for more than four years. If no restrictions affect the


4

property, the title company should delete the exception

in its entirety.

b. Schedule B.2 – Survey Exception.

This exception eliminates coverage for boundaries,

shortages in area, encroachments, protrusions, or

overlapping of improvements. Procedural Rule P-2

allows for deletion of this exception to delete all, save

"shortages in area," under certain circumstances in both

the Owner's and Loan Policies. The amendment is made

to the Loan Policy without additional premium. If

requested, and approved for amendment in an Owner's

Policy, the amendment is available upon payment of (i)

15% of the Basic Rate in an Owner Policy (T-1), or (ii)

5% of the Basic Rate in a Residential Owner Policy (T-

1R), with a minimum premium of $20.00. See Rate Rule

16 of the Texas Basic Manual. At the request of the

Insured (lender, borrower or purchaser) a title insurance

company may accept and rely upon an existing survey

and not require a new survey when providing this

amendment. In this case, the title company will

generally require that (i) the survey be no more than one

generation old (i.e., it was prepared for the current

owner), and the current owner sign an affidavit (see

Form T-47 Residential Real Property) stating that no

improvements have been constructed on the property (or

on adjoining properties near the property's boundary)

since the date of the prior survey. The title company may

also allow surveys with changes if the specific change is

stated and approved by the title company. If the title

company allows this amendment, the final policy or

policy will take specific exception to those matters

shown on the survey in place of the broad exception. In

a practical sense, while the lender may have

requirements regarding the survey, it will defer to the

title company's decision regarding the survey due to the

coverage afforded to the lender in the policy. In other

words, the lenders typically rely upon the title

company's willingness to amend the exception to satisfy

any requirements they may have regarding the survey.

c. Schedule B.3 – Homestead Rights.

This exception applies only to the Owner's Policy

and cannot be deleted.

d. Schedule B.4 – Water Rights.

This exception applies to the Owner's Policy and

the Loan Policy and cannot be deleted. It basically

excepts coverage only for the effects of water.

e. Schedule B.5 – Standard Exception Relating to

Taxes.

Procedural Rule 20 of the Texas Basic Manual

currently provides, in general:

i. Taxes for the Current Year.

The title company may not insure that taxes for the

current year are paid, unless: (a) the taxes are paid or

collected at closing; (b) there is an escrow account with

the payoff lender and the taxes have been paid; or (c)

sufficient indemnity is provided and the title company

escrows the money until proof of payment is received.

If the taxes for the current year have not been assessed

by the taxing authorities, the company may not insure

all taxes for the current year are paid.

ii. Rollback Taxes.

Upon payment of the required premium under R-

19, the words: "and subsequent taxes and assessment by

any taxing authority for prior years due to change in land

usage or ownership", contained in the standard tax

exception may be deleted. Rollback commonly refers to

a subsequent assessment of taxes by the taxing

authorities upon the change in usage of the land based

upon an agriculture or open-space valuation given to the

land. This amendment of the standard exception is only

available on a Loan Policy or Interim Binder. This

deletion may only be provided if there is no agricultural

or open-space valuation, or the rollback taxes have been

assessed.

iii. Taxes Not Yet Due and Payable.

If the company is satisfied that all taxes are paid

except for the year of the issuance of the policy, where

the taxes are not yet due and payable, they may add the

specific year, followed by "not yet due and payable."

Additionally, if the company determines that some, but

not all of the taxes are not yet due and payable, the

company may add the "not yet due and payable language

and limit it to the applicable taxing authority or

authorities only. Under R-24 the charge for this is $5.00.

This amendment is only available on a Loan Policy or

Interim Binder.

f. Schedule B.6 – Terms and Conditions in Vesting

Documents.

This exception applies to both the Owner's Policy

and the Loan's Policy and cannot be deleted. However,

it generally means that the title policy does not insure

against matters placed in the deed or the deed of trust.

g. Schedule B.7 – Mechanic's Liens.

This exception applies only to a Loan Title Policy

Binder on an Interim Construction Loan (i.e., the

lender's binder in connection with residential

construction loans). It may be deleted if the title

company is satisfied that construction has not

commenced prior to the recording of the lender's

mortgage. See Procedural Rule P-8 for more

information.


5

h. Schedule B.8 – Subordinate Liens and Leases.

This exception applies only to the Loan Policy (T-

2). When a Loan Policy is issued to insure the validity

and priority of a lien, the issuing title company is not

required to itemize liens and leases that affect the title,

which are subordinate to the lien insured, unless

requested to do so in writing by the insured. In this

instance, Schedule B, Paragraph 4 of the Loan Policy

may be deleted, and the subordinate lien(s) and lease(s)

will be excepted in Schedule B and the company may

insure that such lien(s) and lease(s) are subordinate. See

Procedural Rule P-11.b(8). However, when issuing a

Title Policy Binder on Interim Construction, the title

company is required to show all subordinate liens in

Schedule B-Part 2 of the binder. In the case of the

Binder, a statement may be included that such lien(s) is

subordinate.

i. Schedule B.9.

This numbered exception is for informational

purposes to set out the application of the exceptions

under Schedule B for the Texas Short Form Residential

Mortgage Policy of Title Insurance (T-2R).

j. Schedule B.10 – All-Inclusive Exception.

All matters found by the title company to affect title

to the property will be listed under this exception (or as

separately numbered exceptions). If there are no

additional matters affecting title, the title company must

delete this exception. Often, whether or not additional

matters are listed on Schedule B is subject to

negotiation. It is in the proposed insured's best interest

to have broad exceptions removed altogether, or in the

least, modified to describe specific exceptions, such as

those shown on a survey or evident by inspection of the

property. Some common additional exceptions are

discussed below.

k. Rights of Parties in Possession.

Rights of Parties in Possession means one or more

persons who are themselves actually physically

occupying the property or a portion thereof under a

claim of right adverse to the record owner as shown in

Schedule A. If the title company makes this general

exception, the insured must execute a written statement

waiving inspection of the property and accepting the

policy subject to the exception. In a commercial

transaction, the language may look more like: "tenants

in possession, as tenants only, without rights or options

to purchase the insured property". In order to remove

this exception, the insured can request an inspection by

the title company. The company may charge its

reasonable and actual costs for an inspection, if

performed. If the title company is hesitant to include a

lender's requested language, the purchaser/borrower

may furnish the title company with copies of the leases

for review. The company may require an Affidavit

regarding the non-existence of leases in order to remove

the exception.

l. Visible and Apparent Easements/Rights of Way.

Procedural Rule P-5 prohibits exceptions such as

this if general in their terms. Most are eliminated upon

review of the survey.

m. Broad/General Exceptions.


this which are general in its terms. Most are eliminated

upon review of the survey.

n. Plat Created Exceptions.




o. Encroachments.




p. Blanket Easements.

In general, you will want each easement that is

excepted to on the Commitment to be visible and located

on the survey. In some cases, the description of an

easement may be "blanket in nature" over a large tract

or survey of land and the legal description contained in

the easement does not allow the surveyor or other parties

to determine the exact location of the easement on the

survey. This is most common with older easements

granted to pipeline companies on rural property. Should

you encounter these exceptions, you may start by

requesting a relocation, limit in size, a more accurate

definition of the location, and/or secure a release of the

easement prior to closing. In general, once a pipeline is

in place (as contemplated by the easement), the

presumption is that the easement runs 25 feet to either

side of the actual pipeline. Tex. Nat. Res. Code §

111.0194.

q. Oil, Gas and Mineral Reservations And/Or Leases.

If there is no evidence of drilling and any mineral

reservations, severances, and/or leases contain waiver of

the surface rights, these types of exceptions should not

cause the purchaser or the lender too much pause. It is

also prudent to review local drilling ordinances, but

remember ordinances can be changed. Platted areas with

designated drill sites can also eliminate drilling

concerns.

r. "As Shown on Survey" Language.

Ancillary to the requirement that all exceptions be

shown on the survey (see below for discussion), many

purchasers and lenders will want to request that the title

company note after each appropriate item that it is "as


6

shown on the survey" or "as noted on the survey" (if a

particular exception affects the property but can not be

plotted on the survey for one reason or another). In

addition, it is becoming increasingly common for

purchasers and lenders to request that the language be

"limited as shown on the survey" or "limited as noted on

the survey", thereby providing assurance against loss in

the event that an exception item is located other than as

drawn on the survey. If this language is requested, the

survey will need to be specifically identified by

surveyor, job/project number, date, and last revised date

(if applicable).

3. Schedule C – Curative Matters.

Schedule C generally contains the requirements

and conditions that must be satisfied in order to issue the

Policy. Typically, the seller is required to take care of

the items listed.

a. Standard Requirements.

In addition to requirements that are specific to the

transaction at hand (see below), Schedule C will include

the following four standard requirements which relate to

(i) the execution and notarizing of documents to be

recorded (see Schedule C.1); (ii) provision of evidence

that (a) there are no parties in possession, (b) all taxes

have been paid, (c) all improvements have been

completed and all contractors and suppliers have been

paid, (d) there is legal access to the land covered by the

Commitment, and (e) the deed of trust is valid (if

applicable) (see Schedule C.2); (iii) payment of the

required consideration (see Schedule C.3); and (iv)

resolution of any matter that arises or is filed subsequent

to the effective date of the Commitment (see Schedule

C.4).

b. Transaction-Specific Requirements.

Though basically covered in the preprinted

language of Schedule C, some title companies elect to

specify the documents needed to effect the ownership

and estate to be insured under Schedule A. For instance,

in a sale transaction, the company may include the

following. "The company requires the recordation of a

warranty deed from record title holder to proposed

insured". A title company may insert the specific names

of the parties.

c. Legal Matters.

Schedule C should be examined closely to ensure

that there are no existing lawsuits, judgments, or

mechanic's liens which affect the property. If there are,

these items will need to be addressed prior to closing.

d. Items Not Removed.

Any title matter that is listed on Schedule C and not

resolved prior to issuance of the Policy will be included

as an exception to title in Schedule B of the Policy

issued. Accordingly, you should always review

Schedule C in detail to ensure that all items listed

thereon will be satisfied and released prior to closing.

Also ensure that there are no existing lawsuits,

judgments or mechanic's liens, and require that existing

liens will be released, unless subordinated or otherwise

accepted or addressed.

4. Schedule D - Disclosures.

Schedule D discloses information regarding title

company ownership, estimated title premiums, and the

title premium splits and divisions among the

underwriter, agent and other parties. The premium

calculations and the schedule of parties should be

completed in its entirety pursuant to Procedural Rules P-

21 and P-22, and §§ 2702.051-2702.053 of the Texas

Insurance Code.

a. Endorsements.

Endorsements are promulgated forms which

modify coverage to address specific areas of concern to

the purchaser or the lender. Some endorsements are

unique to the policy form being used (e.g., an increased

value endorsement is only used in connection with an

Owner's Policy). Procedural Rule P-9 is the principle

rule addressing endorsements; however, other rules may

also require the use of specialized endorsements dealing

with the subject matter of that rule. A few of the most

common endorsements are discussed below. See

Appendix 3 for a more exhaustive list of common

endorsements. See Appendix 4 for a list of

endorsements available in Texas and comparable to

other state endorsements.

b. Minerals.

Coverage involving drilling and exploration can be

obtained through a series of T19 endorsements. The T19

endorsement is for loan policies and is part of a more

comprehensive endorsement and coverage. Paragraph 4

of the T19 does protect against damage to improvements

including landscaping resulting from the future exercise

of rights to use the surface by the mineral owner. The

T19.1 is available for all Owner's title policies and has

similar protection in Paragraph 3, though landscaping is

not protected. More recently the Texas Department of

Insurance promulgated forms T19.2 and T19.3 to deal

specifically with damage from exploration and

production. These two endorsements were intended to

deal with situations where the title company takes a

general exception to minerals in Schedule B, bu they are

seeing broader use. A general exception in Schedule B

is permitted by Rule P-5.1. T-19.2 deals with one acre

or less improved tracts, or mixed use, while the T-19.3,

which is limited to damage to permanent buildings,

deals with larger tracts of land. There is no charge for

the T-19.2 and T-19.3 endorsements for Loan Policies,


7

but the title company may also decline to give these

coverages.

c. Access.

The access endorsement T-23 is provided by

Procedural Rule 54 and may be desirable if assurance of

specific access is desired. The title policy provides

insured access but does not provide for coverage for a

specific point of access. The T-23 endorsement can

provide that coverage. The property must be improved.

d. Contiguity.

