Title Tale: Surveys: The Devil Is In The Details
Written By: Kevin Weaver, Underwriting Counsel
The requirement to produce a survey to remove the general survey exception on a title policy used to be ubiquitous, and while it is still a standard requirement to provide a survey for survey coverage on an owner’s policy, the need for surveys for loan policies has markedly decreased over the past couple of decades. In most states, Underwriters will allow for the removal of the general survey exception based on an affidavit from the owner/borrower of platted property. Requirements may vary for metes and bounds property, and in a handful of states the requirements for production of a survey are stricter due to state laws and regulations. So, while the chances of being involved in survey problems are not as great as they once were, no doubt you have encountered your fair share. If so, you know the biggest issues revealed by surveys are encroachments, either something crawling or springing leaps and bounds from the subject property onto someone else’s property, or vice versa.
How do title companies deal with encroachments? Well, it’s more of an art than a science and, like many title issues, it’ s a matter of risk translated into economic terms. The new addition to the house that sits over the property line? The title company isn’t writing over that one. The cost to the owner, or the title company if they do write over it and it becomes a claim, would be significant. Before tearing down the addition, an attempt would be made by the borrower’s attorney to obtain an easement from the adjoining landowner. There’s the cost of the attorney and the cost of the surveyor to draft a legal description for the easement. Then there is how much the borrower may have to pay the adjoining landowner for the easement rights, which may (probably will) depend on the size of the easement. An expensive proposition no matter how you look at it, and a losing but still expensive proposition if the adjoining landowner is not receptive. Now let’s look at a rickety wooden fence that is one foot over the property line. No easement to buy there. Why would you? Tear down the old fence and build a new one on the property line. Or don’t build a new one at all. The point is, a title company will most likely not show this encroachment on the commitment/policy, or if it does will affirmatively insure over it, because the cost if title eventually needs to pay isn’t the cost of an attorney and surveyor and payment to the adjoining landowner, but maybe the cost of a day laborer or two and a junk removal company.
Those are two easy extremes, but it’s not always that clear, and that brings us to our Title Tale for this issue. It’s a bit funny in a “why did they do that?” kind of way, and a bit informative as well. Kind of a middle ground between our last two examples.
We received a survey showing an encroachment of a “stone area” 17 feet over the southerly property line. Due to the depth of the encroachment, we decided to show it as an exception on the commitment. The client asked what it would take