If multiple tracts are involved in a non-residential

situation, the T-25 and T-25.1 as provided by Procedural

Rule 56 may be very valuable. The T-25 endorsement

provides coverage that boundary lines of two or more

tracts are contiguous, while the T-25.1 expands that

further to insure against gaps, strips or gores. This

endorsement is useful in situations where there are

irregular tracts.

5. Express Insurance.

"Express Insurance" pursuant to Procedural Rule

P-39 is only available for those specifically described

liens, encroachments or title defects that do not fall

within the scope of the coverage of other affirmative

endorsements. See Appendix 5 for more information

regarding affirmative coverage endorsements and

express insurance in Texas.

6. Arbitration.

Arbitration provisions for policies up to $2M in the

T-1 and T-2 policies may be deleted pursuant to

Procedural Rule P-36.

7. Title Update.

This is also commonly referred to as a bring-to-date

(BTD). The purchaser/borrower, lender, and surveyor

should be provided with an original, signed

Commitment each time the Commitment is revised

and/or updated. This should be done as near to closing

as reasonable to check for any new encumbrances, tax

liens, leases, and the like.

D. Review of the Survey.

The primary purpose of a survey is to identify and

locate on the ground the effect of the various record and

non-record matters affecting the property. Efforts to

discuss exactly what to look for in a survey usually end

up with an unstructured discussion covering a

disconnected series of "what about this" and "what

about that" questions arising from transaction-specific

occurrences. Accordingly, critical considerations can

sometimes be overlooked. The items discussed below

represent a series of requirements that have been

determined, over the years, to be of importance in the

review of almost every survey. Careful consideration of

these items are critical to conducting a proper and

complete review of a survey as an important part of the

due diligence process. See Appendix 6 for a survey

checklist.

E. General Information.

a. Identifying Information. The Surveyor's

Name, Phone Number, and Address.

(1) The surveyor's job number.

(2) The type of survey (i.e., boundary or

completion).

(3) A general description of the property

being surveyed.

(4) Scale and bearing. In other words, how

far is that really and which way is North?

Both are very critical to obtaining a

complete understanding when reviewing

a survey.

(5) Surveyors signature and seal. It should

go without saying that every survey must

be made by a registered land surveyor. In

addition, each survey must have the

surveyor's original signature and the

surveyor's seal affixed. As a practical

matter, it can be cost effective to request

a preliminary survey (i.e., unsigned and

uncertified) to circulate to all interested

parties. The collected comments to the

preliminary survey can then be submitted

to the surveyor with the goal of obtaining

a signed and sealed survey that is

acceptable to all parties involved,

without the need for numerous revisions.

b. Dates.

(1) The date of the survey. The date of the

survey is fixed by the surveyor's field

work and should be current (i.e., no more

than 30 days before being submitted to

the parties). Surveyors who come

forward from their prior work are many

times asked to keep costs to a minimum,

and will sometimes re- certify as of a

more current date. You should not,

however, expect a surveyor to certify that

an "on-the- ground" survey was made at

any time other than the date it was

actually done. Some lenders have

requirements that state that the "on-the-

ground" date is as critical as the

"certification" date. That information

should be communicated to the surveyor,

and you can expect the surveyor's fees to


8

be consistent with the requirements

given.

(2) Date last revised. The latest revision date,

if applicable, should always be included

on a survey. This date will likely be

referenced on the Commitment when

describing specific exceptions (i.e., "as

shown on survey dated last revised").

c. Legend.

Although there are many abbreviations which

are readily understood by the real estate

practitioners (i.e., f.i.r. = found iron rod; s.i.r.

= set iron rod; p.o.b. = point of beginning;

etc.), anything which removes confusion and

doubt is welcome. Accordingly, each survey

should include a clear legend explaining any

abbreviations, symbols (i.e., fences, trees,

etc.) and/or fill techniques (i.e., cross-

hatching, shading, etc.) used by the surveyor

in preparing the survey.

d. Scale; Bearing.

See Appendix 7 (discussing the technicalities

of property descriptions) for more information

regarding scale and bearing.

1. Certification.

New 2016 Minimum Standard Detail

Requirements for ALTA/NSPS Land Title Survey (the

"2016 Standards") were adopted by the American Land

Title Association and the National Society for

Professional Surveyors effective on February 23, 2016.

Any survey which is to be certified or recertified using

ALTA/NSPS standards, on or after February 23, 2016,

should use the 2016 Standards.

The 2016 Standards primarily revised Exhibit A, a

table of optional survey responsibilities and

specifications, including twenty (20) items to be

negotiated. There are eight (8) numbered sections and

Table A which constitute the 2016 Standards. These

eight sections are: Purpose, Request for Survey,

Surveying Standards and Standard of Care, Records

Research, Field Work, Plat or Map, Certification and

Deliverables, together with Table A, Optional Survey

Responsibilities and Specifications, are attached to and

made a part of the 2016 Standards. Each of these will be

addressed in detail below.

For reference purposes, the 2016 Standards are

attached as Appendix 8. A marked version of the 2016

Standards showing significant changes from the 2011

Standards is available on the American Land Title

Association website and the NSPS website.

www.alta.org/forms; www.nsps.us.com. Many real

estate attorneys will find changes not reflected in the

markings which they will find significant.

Under the 2016 Standard, the only certification

allowed on the face of an ALTA/NSPS Land Title

Survey is the Certification in Section 7, except as

required by law or regulation. Some state surveying

boards, for example, require specific wording for

Certification. The ALTA/NSPS Certification is attached

as Appendix 9. The Certification in Section 7 is

sufficient in most cases, and this standard "short- form"

Certification covers every issue that the Surveyor can

actually and honestly certify to by stating that the

Survey was conducted in accordance with the

Standards. The wording in Section 7 of the 2016

Standard is essentially a statement from the title industry

and the surveying profession that title insurance

coverage can be provided without additional or alternate

Certification. For those Clients who require an

additional or alternate Certification, it is permissible to

negotiate with the Surveyor to provide another

additional and separate Certification and cross-

reference it to the Survey. In lieu of an additional or

alternate Certification, Lenders may simply use the

standards (including Table A, and Table A, Item 21, if

necessary) as the basis for their requirements.

Also attached are State of Texas Surveyor

certification forms and two generic forms. The State of

Texas forms are not new, but are forms suggested by the

Texas Society of Professional Surveyors. They are

based on the standards and specifications adopted by

TSPS and reference the category of survey requested.

The categories are set out in the TSPS Manual of

Practice. A category 1.A is a high quality survey and

often requested in Texas. The Condition number, I- IV,

establishes tolerances and is largely based on the

location of the property, ranging from urban business

district to rural. Note also that Tex. Admin. Code Title

22, Rule §663.18(e) provides:

Registered professional land surveyors may

certify, using the registrant's signature and official seal,

services which are not within the definition of

professional land surveying as defined in the Act,

provided that such certification does not violate any

Texas or federal law.

The generic survey certifications are similar to

those developed by lenders over time. The certification

often includes data that extends beyond the scope of a

typical survey and plat. It is a good comparison and

checklist, and may serve as a basis for a separate

agreement with a surveyor providing an ALTA/NSPS

certification.

Certifications may vary by transaction depending

on the nature in which the survey is intended to be

utilized. In general, however, the certification should be

to all parties having an interest (i.e., seller,

purchaser/borrower, lender, and title company –

including the underwriter and agent). The form of

http://www.alta.org/forms

http://www.nsps.us.com/


9

certification requested by the parties, particularly by

lenders, has become a matter of some concern and

possibly the subject matter of negotiations between the

surveyor and the parties to whom the survey is certified.

At the same time the ALTA/NSPS structure is intended

to bypass these negotiations to a large extent, and

provide a certificate universally accepted by parties,

surveyors, and the title insurance company. Keep in

mind that the content of the certificate determines the

degree of investigation of the site, and in many instances

the surveyor is simply unable to perform the necessary

investigation to support the contents of the form of

certificate being requested.

2. Property Description.

The full legal description (i.e., the metes and

bounds) of the property must be shown on the survey.

The address of the property may be included in the

survey, only if the address is disclosed in Record

Documents, or observed while conducting the survey.

The legal description must be identical to that shown on

the Commitment. Any discrepancies need to be

corrected or explained (discussed in more detail below).

If the property is described as being on a recorded plat

or map, the survey must contain the recording

information for the plat or map and a legend relating the

property to the plat or map, and the surveyor must

certify that the land which has been platted or mapped

is the same land as that described on the survey. In

addition, any portion of the property that is subject to a

ground lease must be specifically shown and identified

as the ground lease parcel. In general, look for the

following: (i) conformity between the description of the

property as it appears of record (usually taken from the

vesting deed), the description of the property on any

recorded plat or map of the property, and the description

of the property as determined by the surveyor and set

forth on the survey; (ii) the location of the property in

relation to some larger area in which the land is located;

and (iii) the internal relationship of various interests in

the property.

a. Point of Beginning.

The survey should clearly reflect the "point of

beginning" for the legal description (i.e., the point at

which the metes and bounds description of the property

begins). Often, there will be a "point of commencement"

as well, which takes the viewer from a known

monument or point to the point of beginning.

b. Perimeter Property Lines.

All perimeter property lines must be specifically

identified on the survey by courses and distances. In

addition, the survey should specifically show the

relation of the "point of beginning" to the monument

from which it is fixed (thus the "point of

commencement). A clear definition of the perimeter,

with courses and distances shown, will very quickly

disclose conflicts which might be a problem, especially

with respect to easements and access. As noted in the

related discussion of Policy coverages and

endorsements, the contiguity of perimeter lines with

street right-of-way lines and easements is crucial to the

determination of the degree of coverage available as to

matters of access (or more correctly, the title company's

willingness to insure without an exception for lack of

access).

c. Property Description Discrepancies.

It is not uncommon for there to be variances

between the vesting deed legal description, the plat

description, and the survey legal description. The

practical tendency is to accept the survey legal

description as the best contemporary description of the

property, especially once any variances or discrepancies

have been identified and resolved. The prevailing

practice among lenders, in particular, is to use the survey

legal description on their loan documents and to instruct

the title company to be in a position to insure that

description. Typically, the title company is readily

agreeable to this. You may, however, face a reluctant

grantor from time to time, who will refuse to convey to

the purchaser using any description of the property other

than the exact description by which he took title.

Assuming that the vesting deed legal description and the

survey legal description are at reconcilable odds with

each other, the title company can be asked to insure

using a legal description that incorporates the survey

legal description, followed with language to the effect

of "and being the same property described as follows: .

. .".

d. Ground Lease Tracts.

Most surveyors will have no problem identifying

ground lease tracts (i.e., pad sites) within a larger tract,

assuming that the ground lease used something other

than a crude drawing to identify the property subject to

the lease. It is also customary, particularly in multiple

loan and second- lien situations, to request that the

surveyor identify the various encumbered tracts by

reference to the recorded deed(s) of trust. The obvious

purpose is to provide the parties a visual representation

of the end result of their respective

purchasing/borrowing and lending efforts.

e. Square Footage/Acres.

The total number of square feet and/or acres

contained in the property should be specifically

identified on the survey. The total area comprising the

property can be of concern to all parties, particularly if

pricing or ordinances are affected.


10

f. Vertical Relief.

Vertical relief with the source of information, contour

interval, datum, and originating benchmark identified

may be requested for the survey.

g. Wetlands.

The survey may be requested to include the

location of wetland areas as delineated by appropriate

authorities.

3. Exceptions to Title.

One of the primary reasons for including

preparation and review of a survey in the due diligence

process is so that the purchaser and/or the lender can

specifically locate and analyze all of the easements and

other interests in favor of third parties which affect the

property. This is a consideration that goes directly to the

business points of the transaction.

a. Commitment and Exception Documents.

This should go without saying, but the parties need

to ensure that the surveyor has a copy of the

Commitment and all of the exception documents for use

in preparing the survey. In order to ensure early

coordination between the title company and the

surveyor, an initial direction to the title company should

be to provide the surveyor with a Commitment that

addresses not only the property in question, but also any

appurtenant easements or other items which might be

disclosed by the title search. In addition, having the

surveyor prepare a preliminary survey assists the title

company clean up the Commitment. For example, the

title company may have taken exception to a document

that purports to affect portions of more than one tract of

land. If the surveyor can locate that exception on a tract

other than the tract being insured and/or can

demonstrate to the title company that the exception does

not affect the tract being insured, the title company will

remove the exception from the Commitment.

b. Shown on the Survey.

All exceptions shown on the Commitment must

either be (i) shown (i.e., plotted) on the survey, or (ii)

identified on the face of the survey as being un-

plottable. For any exception (other than a lien) which

affects the property but is not plottable, the surveyor

should specifically indicate on the face of the survey

(i.e., in the surveyor's notes) the reason the exception is

not plottable. Some items that fall into the un-plottable

category are laundry leases and telecommunications

leases. In addition, all items shown on the survey should

be referenced with the applicable recording information

(i.e., indicating how the item originated). In the event

that any exceptions shown on the Commitment are not

shown on the survey, you should request that it either be

located on the survey or deleted from the Commitment.

c. Easements.

i. In General.

Each easement affecting the property (including

easements on or over other tracts which benefit the

subject property) must be identified on the survey by the

recording information for the document creating the

easement. With regard to each easement shown on the

survey, the surveyor should (i) show both boundary

lines, rather than just the centerline, (ii) depict the width

by arrows pointing to each boundary line, and (iii) label

with the applicable recording information (i.e., the

volume/page number or the plat's recording number.

The surveyor may be requested to locate improvements

within any offsite easements benefiting the surveyed

property that are disclosed in the Record Documents and

that are observed during the process of the survey. In

addition, monuments may be requested (or a reference

monument or witness to the corner) at all major corners

of any offsite easements benefiting the surveyed

property and disclosed in Record Documents.

ii. Platted Easements.

If an easement has been created by or is shown on

a recorded plat, the surveyor must certify that the

easement shown on the survey is the same as the

easement shown on the plat.

iii. Blanket Easements.

If there are blanket easements, these need to be

addressed. Blanket easements were common in large

tracts of unimproved property during a time when there

was significant expansion of pipelines and utilities. If

there is a blanket easement and the utility or pipeline has

been placed, the companies will generally work with the

borrower or lender to restrict the easement. There are

also statutory provisions which limit utilities and

pipelines in place pursuant to blanket easements. If there

is not a utility or pipeline in place in connection with a

blanket easement, it is prudent to obtain a definition and

limitation of that easement to permit the property to be

improved or otherwise better utilized.

iv. Abandoned Easements.

If the Commitment shows an easement that the

surveyor is unable to locate on the property, the

document purporting to create the easement should be

reviewed in detail to determine if it terminates

automatically upon abandonment (common for rural

service and transmission line easements). If that is the

case, the surveyor should be asked not only to advise as

to the non-plottability of the easement, but also that

there is no physical evidence on the ground of any

facilities existing pursuant to the easement, in which

case the title company can be asked to remove it.


11

4. Building Lines and Set-Back Lines.

It is not unusual for surveyors to show building

lines and set- back lines on the survey, however, the

source of authority for inclusion of said building lines

and set- back lines are rarely disclosed. Building lines

and set- back lines can arise via (i) separate declaration,

dedicatory language on the recorded plat, or application

of current municipal standards to the site. Building lines

and set-back lines created by separate declaration should

be shown on the survey, but keep in mind that a more

restrictive municipal requirement will prevail –

likewise, a more restrictive private requirement will

prevail over a more lenient municipal requirement. If

there is a conflict, both sets should be shown. If building

lines and/or set-back lines are shown on the recorded

plat (and thus on the survey), but are not included within

the dedicatory language of the plat itself, the lines

shown are most likely those provided for by municipal

standards in place at the time the plat was submitted for

approval and filing.

5. Streets and Rights-of-Way.

All streets and rights-of-way on or adjacent to the

property should be specifically shown and identified. In

particular, the survey should indicate, with respect to

each street/right-of-way (i) whether it is public or

private, and (ii) the centerline and width. In addition, the

survey should confirm that the property has direct

access to a public right of way. If information is

available from controlling jurisdictions regarding

proposed changes in street right of way, those proposed

changes may be requested, as well as observed evidence

of recent construction on the street or sidewalk. With the

advent of access coverage in Texas, the contiguity of the

property with abutting public streets is of paramount

concern. Texas does not allow assurance that the

adjoining streets are public, although a recitation in the

survey legal description that a particular line is the same

as a right- of-way of a public street is of some comfort

(for example, "thence S 45 deg. 13 mm. 43 sec. W, a

distance of 435.89 feet along the southwest line of this

tract and the northeast line of Main Street (a public

street), to a point..."). As mentioned above, if access to

a specific street or location of point of access is

important, such as in connection with the purchase of

land for a shopping center or an apartment complex, it

is advisable to obtain T-23 coverage.

6. Structures and Improvements.

All structures and improvements located on the

property or on the property's boundary line must be

shown on the survey, with horizontal lengths of all sides

and the relation thereof by distances to all boundary

lines of the property, easements on or over the property,

established building and set-back lines, and street lines.

The indication of distances from the boundary lines,

easements, etc., is crucial to the determination of actual

violations on the ground and any attendant possible

zoning violations, as well as allowing the title company

to evaluate realistically any risk it is being asked to take

in providing affirmative assurances over survey matters.

Although the need to address these items on the survey

is apparent, recent experience indicates that there may

be some debate as to what constitutes an

"improvement", especially when the title company is

asked to insure over noted encroachments and/or

protrusions. In that situation, the title company can be

expected to require some comfort from the surveyor and

the question of what constitutes an improvement will

arise. The most common problems in that regard are

sidewalks and driveways, which almost without

exception lie over utility easements, underground

drainage facilities, and the like. In addition, the advent

of covered parking as a salable amenity for apartment

complexes has resulted in the construction of parking

structures that encroach over building lines, easements,

etc. The problem here is that a detailed review, and any

attempt to address all of these situations, can create an

adversarial situation between surveyor, title company

and proposed insured that may not need to exist. The key

seems to be a willingness on the part of the purchaser

and/or lender to address the problem from a business

risk standpoint first, and let the surveyor and title

company know up front what will be acceptable.

a. Buildings.

i. Area.

The survey should include the square footage of

each of the buildings located on the property. The

absence of zoning endorsements in Texas makes the

square footage of the buildings of primary concern,

since a zoning letter or other information regarding

zoning requirements will have established the need for

this information to determine compliance and to

determine if any waivers are needed.

ii.. Height.

The survey should indicate the height of the

buildings located on the property.

iii. Relative Location.

The survey should reflect the distances between the

property boundary lines and the nearest point on each

building located on the property.

b. Parking.

The absence of zoning assurances in Texas

establishes the need for parking and related information

to determine compliance with current zoning standards.

Accordingly, the survey should identify each parking

area and should set forth for each (i) the total number of

parking spaces, (ii) the total number of regular parking

spaces, and (iii) the total number of handicapped

parking spaces.


12

c. Fences/Power Poles/Walls.

Without expressing a legal opinion on the nature or

ownership of any encroachment, the survey should

record the dimensions of all encroaching utility pole

cross members or overhangs. The survey may be

requested to indicate determination of the relationship

and location of certain division or party walls designated

by the client with respect to adjoining properties (client

must obtain necessary permissions). In addition, may

determine whether certain walls designated by the client

are plumb (client must obtain necessary permissions).

d. Landscaping.

The location of any major trees and/or shrubbery to

be protected should be shown on the survey.

e. Other Structures/Improvements.

All other structures and improvements, including

sidewalks, stoops, overhangs, and paved areas, must be

shown on the survey, with horizontal lengths of all sides

and the relation thereof by distances to all boundary

lines of the property, easements on or over the property,

established building and set-back lines, and street lines.

In addition, all curb cuts and driveways should be shown

on the survey.

7. Encroachments.

All encroachments of buildings and other structural

appurtenances (i.e., loading docks, awnings, canopies,

porches, fire escapes, and bay windows) by or on

adjoining property, over easements, onto or from

abutting streets or alleys, whether surface or subsurface,

must be indicated on the survey with the extent of each

such encroachment clearly defined. Likewise, any

known variance granted by governmental authority for

such encroachments must be listed and explained. This

requirement speaks to another one of the primary

reasons for obtaining and reviewing a survey as a part

of prudent due diligence. What is needed is to reconcile

this to the recorded documents - if an easement by its

terms permits some "overbuilding", the title company

should give effect to that permission in its exceptions.

Likewise, the granting of permission to build over an

easement (common in Harris County) should be noted

on the survey and Commitment, and the title company

should be requested to give full effect, to the extent of

the permission granted. If an encroachment or

protrusion is the subject matter of a beneficial grant

appurtenant to the property (many cities will grant a

license to protrude into public spaces such as sidewalks,

alleys, etc.), consider requesting the title company to

insure the appurtenant rights.

8. Utilities.

a. Utility lines.

The survey should identify all utility lines (i.e.,

sewer, water, gas, electric, telephone, etc.) as they

service the property and the improvements. The survey

should also indicate whether said utility lines are above

or below grade. The availability of utility services is

typically not the reason for this requirement. More

importantly, it is whether utilities serve the site from

public or private easements, from public rights-of-way,

or across adjoining lands, that is of concern. Whether

the utility lines are above or below grade typically goes

more towards aesthetic/business concerns. Many

surveyors are reluctant to make any statement which

will satisfy this requirement - look for water meter

boxes, electric meter boxes, etc. as clues.

b. Utility transformers.

The survey should identify any utility transformers

located on the property and should specifically make

reference to those transformers which are labeled as

containing PCBs. Obviously driven by environmental

concerns, compliance with this request is easy enough

when you are dealing with transformer pads located on

the ground. Most surveyors will not make a close

inspection of any transformers located on power poles,

although some will attempt to take a reading with

binoculars.

9. Flood Zone Information.

a. In General.

The survey must state whether or not the property

appears on any (i) U.S. Department of Housing and

Urban Development ("HUD") Flood Hazard Boundary

Map, or (ii) special flood hazard area map published by

the Federal Emergency Management Agency

("FEMA"). If the property appears on a HUD Flood

Hazard Boundary Map, the survey should state the map

number and whether or not the property appears in the

"Flood Hazard Area" shown on the map. If the property

appears on FEMA special flood hazard maps, the survey

should state whether or not the property lies within a

flood hazard area and, if so, further state the flood zone,

the applicable map ("FIRM", "FHFBM", "FBFM") and

the community panel number. Keep in mind, however,

that not all municipalities participate in these federal

programs, and the requested information may not be

available. Accordingly, the surveyor may not be able to

make an affirmative statement to the degree requested,

particularly if the underlying information/mapping is

not available. In many cases, pricing may be different

for land in the flood plain, so this can be quite critical.

b. Sample Language.

"The Property is not located in a 100-Year Flood

Plain or in an identified 'flood prone area,' as defined by

the U.S. Department of Housing and Urban

Development, pursuant to the Flood Disaster Protection

Act of 1973, as amended, as reflected by Flood

Insurance Rate Map Panel # , dated _______________,

which such map panel covers the area in which the


13

Property is situated. The Property is located within Zone

___."

10. Other Items to Consider.

a. Elevation.

b. State Platting Statute.

c. Streams, Rivers, Surface Drainage Systems.

d. Underground Tanks.

e. Railroad Tracts.

f. Number of Prints Required.

g. Professional Liability Insurance.

11. ALTA/NSPS Land Title Surveys and Standards.

The items discussed above are applicable in the

review of any type of survey. As noted, the American

Land Title Association ("ALTA") and the National

Society of Professional Surveyors ("NSPS") have

established basic standardized requirements for land

title surveys (namely, the Minimum Standard Detail

Requirements) to provide consistency across the

country. ALTA/NSPS Land Surveys require a higher

level of detail and are, accordingly, frequently required

by lenders, title companies, attorneys and purchasers of

commercial real estate.

a. Analysis of 2016 Standards.

The following is an analysis of the 2016 Standards

section by section, noting the changes from the 2011

Standards which will be significant to most

practitioners.

12. Purpose.

a. ALTA Survey.

Section 1 of the 2016 Standards defines what a

survey must include to qualify as an ALTA

Survey. Four items are specified: (i) on-site

field work, (ii) a plat or map showing results of

the field work and relationship to documents

provided to or obtained by the surveyor, (iii)

any information required in Table A, and (iv)

the surveyor's certification.

b. Lender.

The 2016 Standards expressly recognize lenders as

one of the parties which will rely upon complete and

accurate surveys.

13. Request for Survey.

a. Authorization and Specifics.

The 2016 Standards included the requirements that

written authorization to proceed must come from the

client, and that title insurers are not responsible for the

cost of the ALTA survey unless otherwise authorized by

them in writing. This section also incorporates the

designated optional items listed in Table A. However,

the 2016 Standards also provide guidance dealing with

special types of properties to be surveyed, and

specifically, lists marinas, campgrounds, trailer parks

and leased areas. Special properties need to be the

subject of separate discussions and agreements between

the surveyor and the client, since these properties have

unique issues as to what the surveyor is being requested

to depict.

b. Access Authority.

Another new aspect of this section is the placement

on the client of the responsibility to obtain permission

for the surveyor to enter upon the surveyed property,

adjoining properties or offsite easements. Despite the

mandate for the client to secure such permission, the

written engagement contract between the client and

surveyor can shift this burden to the surveyor; however,

absent contractual provisions to the contrary, the

responsibility and cost of this will lie with the client. As

a practice guide, this responsibility should be clearly

delineated in the contract and not left to the 2016

Standards for the answer; this will minimize the chance

of a surprised client.

14. Surveying Standards and Standards of Care.

a. Standards of Care.

This section establishes a national, objective

standard of care for preparing an ALTA Survey;

however, due to the existence of various other federal,

state and local laws, statutes, ordinances and other

administrative rules that regulate the practice of

surveying in those jurisdictions, the 2016 Standards

allow for modification of the national objective

standards to recognize such other applicable laws.

Although somewhat dated at this time, a compilation of

all 50 state laws and other significant agency and federal

requirements governing surveying practices are

contained in Mitchell G. Williams, Editor, Land

Surveys, A Guide for Lawyers and Other Professionals,

Second Edition, Chapter 11, Minimum Survey

Standards: A Survey of State and Federal Laws and

Regulations, by J. Richard White (American Bar

Association 2000). In addition to local requirements, the

2016 Standards recognize the existence of unwritten,

subjective standards of care in certain locales. See, 2016

Minimum Standards, Section 3.C. Therefore, there are

three sets of guidelines applicable to a proper ALTA

Survey: (i) the national objective standards contained in

the 2016 Standards, (ii) federal, state and local laws,

rules and ordinances, and (iii) unwritten, subjective

standards of care applicable to the particular location.

b. Boundary Resolutions.

Section 3.D of the 2016 Standards represents an

enhanced level of work by the surveyor. It will come as

a surprise to most real estate practitioners, however, that

under prior survey standards, the surveyor was not

required to make a professional judgment on the actual


14

boundary line of the surveyed property. See, Bales and

Kent, The 2011 ALTA/ACSM Land Title Survey

Standards, 25 Prob. & Prop. 12, at 14 (July/August

2011) [Note: The authors of this article were members

of joint committee that drafted the 2011 Standards; Gary

Kent was the Chair of the committee.]; NEW 2011

ALTA/ACSM Standards – Summary of Significant

Wording Changes between 2005 ALTA/ACSM

Standards and the New 2011 ALTA/ACSM Standards,

www.smith- roberts.com/pdf/2011-alta-summary-of-

changes.pdf. Under Section 3.D, an ALTA Survey

requires all boundary lines and corners to be established

or retraced in accordance with appropriate boundary law

principles governed by the set of facts and evidence

found in the course of performing the research and

survey. Under some earlier standards, the surveyor was

required to show the location of existing boundary lines

from information provided; however, the existence of

gaps and gores (referred to as "overlaps") that might

have been discovered by the surveyor were not required

to be depicted. The 2016 Standards require the surveyor

to disclose such matters to the client and title insurer and

work with them to make a professional judgment based

upon existing facts and real estate boundary law as to

the proper boundary lines and corners. See, 2011

Standards, Section 6.B.vii; Bales and Kent, The

ALTA/ACSM Land Title Survey Standards, 25 Prob. &

Prop. 12, at 15 (July/August 2011).

c. Measurement Standards.

Section 3.E of the 2016 Standards contains the

measurement standards. The terminology is simply to

reflect that the measurements have a certain degree of

precision and may not be exact. A boundary can be

precise because the survey measurements are precise;

but the boundary can still be inaccurate because of

improper application of boundary law principles.

However, even though the terminology describes the

relative positional precision of lines and measurements,

other provisions of the 2016 Standards address the

accuracy of legal boundary determinations. See, Sec.

3(b), supra. Remember that metes and bounds are very

low on the priority list for determining boundaries

which is: (i) natural monuments, (ii) artificial

monuments, (iii) calls for adjoinders, (iv) metes and

bounds measurements, and (v) acreage.

As to the accuracy standards, Section 3.E.v

specifies the maximum allowable Relative Positional

Precision for an ALTA Survey, but recognizes that

circumstances such as size or configuration of the

surveyed property, relief, vegetation or improvements

may result in exceeding the maximum allowable

Relative Positional Precision. In such case, this

discrepancy must be noted and explained by the

surveyor. See, 2016 Standards, Section 6.B.x.

15. Records Research.

Under the 2016 Standards, the surveyor must be

furnished with the following types of documents: (i) the

most recent title commitment, (ii) current record

descriptions of the property to be surveyed (or if it is a

new original survey, the description of the parent

parcel), (iii) the current record description of adjoining

properties, (iv) recorded easements appurtenant to and

benefiting the surveyed property, (v) copies of record

easements, servitudes and covenants burdening the

surveyed property, (vi) documents of record referred to,

(vii) documents necessary to ascertain junior or senior

relationships with respect to gaps or gores, and (viii)

other documents which have appropriate information

affecting the surveyed property. It is anticipated that the

title company will furnish such items to the surveyor;

however, the cost of this will not be borne by the title

company. The client and title insurer should have an

agreement on this prior to the engagement of survey

work. From a practical perspective, if the attorney or

client does not have an established working relationship

with the title insurer, or if you are addressing property

in a different state, the prudent practitioner will obtain a

written commitment from the title insurer about the

obtainment and delivery of these documents.

With respect to the furnishing of title evidence on

adjoinders, the surveyor only needs the legal description

and not a complete search of title to the adjoinder.

However, from a practical standpoint, with respect to

any adjoining property that constitutes an easement

appurtenant which benefits the surveyed property,

prudent counsel to the acquiring property owner and

lender, will probably require a title search for such

adjoinder properties. Again, this needs to be addressed

at an early point between the client and the title insurer.

However, many states require surveyors to conduct their

own deed research; therefore, in those states, the 2016

Standards incorporate that local requirement and relieve

the client or title insurer from performing such work.

The cost for obtaining such documentation is not

specified to be that of the surveyor; consequently,

practitioners may want to address this cost in the

contract with the surveyor.

16. Fieldwork.

This section provides the substantive care of the

surveying standards. There are a few items which are

important.

a. Access.

The 2016 Standards require that the location and

character of vehicular, pedestrian and other access to the

surveyed property by parties by other than apparent

occupants must be shown. These access rights would

include driveways, alleys, private roads, sidewalks, foot

paths, curb cuts and other matters observed during the

field work. The location requirement is obvious, but the


15

character requirement may need elaboration. The

surveyor, in noting the character, should explain the

usage or other title significant aspects. For example, a

drainage ditch may need to be characterized as drainage

flow from an adjoining property, a foot path may need

an explanation of the properties being served or which

use such pathway.

b. Utilities.

Locating and showing observed evidence of

utilities is mandatory.

c. Water Boundaries.

The water boundary provision, Section 5.G.

requires the location and attributes of water boundaries

and features located on the survey to be congruent with

the legal description. Water features, such as top of

bank, edge of water, high water mark, center of creek,

etc., must be shown on the survey and must be

consistent between the description and the drawing.

Therefore, the limits of water boundaries must be

consistent with boundary law principles. Of course,

legal principles may require a determination of whether

the water is navigable or non-navigable while the 2016

Standards do not specify if the surveyor is required to

make such determination; however, since the 2016

Standards require a judgment on the legal boundary,

such a determination is implicit.

17. Plat or Map.

Because there are significant differences between

the terms "plat" and "map" as used from state to state,

too difficult to reconcile, so, the Standards use the dual

terminology.

a. Dimensions.

Dimensions shall be in accordance with surveyor's

professional opinion as to the needed degree of

precision.

b. Legal Description.

New legal descriptions should be avoided unless

deemed necessary or appropriate by the surveyor and

insurer. Furthermore, the use of new descriptions for a

lot and block of a recorded, platted subdivision is also

to be avoided. This means that the often used practice of

describing a property by its lot and block description

pursuant to the recorded plat, and then providing a

phrase such as "more particularly described as follows"

and then giving a full metes and bounds description

should be resisted by a surveyor performing an ALTA

Survey.

c. Discrepancies.

Any significant discrepancies in measuring or

calculating dimensions should be shown in addition to

and differentiated from the corresponding record

dimension. This provision is in keeping with the spirit

that the surveyor is to provide an opinion on the correct

boundary of the surveyed property.

d. Remainder Properties.

Section 6.B.v adds further detail when the surveyed

property leaves a remainder in the parent tract. The 2016

Standards provide that the remainder tract need not be

included as part of the ALTA Survey unless necessary

to locate lines and corners of the surveyed property, and

need not be fully dimensioned or drawn on the same

scale as the surveyed property.

e. Gaps and Gores.

The 2016 Standards, Section 6.B.vii, require gaps

and gores to be identified and disclosed to the insured

and client for determination of the course of action to be

taken in showing the boundary line or corner.

Nationally, surveying practices are divided as to

whether the surveyor should attempt to resolve a gap or

gore discrepancy or to simply identify and disclose

same. Bales and Kent, The 2011 ALTA/ACSM Land

Title Survey Standards, 25 Prob. & Prop. 12, at 14

(July/August 2011). Therefore, this disclosure and

consultation requirement needs a collaborative effort by

the insurer and the surveyor to determine the legally

effective boundary line or corner. Despite this

requirement for the conclusion or opinion on the

property boundary line, the prudent practitioner should

probably insist on having access to all of the facts and

information that went into the conclusion to verify

concurrence with the conclusion.

f. Title Evidence.

Surveyors should note on the face of the plat or

map the title commitment policy number, effective date

thereof, and name of the insurer providing the title work.

g. Easements.

With respect to easements, servitudes, rights-of-

way and the like, the 2016 Standards require a summary

of each.

h. Presentation.

Section 6.D sets out specific requirements for the

drawings.

18. Certification.

a. Form.

Again, perhaps the more controversial provision

relates to the certification of the surveyor, and the

requirement that the prescribed certification be the only

certification that can be used and that it be unaltered. If

a certification on what appears to be an ALTA Survey

contains any additional certifications or the prescribed

certification is altered in any way, other than as required

by the Section 3B standards of practice, the effect is that


16

the 2016 Standards are not incorporated into the

certification and the survey is not an ALTA Survey.

Whether this will be legally enforceable is an open issue

and may be determined on a state by state judicial

decision basis. If a non-compliant "ALTA Survey" is

signed and sealed by the surveyor, which surveyor knew

that the standards were not adhered to, would there be

state law remedies for fraud or professional malpractice?

The prescribed certification form represents the most

favorable change in the 2016 Standards from the

surveyor's perspective. Clearly, the intent of the drafters

was to eliminate the "long form" of certifications

required by various lenders and the ensuing lengthy,

costly and contentious negotiations. Some of those

certifications exceeded the scope of proper surveying to

include legal determinations, such as zoning violations,

zoning setbacks, encroachments and other matters

appropriate only for determination by an attorney or title

insurer. Mitchell G. Williams, Editor, Land Surveys, A

Guide for Lawyers and Other Professionals, Ch. 9,

Robert W. Foster, Certifications from a Surveyor's Point

of View, (American Bar Association, 2000); J. Richard

White, Surveys: Interplay Between Lawyer and

Surveyor, Annual Convention of the American

Congress of Surveying and Mapping (1989). See also

Appendix 9 Certificate Forms.

b. HUD – Multifamily.

The U.S. Department of Housing and Urban

Development has issued Mortgagee Letter 2011-21,

dated June 20, 2011, with respect to all FHA approved

multifamily mortgages. See, http://portal.hud.gov/hudp

ortal/documents/huddoc?id=11-21ml.pdf. HUD has

adopted, effective as of September 1, 2011, the 2011

Standards and revised the HUD's Survey Instructions

and Report, Form HUD-92457A-M,

http://portal.hud.gov/hudportal/documents/

huddoc?id=92457am.pdf, and the Surveyor's Report,

Form HUD-92457M, http://portal.hud.gov/

hudportal/documents/huddoc?id=92457m.pdf. This

Survey Report requires an additional certification by the

surveyor on a certification separate from the ALTA

Survey and is, therefore, in compliance with the 2011

Standards. Additionally, as to the optional Table A

survey specifications, HUD will require items 1, 2, 3, 4,

6a, 6b, 7a, 8, 9, 10a, 10b, 11, 12, 13, 16, 17, 18, 19 and

20. HUD also requires that the surveyor indicate the 100

year flood plain and the 500 year flood plain on surveys

for Section 811 housing programs.

c. Date.

The surveyor certification was also revised to

include both the date of the certification and the date of

the field work. This may be confusing at first,

particularly in determining the correct date for

determining whether a survey is current. However, it is

anticipated that the most appropriate date in the

determination of whether the survey is current will be

the date that field work was completed. The date of

certification, being the other date in the certification,

could be many months after the field work and research

were completed. Therefore, any intervening matters,

such as new documents, encroaching improvements,

water courses, trespasses and the like, would not be

reflected; reliance on the date of certification will be

unwarranted as a general practice.

d. Flood Zone.

At the current time, there are a number of long form

lender surveyor certifications which require the

surveyor to locate boundaries of the 100 and 500 year

flood plains and to certify the location of same on the

map or plat based upon the current FIRM map or letter

of map revision. This certification may be problematic

for those lenders. Such flood locations may be included

on the ALTA Survey and noted on the face of the

survey, but cannot be included in the certification.

Alternatives for this would include a separate

certification off of the ALTA Survey or, possibly, the

use of the applicable state's survey standards and

certifications, in lieu of an ALTA Survey, if those allow

the flood zone to be certified. Of course, this needs to be

addressed in the engagement letter with the surveyor.

19. Deliverables.

The 2016 Standards allow digital copies of the

ALTA survey to be provided in addition to or in lieu of

hard copies. The terms of the contract between the

surveyor and the client will determine the form in which

the ALTA Survey will be delivered. Therefore, both

parties to the contract need to be specific as to what is

contemplated to be delivered. However, the 2016

Standards also contemplate that this contractual

requirement for deliverables may be affected by existing

local law where an original signature or embossed seal

is a condition to a valid survey.

20. Table A.

Table A includes twenty (20) items to be

negotiated. Paragraph 21 is used for additional

unidentified topics.

a. Address.

Item 2 makes the address of the surveyed property

optional and, if selected, must be included if the address

is disclosed in either provided documents or is

observable while conducting the fieldwork. This will

probably be a relatively standard selected optional item

for surveys of improved properties.

b. Vertical Relief.

Any vertical relief shown is required to specify the

source information and contour information contained

in Item 5.

http://portal.hud.gov/hudportal/documents/huddoc?id=11-21ml.pdf



http://portal.hud.gov/hudportal/documents/%20huddoc?id=92457am.pdf

http://portal.hud.gov/hudportal/documents/%20huddoc?id=92457am.pdf

http://portal.hud.gov/%20hudportal/documents/huddoc?id=92457m.pdf

http://portal.hud.gov/%20hudportal/documents/huddoc?id=92457m.pdf


17

c. Zoning.

Item 6, relating to zoning, setback lines and the

like, includes no reference to building codes. As to

zoning, there are two choices: (i) either a listing of the

current zoning classification as provided by the insurer;

or (ii) the current zoning classification and building

setback requirements, height and floor area restrictions

applicable to the classification, as provided by the

insurer. The significance of this provision is that the

surveyor is not required to make any independent

investigation or determination of zoning classifications

and requirements; rather, the surveyor merely reflects

the information as provided by the insurer (or other

parties). Since zoning endorsements are not available on

title policies issued in Texas, it is unlikely that title

insurers will provide such information. But in "ALTA

states," clients or lenders often ask for an ALTA

Endorsement 3.1 (Zoning – Completed Structure) from

the title insurer; in such a case, the title insurer might be

willing to furnish the zoning information it has obtained,

typically after extensive and careful research.

Regardless of whether a zoning endorsement was

requested of or provided by the title insurer, the 2016

Standards do not require that such zoning information

be provided by the title insurer. See,

www.alta.org/forms, ALTA/ACSM Land Title Surveys –

FAQs, Question #6 (Revised 06-06-2011).

So, can this information be provided by a party

other than the title insurer, and if so, will use of such

information and disclosure on the survey render the

survey a non-conforming ALTA Survey? This question

is generally answered in the introductory paragraph to

Table A which provides that such items can be

negotiated between the surveyor and client, and can be

qualified or expanded based upon that negotiation.

Therefore, a party other than the title insurer (such as the

client, its attorney or a third party provider) can supply

the information and the survey still qualifies as an

ALTA Survey. See, www.alta.org/forms, ALTA/ACSM

Land Title

Surveys – FAQs, Question #6 (Revised 06-06-11).

In this case, the surveyor may modify the certification

to provide that Table A item 6(a or b) was prepared "as

negotiated." However, consideration should be given to

applicable state law as to whether providing such

information would constitute the unauthorized practice

of law, depending on who provides the information.

d. Floor Area.

Item 7 does not include any reference to gross floor

area of the building. This was eliminated since an

indication of gross floor area would have required

measurements of the inside of the building.

e. Access; Party Walls.

Item 10 addresses the relationship and location of

division and party walls and whether such walls are

plumb.

f. Utilities.

With respect to the location of utilities, contained

in Item 11, the 2016 Standards require notations with

respect to utilities. This notation must indicate that

underground utilities will not be exactly located, and are

shown based on source information from plans and

markings and observed surface evidence. It further

advises that for exact locations, excavation may be

required.

g. Proposed Rights of Way.

Item 17 included "proposed" changes in street

right-of-ways. Such proposals are to be shown only if

available from the controlling jurisdiction. Completed

roads must be observed.

h. Wetlands.

Item 18 allows a specification for showing wetland

areas if they are delineated by a qualified specialist.

i. Off-Site Improvements.

Item 19 provides for the location of improvements

within an offsite easement or servitude benefiting the

surveyed property. Before checking these optional

provisions, the practitioner should be aware of the

potential increase in cost and permissions necessary

with respect to this work.

j. Professional Liability Insurance.

Finally, Item 2 has been included to require

professional liability insurance (i.e., errors and

omissions insurance) to be obtained by the surveyor in

a designated amount. There are a significant number of

surveyors who do not carry such insurance, and the

requirement for this may either increase the cost of the

survey, delay the time for obtaining the survey (so that

the surveyor can obtain such insurance), or prevent the

surveyor from agreeing to such engagement. If selected,

this provision requires that the insurance be in effect

throughout the contract term. According to the ALTA,

this term will be whatever is agreed upon by the

surveyor and client. See, www.alta.org/forms,

ALTA/ACSM Land Title Surveys – FAQs, Question #8

(Revised 06-06-2011). Absent such an agreement

otherwise, the applicable statute of repose and statute of

limitations would control the period of liability.

Attorneys for surveyors should review the applicable

E&O Policy provisions dealing with limitations to

assure that the contract is consistent with the coverage.





18

F. Conclusion.

The interplay between the 2016 Standards and the

existing standards in Texas, as contained in the Manual

of Practice for Land Surveying in the State of Texas, 11th

Edition, adapted by the Texas Society of Professional

Surveyors, and in 22 Tex. Admin. Code §633, remains

to be developed and should be monitored. The 2016

Standards should be reviewed with respect to

engagement letters, retention contracts, and survey

reviews.

IV. OTHER TITLE, SURVEY AND PROPERTY

ISSUES.

A. Insured Closing Letters.

These types of letters are typically only required by

lenders, but are available to purchasers. In the event that

the Commitment is issued by an agent of the

underwriter, rather than by a direct operation of the

underwriter, lenders will typically require that the agent

obtain a letter from the underwriter stating that the

issuing agent is an approved agent of that underwriter

and that the underwriter will stand good for any funds

delivered to the agent by the lender. As indicated, an

insured closing letter can also be requested by a

purchaser or seller who request the coverage prior to

closing of the transaction. The promulgated Insured

Closing Service form used to satisfy the lender's request

is T-50 and is contained in Section V of the Basic

Manual, a copy of which is attached. The promulgated

form of a Purchaser/Seller Insured Closing Service

Letter which is T-51, is also contained in Section V of

the Basic Manual, a copy of which is also attached. See

Appendix 10.

B. Pro Forma Policy.

Delivery of Pro Forma Policies and Promulgated

Forms is provided for in the Basic Manual pursuant

Procedural Rule P-52 which states that for purposes of

the rule, a "pro forma policy" is an Owner or Loan

Policy prepared prior to payment for, issuance and

delivery of the policy, with completed Schedules A and

B, showing the proposed insured, the amount of

insurance, the exceptions that are proposed to be placed

in the final policy to be issued, and the name of the title

insurance company and title insurance agent. Texas

regulation does not allow the delivery to a proposed

insured for review a pro forma policy unless (a) the land

is not residential real property and has a proposed

amount of insurance of $500,000 or more, and (b) each

page of the completed schedules conspicuously states

"This is a Pro Forma Policy furnished to or on behalf of

the party proposed to be insured for discussion only. It

does not reflect the present status of title and is not a

commitment to insure the estate or interest as shown

therein, nor does it evidence the willingness of the

Company to provide any coverage shown. Any such

commitment must be an express written undertaking

issued on the appropriate forms of the company." The

limited scope of the pro forma policy in Texas by rule

makes the title commitment the important closing

document.

C. Taxes.

1. Tax Certificates.

As a part of your title and survey review, you

should request and review all applicable tax certificates

to ensure that the property covered by the Commitment

consists of one or more separate tax parcels, with no

more or less property included as part of the one or more

applicable tax parcels. In other words, the property

should be taxed as one or more separate parcels, not as

a portion of a larger parcel. This can sometimes become

an important issue for lenders, who may require that the

purchaser/borrower escrow enough money to pay all the

taxes included in a tax parcel until such time as the

property is assessed as a separate tax parcel.

2. Roll-Back Taxes.

The parties to the transaction need to address

responsibility for roll back taxes as a part of the contract.

Roll back taxes may arise in the event that the property

has been receiving an agricultural use or open space

designation. These designations permit the property to

be taxed at a lower value and upon a change of use or

ownership the taxing entity may seek to recover three to

five years taxes depending on the designation. This may

be a matter of escrow or other agreement. Often the

lender will also require payments into escrow to address

the eventuality of a roll back assessment. The tax

certificate will set out any special designations resulting

in a reduced tax valuation. Most tax certificates will

indicate the fair market value and the difference in taxes

which may be subject to a roll back assessment.

D. Zoning Letters/Zoning Ordinances.

Zoning is generally not covered by a title insurance

policy unless there has been some specific matter related

to zoning placed of record, creating a title encumbrance.

However, those representing a purchaser or lender

always need to review the survey and the zoning

ordinances to assure that the contemplated purpose for

the purchase can be accomplished and there is no

adverse impact on value. In addition, if variances or the

like are needed, those typically need to be obtained as

part of the closing. This is a very definite and important

area to a real estate acquisition which will not be

assisted in most cases by review of the commitment.

Careful independent review of the zoning ordinances is

required.

E. Matters Known to the Insured.

One other title issue to be considered is the

existence of matters known to the insured but not to the

title company and not of record. These matters will be


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excluded from coverage per the terms and conditions of

the policy. It is recommended these be disclosed in

writing to the title company to avoid this potential loss

of coverage. The title company may also use this

information in its title search and resulting commitment.

V. SAMPLE OBJECTIONS AND SOME

PRACTICAL RESPONSES

This portion of the paper addresses some typical

exceptions and handling of the title objections with

available coverages. A Sample Title/Survey Review

Memorandum is attached as Appendix 11. A list of

some potential objections is attached as Appendix 12.

These are organized by:

Restrictive Covenants

Schedule B modifications

Mineral Interests

Easements

Leases

Encroachments

Access

Schedule C compliance

Arbitration

There may also be objections specific to the survey as

previously discussed. See also Melamed, Objection

Letter Update, Texas Land Title Institute, 2015, and

Kramer, Responding to the Title Commitment and

Survey, 49th William W. Gibson, Jr. Mortgage Lending

Institute, 2015.

A hypothetical commitment is attached as

Appendix 13 and as will be noted, includes a number of

exceptions in Schedules B and C. Reference to that

commitment will help understand the hypothetical

transaction and the objection and responses below. In

general, these same exceptions, objections, and

responses would be applicable to any commitment and

closing having those same title issues.

Summary of the Hypothetical Transaction.

These sample objections and title company

responses arise out of a hypothetical

transaction involving the sale of an apartment

complex for $8,500,000.00 located on Tract 1,

together with an adjoining unimproved Tract

2 that maintains an agricultural exemption.

The seller has an existing survey from 2010.

The seller does not own 100% of the minerals

and has two oil and gas leases (one old and

one new). The examination shows both an old

blanket easement and a new designated

easement. The survey reveals both major

(building across property line) and minor

(protrusion into the utility easements) issues.

Objections to the Commitment are set out

below, with possible responses by the title

company.

Easements that benefit the property.

Objection: Items 3 and 4, Schedule A of the

Commitment do not include the Reciprocal

Easement Agreement and Declaration of

Covenants and Restrictions recorded in

Volume , Page , Real Property Records of

_____ County, Texas (the "Records"), as

amended and restated under Document No.

_____, and as further amended by that certain

First Amendment recorded as Document No.

______, both in the Records. The rights

granted by these instruments must be insured

to purchaser in the owner's policy to be issued

in this transaction (the "Policy").

Response: Agreed, as they benefit the

property - With the addition of stating in Item

2 of Schedule A that these will be easement

estate tracts instead of fee simple estate tracts.

Survey deletion.

Objection: Item 2, Schedule B of the

Commitment should be revised to read

"shortages in area" in the Policy.

Response: Agreed. Title company must,

however, be furnished with an acceptable

survey to be reviewed and approved by our

examiners. We may not delete the

promulgated language from the Commitment,

but we may place in Schedule C a statement

that when the survey is reviewed and

approved we will agree to make the requested

deletion in the Policy. Further, if we have

approved the survey, we may state in

Schedule C that we have approved deletion of

the survey exception in the Policy as

requested.

Tax exception.

Objection: Item 5, Schedule B of the

Commitment should be amended to read in its

entirety as follows: "Standby fees, taxes and

assessments by any taxing authority for the

year 2020, and subsequent years." Purchaser

requires the payment of all ad valorem taxes

and assessments for all prior years, up to and

including the year 2019.

Response: Upon payment of the 2019 taxes,

this exception may be changed to read "2020".

However, for an owner's policy we are not


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allowed to delete the exception for possible

roll back taxes, described by the phrase, " . . .

and subsequent taxes and assessments by any

taxing authority for prior years due to change

in land usage or ownership . . .". The risk of

possible roll back taxes is always borne by the

parties and the contract must be examined to

determine who will carry forward the risk.

Unrecorded Leases.

Objection: Item 10.a, Schedule B of the

Commitment should be deleted from the

Policy or replaced with an itemized listing of

existing tenants and the term of each of their

leases.

Response: If the parties have furnished a list

of existing leases in the contract, or provided

for one, then upon being furnished the list,

each lease may be excepted to instead of the

general exception to unrecorded leases.

Deleting exception for reciprocal easement.

Objection: Item 10.c, Schedule B of the


Policy because the easements described

therein constitute a part of the property to be

insured in this transaction.

Response: While as to Tract 3 (the now-added

easement estate) this is correct, the easements

are still a burden to Tracts 1 and 2 (fee simple

estates) and therefore must be listed as

applying to those tracts.

Oil and gas leases.

Objection: Item 10.e and f, Schedule B of the


Policy or the purchaser must be insured

against the exercise by the respective lessees

of the surface rights associated with the sub-

surface mineral rights. With regard to this

item, purchaser requires an assignment of the

seller's interest in the lease(s) if either or both

of the leases have not expired.

Response: As to Item 10.e, Schedule B (the

1951 lease), with a properly documented

affidavit of non- production, this exception

may be removed. As to Item 10.f, Schedule B

(the 2008 lease), the term may not have

expired. Therefore, this exception must

remain unless released by the holder of the

lease. Coverage for T.19.1 as to damage to

buildings may only be given if the tracts

insured meet the underwriter's criteria for

allowing this affirmative coverage. General, if

the City of _____________ has a "no drilling"

ordinance that would prohibit drilling on the

tracts insured, the coverage requested under

T-19.1 may be given. P-39a express coverage

for this risk is prohibited as to matters that

may be insured with the T-19.1 endorsement.

The request to require assignment of the

seller's interest is a contract matter to be

handled by the parties.

Blanket easement.

Objection: Item 10.g, Schedule B of the

Commitment must either be deleted or the

survey revised to include the location of the

easement on the property.

Response: The best evidence that can be

obtained by the surveyor, owner, and

examiner should be utilized to see if any

easement exists on any part of the larger tract

on which this easement was granted. Also,

research should determine the present

ownership of the easement, and, if the entity

can be contacted, direct information as to the

existence or location of the easement should

be obtained. If satisfactory evidence of no

easement affecting this tract is obtained, the

exception can be removed. If inconclusive

evidence is offered, the coverage under T-19.1

does provide coverage against damage to

buildings on Tract 1.

Objection: Item 10.h, Schedule B of the

Commitment, buyer objects to the general

exception for minerals.

Response: This exception is permitted

pursuant to Procedural Rule 5.1. However, the

buyer and lender may request, under the

Procedural Rule 5.1, to issue either the T-19.2

or the T-19.3 endorsements for each tract of

land being insured, depending on the exact

type of property and the use of each tract. The

T-19.2 and T-19.3 are not required to be

issued, but are subject to underwriting

guidelines. However, the T-19.2 and T-19.3

when provided for Loan Policies will be at no

charge. There is a $50 charge for Owner's

Policies.

In this case, because Tract 1 is a developed tract with

multi-family apartments, the T-19.2 endorsement would

be available. It would protect against damage to the


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"improvements (excluding lawn shrubbery or trees)" by

anyone outside the owner who has the rights at the time

the policy is issued and later damages the

"improvements" because they drill for oil and gas, or

develop the land for coal or lignite.

As to Tract 2, being an undeveloped tract of land,

the T-19.3 endorsement would be available under which

protection is limited to damages to "permanent

improvements" (excluding lawn shrubbery or trees) on

the property, both now, and later.

In addition, the buyer may request for both tracts

the T-19.1 endorsement, which has other protections.

Note that this provides a greater coverage, as the T-

19.1 only covers damage to "permanent buildings. The

T-19.1 is a more expensive endorsement.

Protrusion of building.

Objection: Item 10.j, Schedule B of the

Commitment lists a protrusion of building

over the East property line. This item should

be deleted from the Policy.

Response: This protrusion is a fact that must

result in an exception. The T-19.1 will provide

some additional coverage, and the adjoining

owner's rights must be evaluated and if a

material intrusion exists, deletion of coverage

for this exception from the T-19.1 will be

made. Alternatively, an easement or

encroachment agreement from the adjoining

owner for the portion of the adjoining tract

encroached upon by the building could be

obtained. Then the T-19.1 could be given

without deletion for this exception.

Schedule C items.

Objection: All items in Schedule C of the

Commitment must be satisfied and deleted at

or before closing.

Response: Agreed. Survey certificate.

Objection: The certificate on the survey is not

addressed to the buyer and does not certify

that the survey was made in accordance with

the Minimum Standard Detail Requirements

for ALTA/NSPS Land Title Surveys. Buyer

will require a revised certificate which meets

these objections.

Response: Agreed. Also, even though

Procedural Rule 2 allows use of an old (2001)

survey for a commercial transaction with a T-

47 affidavit of someone with knowledge, a

title company typically will not accept a

former survey for a significant commercial

transaction.

Endorsements.

Objection: Upon payment of the applicable

premium at closing, buyer will require the

issuance of a T-19.1 Endorsement, a T-23

Access Endorsement, and a T-25 Contiguity

Endorsement. Buyer will not accept any

deletion of any coverage provided by the

promulgated form of each of these

endorsements.

Response: As to the T-19.1, the response will

depend on answers received to other

objections. As to the T-23, issuance of this

endorsement will require the names of the

streets and the surveyor's certificate to include

access to the street requested. This

endorsement is only available by rule for

improved properties; therefore it is only

available for Tract 1 in this transaction. As to

T-25, issuance of this endorsement will

require the surveyor's certificate to assure the

contiguity between Tract 1 and Tract 2. In

Texas we are limited in insuring with this

endorsement to only the facts presented in this

case, where both tracts are insured.

Appendices 14 and 15 include some example forms

for Objection Letters.

VI. INSTRUCTION LETTER.

The "instruction letter" serves a number of

purposes, but should not be considered an opportunity

to renegotiate the contract or add title coverage outside

of requested endorsements. It is an important tool to

provide a closing checklist of sorts, or a roadmap,

outline deliverables, and assure proper settlement of the

consideration and recording of title matters. The

instruction "letter" can be a letter, a memo, an e-mail, or

even verbal, but better practice is something in writing

with some formality.

Three items may be important from the escrow

perspective. First, by this point the purchaser and lender

should have considered and probably requested closing

protection letters. Most lenders routinely request these,

but purchasers often do not. These letters from the title

insurance underwriter provide assurance that the agent

will follow instructions and protect against fraud or

other wrongful conduct that causes a loss of funds

passing through escrow. Note that the letters need to be

signed and carry a limitations period of one year.

The second item of which to be aware is Procedural

Ruel 35 promulgated by the Texas Department of

Insurance. In essence, P-35 states that a title insurance

agent may not provide coverage outside the title


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insurance policy. Thus, an overreaching instruction

letter may find itself stamped by the title insurance agent

with the verbiage of P-35. Many counsel request that the

escrow officer sign the instruction letter, which this

author believes unnecessary in view of the purposes

served by the letter. However, most escrow officers will

acknowledge the letter and its instructions so long as the

letter is only instructive, and not an attempt to create

some new obligation, such as extracontractual policy

coverage.

Third, some circumstances as discussed above

permit use of a pro forma policy. If a pro forma is used,

an instruction should be included that requires

consistency with the final pro forma policy.

Accordingly, the instruction letter should

accomplish as least the following:

Documents to be executed and delivered;

Issuance of the Title Policy, per the updated

title commitment after satisfaction of all

Schedule C requirements. No Schedule C

requirements are to become Schedule B

exceptions;

Additional policy endorsements;

Lender must have executed settlement

statement and delivered funds;

Escrow agent must have good funds from

lender and borrower sufficient to satisfy

contract and close without a shortage;

Lender must have provided a final

unconditional authorization to proceed with

Closing;

Order of recording documents;

Disbursements of proceeds per executed

settlement statement;

Funds that must be delivered day of Closing

by wire transfer;

Deliverables;

Miscellaneous items such as timing, time is of

the essence, entirety of the agreement; and,

Reporting to the IRS, etc.

Note that the parties will often want to approve executed

documents before authorizing a release of monies or

recording of title transfer documents. Also, counsel may

request that she be contacted immediately if funds

cannot be disbursed, documents cannot be recorded, or

there is a delay. See Appendix 16 for some example

Instruction Letters. In addition, good references beyond

the State Bar Forms Manual are Stolle, Bauer, and

Phares, Title Company Instruction Letters and

Endorsements, 21st Advanced Real Estate Drafting

Course, 2010., and Bernhardt, Annotated Review of the

“Other” Closing Documents, 29th Advanced Real Estate

Drafting Course, 2018.

VII. CONCLUSION:

For ease of reference, a sample survey review or

memorandum, a sample purchasers title and survey

objection letter and a sample lenders' title and survey

objection letter are attached as Appendices 14 and 15.

Instruction letters are attached as Appendix 16. These

are merely proposals and should be readily altered to fit

the transaction at hand. However, in general, they

provide a template and a good checklist for the attorney

representing a purchaser/borrower or the lender. As can

be seen from the previous discussion, a careful

comparison of the commitment and survey is the first

order of business. Many exceptions in Schedule B and

Schedule C can be eliminated by review of the

documents for location on the survey. It is to be noted

that Schedule B should also be reviewed and not

overlooked because some exceptions find their way

immediately into Schedule B and they are not

applicable. Also to be noted, however, and equally

important, many exceptions to title are correct or

meritorious, but can be addressed by endorsement

coverage. While a title company is generally not

permitted to insure over a title encumbrance or

exception, the title insurance business is still a risk

business and coverages can often be obtained to address

title risks. In other situations where there may be a

perfectly valid legal position that the encumbrance

could be defeated or defended against, the risk may be

too high for a title insurance company to choose to

insure against the title risk in relation to the promulgated

premium. In that event, the review of the commitment

and the survey will have at least identified the title

concern and provided full disclosure to all parties so that

an informed decision can be made in connection with

the transaction.

Title & Survey Objection Letter,

Instruction Letter: Guidelines and Solutions

G Roland Love, Vice President, Business Alliances & Field Operations Independence Title Company

[email protected] 214-202-1959

Introduction

• Review of Title Commitment is determined by the agreement between the

parties.

• Be sure it is clear when the review and objection period starts and how long

you have.

• Do you need the Survey? The Exception Documents? Anything else?

• Are the materials received complete and legible?

Overview of Texas Title Insurance

• Regulated by Title XI of the Texas Insurance Code

• “Basic Manual”- Controls the issuance of commitments and title policies

• “The Commitment”- Title companies must issue a Commitment for Title

Insurance

• Endorsements- Override exceptions and exclusions to coverage

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mailto:[email protected]

Basic Manual

• Promulgated by Texas Department of Insurance, contains:

• Procedural Rules

• Rate Rules

• Forms of commitments, policies, and endorsements

• Claim procedures

• Bulletins issued by the Texas Department of Insurance

Title and Survey Review

• Unlike other forms of policy, title insurance is not reviewed and

available for updates annually. Thus, the initial review period is

very important.

• Review of the Commitment- Must include various forms and

notices, including schedules A-D

Schedule A

• Schedule A must include the following:

• Effective Date- Typically seven to ten days earlier than the date the

Commitment is issued

“Gap Period”- Refers to the lag period between the Effective Date

and the date the Commitment is issued.

• Policy Amount- Insured dollar amount verified

• Proposed insured- Be sure names are correct

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Schedule A (Cont)

• Schedule A must include the following:

• Legal interest- Be sure easements benefiting the property are described

and included

• Record Owner

• Property Covered by the Commitment- Be sure that all of the property

being purchased is included and ensure that the legal description is

correct.

Ensure that the property does not consist of a portion of a legally platted lot.

Schedule B

• Schedule B describes the exceptions from coverage, which includes the eight

“standard exceptions”

• Restrictive covenants

• Survey

• Homestead and community property

• Stream and water rights issues

• Taxes and assessments

• Documents creating the insured’s interest in the land

• Construction

• Subordinate liens and leases

Schedule B

• The following exceptions compose Schedule B:

• Schedule B.1 – Restrictive covenants

• Schedule B.2 – Survey exception

• Schedule B.3 – Homestead rights

• Schedule B.4 – Water rights

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Schedule B (Cont)

• Schedule B.5 – Standard exception relating to taxes. This

includes the following:

• Taxes for the current year

• Rollback taxes

Only available on a Loan Policy or Interim Binder

• Taxes not yet due and payable

Only available on a Loan Policy or Interim Binder

Schedule B (Cont)

• Schedule B.6 – Terms and conditions in vesting documents

• Schedule B.7 – Mechanic's liens

• This only applies to a Loan Title Policy Binder or Interim Construction

Loan (See Procedural Rule P-8)

Schedule B (Cont)

• Schedule B.8 – Subordinate liens and leases

• This only applies to the Loan Policy (T-2)

• Subordinate liens and leases may be listed and excepted if a

request is sent in writing by the insured to the title company

• Schedule B.9 – Informational Purposes for application of exceptions

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Schedule B (Cont)

• Schedule B.10 – All-inclusive exception includes the following:

• Rights of parties in possession

• Visible and apparent easements/rights of way

Procedural Rule P-5 prohibits exceptions which are general in its terms

• Broad / general exceptions

• Plat created exceptions

• Encroachments

• Blanket easements

• Oil, gas and mineral reservations and/or leases

• “as shown on survey” language

Schedule C- Curative Matters

• Contains the requirements and conditions that must be satisfied in order to issue the policy

• Seller must take care of the following:

• Standard requirements

• Transaction-specific requirements

• Legal matters

• Items not removed or satisfied become Schedule B exceptions

Schedule C (Cont)

• Standard Requirements- Schedule C must include evidence the

following four standard requirements have been met:

• There are no parties in possession

• All taxes have been paid

• All improvements have been completed and all contractors and suppliers

have been paid

• There is legal access to the land covered by The Commitment

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Schedule D - Disclosures

• Schedule D discloses information regarding title company

ownership, estimated title premiums, and the title premium splits

and divisions

• Premium calculations should be completed pursuant to

Procedural Rules P-21 and P-22

Endorsements

• Endorsements- promulgated forms which modify coverage to

address specific areas of concern

• Common endorsements are restrictions, encroachments and minerals;

access, and contiguity

• These are typically not part of commitment, and purchaser and/or lender

will need to request

• See Appendix 3 for a more exhaustive list of common

endorsements

• See Appendix 4 for a list of endorsements available in Texas

comparable to other states.

Endorsements (Cont)

• The following are common endorsements to be familiar with:

• Minerals

Coverage involving drilling and exploration can be obtained through a series of T-19 endorsements.

• Access

The access endorsement is T-23.

The property must be improved.

• Contiguity

If multiple tracts are involved in a non-residential situation, T-25 and T-25.1 are useful.

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Lender Concerns

• Revolving Credit / Future Advances

• Non-imputation

• Mezzanine Lending

• Multiple Collateral

Other Forms (Cont)

• Express Insurance- Pursuant to P-39, is only available for title matters that do

not fall within the scope of other affirmative endorsements

• Arbitration- Arbitration provisions may be deleted pursuant to Procedural

Rule P-36

• Title Update- Commonly referred to as a bring-to-date, make sure an original,

signed Commitment is provided each time the Commitment is revised or

updated.

Review of the Survey

• Primary purpose of the survey is to identify on the ground matters

affecting the property

• Survey should include critical information, such as general

information regarding the survey / surveyor, certification, and

property description

• See Appendix 6 for a survey checklist

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Items within the Survey

• General Information

• Surveyor’s name, job number, phone number, and address

• Type of survey

• General description of property

• Scale and bearing

• Surveyor’s signature and seal

• Important dates

• Date of Survey

• Date last revised

• Legend explaining any abbreviations or symbols

• Scale; Bearing

• See appendix 7 for information regarding scale and bearing

Items within the Survey (Cont)

• Certification

• Note new (2016) ALTA/NSPS Standards. Appendix 8.

• If used, certificate cannot be altered

• Pay attention to "Table A."

• Certification should be to all parties having an interest

• Content of certificate determines degree of investigation of the site

• See Appendix 9 for sample certification forms


• Property Description

• Full legal description of the property must be shown on the survey

• Must be identical to that shown on the Commitment

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• Property Description- The surveyor’s description of the property

should contain the following:

• Point of beginning

• Perimeter property lines

• Property description discrepancies

• Ground lease tracts

• Square footage / acres

• Vertical relief

• Wetland areas


• Exceptions to Title- One of the primary reasons for review of a

survey is so the purchaser or lender can specifically locate and

analyze all of the easements and other interests in favor of third

parties which affect the property


• Exceptions to Title• Commitment and exception document

• Ensure that the surveyor has a copy of the Commitment and exception documents

• Shown on the survey

• All relevant exceptions on the Commitment must be shown on the survey

• Easements

• In general – Each easement affecting the property must be identified on the survey by

the recording information for the document creating the easement

• Platted easements – If an easements is shown on a recorded plat, surveyor must

certify that the easement shown on the survey is the same as on the plat

• Blanket easements should be noted. Actual utility lines, etc. should be located.

• Abandoned easements – Abandoned easements should be assessed by the

surveyor, and if no evidence on the ground exists, the title company may be asked to

remove the easement on the Commitment

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• Building Lines and Set-Back Lines-

• Surveyors typically show building lines and set-back lines on the survey,

but often do not disclose the source of authority for the lines

• These can arise via separate declaration, dedicatory language on the

recorded plat, deed restriction, or application of current municipal

standards to the site


• Streets and Rights-of-Way

• All streets and rights-of-way on or adjacent to the property should be

shown

• Survey should also indicate the following:

• whether the roadway is public or private

• the centerline and width

• In addition, the survey should assure the property has direct access to a

public right-of-way


• Structures and Improvements

• All structures and improvements located on the property or the property’s

boundary line must be shown on the survey

• The indication of distances of these from property lines and easements is

crucial to the determination of violations

• Structures and improvements include buildings, parking, fences, power

poles, walls, landscaping

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▪ Structures and Improvements

❑ Buildings▪ Survey should include the square footage, height, and relative location of each building on the property

❑ Parking▪ Survey should identify each parking area and determine the number of parking spaces, regular parking

spaces, and handicapped parking spaces

❑ Fences/Power Poles/Walls▪ Record the dimensions of all encroaching utility pole crossmembers or overhangs, without expressing a

legal opinion of the ownership

▪ Determine relationship of certain party walls designated by the client

❑ Landscaping▪ Location of major trees and shrubbery to be protected

❑ Other▪ All other structures and improvements must be shown on the survey


• Encroachments-

• Must define all encroachments of buildings or other structural

appurtenances on the property, with the extent of the encroachment

clearly defined


• Utilities-

• Utility lines

• Survey should identify all utility lines that service the property and improvements, as well as indicate whether they are above or below grade

• A key item is whether utilities serve the site from public or private easements

• Utility transformers

• Survey should identify any transformers on the property, while making specialreference to those transformers containing PCBs.

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• Flood Zone Information-

• In general- Survey must state whether property appears on any HUD

Flood Hazard Boundary map, or any other area map published by FEMA

• This is important, as pricing is often different for land in the flood plain


• Other Items to Consider-

• Elevation

• Platting Requirements

• Streams, Rivers, Surface Drainage Systems

• Underground Tanks

• Railroad Tracks

• Number of Prints Required

• Professional Liability Insurance


• ALTA/NSPS Land Title Surveys and Standards-

• Items discussed in previous slides regarding items in the survey areapplicable in any survey

• ALTA and NSPS have established basic standardized requirements for land title surveys and revised them 2/23/2016.

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Considerations in Drafting a Survey Certification

• American Land Title Association

• National Society for Professional Surveyors

• Effective on February 23, 2016

• New 2016 Standard

22 Items in Table A


• Under the 2016 Standard, the only certification allowed on the

face of an ALTA/NSPS Land Title Survey is the Certification in

Section 7, except as required by law or regulation.

2016

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• Title insurance coverage can be provided without additional or

alternate Certification

• Negotiate additional and separate Certification

• Other forms remain

• Texas Society of Professional Surveyors

• Lender based generic form

Good checklist

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Analysis of 2016 Standards

Purpose

• ALTA Survey

i. On-site field work

ii. A plat or map showing results of the field and work and relationship to

Record Documents

iii. Any information required by Table A, and

iv. The surveyor's certification

Surveying Standards and Standards of Care

• Boundary Resolutions

• ALTA Survey now requires all boundary lines and corners to be

established or retraced in accordance with appropriate boundary law

principles

• Measurements Standards

• Relative Positional Precision

• Measurements have a certain degree of precision and may not be exact

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• Records Research

• Surveyor must be furnished with the following types of "Record

Documents"

i. Most recent title commitment

ii. Current record descriptions of the property

iii. Current record description of adjoining properties


iv. Record easements appurtenant to and benefiting the surveyed

property

v. Copies of record easements, servitudes, and covenants burdening the

surveyed property

Fieldwork

• Access

• Location and character of vehicular, pedestrian and other access to the

surveyed property by parties by other than apparent occupants must be

shown

• Improvements

• Location of all buildings on the surveyed property is now mandated

• Water Boundaries

• New water boundary provision now requires the location and attributes of

water boundaries and features located on the survey to be congruent with

the legal description

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Plat or Map

• Dimensions

• Shall be in accordance with appropriate standards of care

• Legal Descriptions

• New legal descriptions should be avoided unless deemed necessary or appropriate by the surveyor and insurer

• Discrepancies

• Any significant discrepancies in measuring or calculating dimensions to beshown

Plat or Map

▪ Gaps and Gores

• Require gaps and gores to be identified and disclosed

▪ Title Evidence

• Requires surveyors to note on the face of the plat, or map the title commitment policy

number, effective date thereof, and name of the insurer providing the title work

▪ Easements

• Width

• Non-Locatable Documents

▪ Presentation

• Requires a vicinity map

Certification

• Form

• The prescribed certification is the only certification that can be used it

must be unaltered

• Date

• Include both the date of the certification and the date of the field work

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Certification

• Flood Zone

• Flood locations may be included on the ALTA Survey and noted on the

face of the survey, but cannot be included in the certification

Deliverables

• Both parties to the contract need to be specific as to what is

contemplated to be delivered

Table A

What's New

• Address

• Vertical Relief

• Zoning

• Totally removed is the reference to building codes. As to zoning there are now two

choices

• Either a listing of the current zoning classification as provided by the insurer; or

• The current zoning classification and building setback requirements, height and floor area

restrictions applicable to the classification, as provided by the insurer

• Zoning endorsements are not available in Texas, and this information will not be available

from the insurer

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Table A

What's New

• Floor Area

• Eliminates any reference to gross floor area

• Would have required measurements of the inside of the building

• Utilities-underground

• Party Walls- division

• Proposed Right of Ways- available?

• Wetlands-optional

Table A

What's New

• Off site Improvements

• Optional

• Benefits the property?

• Professional Liability Insurance

• New item 21 has been included to require professional liability insurance

to be obtained

Terminology

• 2011 Standards adopted standardized terms

• Surveyed Property

Term "surveyed property" now replaces all the variants used in the 2005 Standards:

"premises", "property", "parcel", "tract" and "plat“

• 2016 Standards continue “surveyed property”

• Observed

• Observed in the process of conducting the survey

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Conclusions

• Interplay between the 2016 Standards and the existing standards

in Texas

• The 2016 Standards will affect existing practice with respect to

engagement letters, retention contracts, and survey reviews

Other Title, Survey, and Property Issues

• Insured Closing Letters. - Appendix 10

• These types of letters are only required by lenders, but purchasers may

request them

• These primarily deal with the handling of funds and following closing

instructions

Other Title, Survey, and Property Issues

• Pro Forma Policy- An Owner or Loan Policy prepared prior to

payment for, showing Schedules A and B, the proposed insured,

the amount of insurance, exceptions proposed to be placed in the

final policy, and the name of the title insurance company and

agent. Allowed only under Procedural Rule 52. Only allowed if

property is not residential real property, and the transaction is over

$500,000. It does not override the title commitment, so any

objections to title must be changed in the title commitment.

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Other Title, Survey, and Property Issues (Cont)

• Taxes- One should request and review all applicable tax

certificates to ensure that the property is taxed as one or more

separate parcels, not as a portion of a larger parcel

• Roll-Back Taxes- The parties to the transaction need to address

responsibility for roll back taxes as a part of the contract

Other Title, Survey, and Property Issues (Cont)

• Zoning Policy- Not covered by title insurance; however the lawyer

representing a purchaser or lender should review the zoning

designation with the City, and require any zoning to be shown in

the survey, in order to confirm the purchase can be accomplished.

Objections

• Appendix 11 – Review Memorandum

• Appendix 12 – Sample Objections

• Restrictive Covenants

• Schedule B Modifications

• Mineral Interests

• Easements

• Leases

• Encroachments

• Access

• Schedule C Compliance

• Arbitration

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Hypothetical Transaction Commitment

• The following slides will look at sections from the Hypothetical

Transaction Commitment found in Appendix 13, while attempting

to analyze common objections that would be made.

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Easements that benefit the property

• Objection: Items 3 and 4, Schedule A of the Commitment do not include the

Reciprocal Easement Agreement and Declaration of Covenants and

Restrictions recorded in Volume _____, Page _____, Real Property Records

of ________ County, Texas (the "Records"), as amended and restated under

Document No. __________, and as further amended by that certain First

Amendment recorded as Document No. __________, both in the Records.

The rights granted by these instruments must be insured to purchaser in the

owner's policy to be issued in this transaction (the "Policy").

• Response:Agreed, as they benefit the property. With the addition of stating

in Item 2 of Schedule A that these will be easement estate tracts instead of

fee simple estate tracts.

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Survey Deletion

▪ Objection: Item 2, Schedule B of the Commitment should be revised to read "shortages in area" in the Policy.

▪ Response: Agreed. Title Company must, however, be furnished with an acceptable survey to be reviewed and approved by our examiners. We may not delete the promulgated language from the Commitment, but we may place in Schedule C a statement that when thesurvey is reviewed and approved we will agree to make the requested deletion in the Policy. Further, if we have approved the survey, we may state in Schedule C that we have approved deletion of the survey exception in the Policy as requested.

Tax Exception

• Objection: Item 5, Schedule B of the Commitment should be amended to

read in its entirety as follows: "Standby fees, taxes and assessments by any

taxing authority for the year 2010, and subsequent years." Purchaser

requires the payment of all ad valorem taxes and assessments for all prior

years, up to and including the year 2009.

• Response: Upon payment of the 2009 taxes, this exception may be

changed to read "2010". However, for an owner's policy we are not allowed

to delete the exception for possible roll back taxes, described by the phrase,

" . . . and subsequent taxes and assessments by any taxing authority for prior

years due to change in land usage or ownership . . .". The risk of possible

roll back taxes is always borne by the parties and the contract must be

examined to determine who will carry forward the risk.

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Unrecorded Leases

• Objection: Item 10.a, Schedule B of the Commitment should be deleted from

the Policy or replaced with an itemized listing of existing tenants and the term

of each of their leases.

• Response:If the parties have furnished a list of existing leases such as by

contract, or otherwise provided for one, then upon being furnished the list,

each lease may be excepted to instead of the general exception to

unrecorded leases.

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Deleting exception for reciprocal easements

• Objection: Item 10.c, Schedule B of the Commitment should be deleted from

the Policy because the easements described therein constitute a part of the

property to be insured in this transaction.

• Response:While as to Tract 3 (the now-added easement estate) this is

correct, the reciprocal easements are still a burden to Tracts 1 and 2 (fee

simple estates) and therefore must be listed as applying to those tracts.

Minerals

• Objection: Item 10.e and f, Schedule B of the Commitment should be deleted from the Policy or the purchaser must be insured against the exercise by the respective lessees of the surface rights associated with the sub-surface mineral rights. With regard to this item, purchaser shall requirean assignment of the seller's interest in the lease(s) if either or both of the leases have not expired.

• Response: As to Item 10.e, Schedule B (the 1951 lease), with a properly documented affidavit of non-production, this exception may be removed. As to Item 10.f, Schedule B (the 2008 lease), the term may not have expired. Therefore, this exception must remain unless released by the holder of the lease.

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Minerals (Cont)

▪ Coverage for T.19.1 as to damage to improvements, at present or

in the future, may only be given if the tracts insured meet the

underwriter's criteria for allowing this affirmative coverage.

Generally, if the City of San Antonio has a "no drilling" ordinance

that would prohibit drilling on the tracts insured, the coverage

requested in T-19.1 may be given. Or, if the lease still in effect is

amended to waive surface use, it can be given.

Minerals (Cont)

• Surface protection may also be obtained via a T-19.2

endorsement

• P-39a express coverage for this risk is prohibited as to matters

that may be insured with the T-19.1 or T-19.2 endorsement.

• The request to require assignment of the seller's interest in

mineral leases is a contract matter to be handled by the parties.

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Blanket Easements

• Objection: Item 10.g, Schedule B of the Commitment must either be deleted

or the survey revised to include the location of the easement on the property.

• Response:The best evidence that can be obtained by the surveyor, owner,

and examiner should be utilized to see if any easement exists on any part of

the larger tract this easement was granted across. Also, research should

determine the present ownership of the easement and if the entity can be

contacted, direct information as to the existence or location of the easement

should be obtained. If satisfactory evidence of this easement not affecting

this tract is obtained, the exception can be removed. Otherwise a partial

release must be obtained.

General mineral exclusion

• Objection: Item 10.h, Schedule B of the Commitment, buyer

objects to the general exception for minerals.

• Response: It is permissible for this exception to be added to

any commitment. However, title company may issue either the T-

19.2 or the T-19.3 endorsements for each tract of land being

insured, depending on the exact type of property and the use of

each tract.

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General mineral exclusion (Cont)

• In this case, because Tract 1 is a developed tract with multi-family

apartments, the title company would give the buyer and lender, upon request,

the T-19.2 endorsement. It would protect against damage to the

"improvements (excluding lawn shrubbery or trees)" by anyone outside the

owner who has the rights at the time the policy is issued. It also provides

coverage against later damages to "improvements" if a mineral owner drills

for oil and gas, or develops the land for coal or lignite.


• As to Tract 2, being an undeveloped tract of land over one acre, the title

company may issue the T-19.3 endorsement, under which protection is

limited to damages to "permanent buildings” on or after the Date of Policy.

• In addition, the buyer may request for either or both tracts the T-19.1

endorsement, which has other protections. Note that T-19.1 has a greater

coverage for minerals extraction, as the T-19.3 only covers damage to

“permanent buildings”, while the T-19.1 includes “damage to improvements

(excluding lawns, shrubbery, or trees”, also “on or after the Date of Policy”.


Changes Effective 1/1/12:

• No charge for T-19.2, T-19.3 endorsements for Loan Policies.

• Title Company may take general exception for minerals, but is no longer

required to give T-19.2 or T-19.3.

• T-19.2 or T-19.3 for an Owner’s Policy will continue to be $50.00.

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Protrusion of building

• Objection: Item 10.l, Schedule B of the Commitment lists a protrusion of

building over the East property line. This item should be deleted from the

Policy.

• Response: This exception states a fact shown on the survey that must

have an exception. The adjoining owner's rights must be evaluated and if a

material intrusion exists, deletion of coverage for this exception from the T-

19.1 will be made. Alternatively, an easement or encroachment agreement

from the adjoining owner for the portion of the adjoining tract encroached

upon by the building could be obtained and added to the description of the

insured tract. Then the T-19.1 could be given without deletion for this

building over the east property line.

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Schedule C items

• Objection: All items in Schedule C of the Commitment must be

satisfied and deleted at or before closing.

• Response: Agreed.

Survey Certificate

• Objection: The certificate on the survey is not addressed to

the buyer and does not certify that the survey was made in

accordance with the Minimum Standard Detail Requirements for

ALTA/NSPS Land Title Surveys. Buyer will require a revised

certificate which meets these objections.

• Response: Agreed. We require the certificate to be

addressed to the buyer and to us as title underwriter.

Survey Certificate (Cont)

• The revised ALTA /NSPS Land Title Standards, adopted effective

2/23/2016, require the party acquiring the survey to list exactly

what the purchaser requires on a 21 item list. This should be

consulted and arrangements made to receive such a survey, if

required by the buyer.

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Endorsements

• Objection: Upon payment of the applicable premium at closing,

buyer will require the issuance of a T-19.1 Endorsement, a T-23

Access Endorsement, and a T-25 Contiguity Endorsement. Buyer

will not accept any deletion of any coverage provided by the

promulgated form of each of these endorsements.

• Response: As to T-19.1, response will depend on answers

received to other objections previously addressed.

Endorsements (Cont)

• As to T-23, Access Endorsement, issuance of this endorsement

will require the names of the streets and the surveyor's certificate

to include access to the street requested, and the street being

open. This endorsement is only available by Procedural rule P-54

for improved properties, therefore it is only available for Tract 1 in

this transaction.

• As to T-25, Contiguity Endorsement, issuance of this endorsement

will require the surveyor’s certificate to assure the contiguity

between Tract 1 and Tract 2.

Endorsements (Cont)

• As to T-25, Contiguity Endorsement, issuance of this endorsement

will require the surveyor’s certificate to assure the contiguity

between Tract 1 and Tract 2.

• The T-25.1 is also available to address gaps, strips, or gores. This

endorsement is useful for a combination of irregular tracts.

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Instruction Letters

• See Appendix 16• Different forms depending on the party.

• Closing Checklist• Deliverables

• Policy Form• Endorsements

• Recording

• Lender Approval

• Funding and settlement

• P-35 – Not for additional coverage

Conclusion – What to do

• Get:

• Commitment

• Exception Documents

• Survey

• Zoning / Ordinances

Conclusion- What to do (Cont)

• CHECK:

• Schedule A against the Contract

• Schedule B – Exceptions

• Schedule C – Curative

• Survey for completeness

• Survey against the Commitment

Does it have everything you want to know?

• Zoning / Ordinances for purchaser’s objective

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Conclusion – What to do (Cont)

• ASK FOR:

• Removal of inappropriate exceptions

• Endorsements that address needs or problems

Conclusion – What to do (Cont)

YOU’RE READY* TO CLOSE!

*(Except for environmental, due diligence, money, financing, etc.)

Questions?

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Thank You!

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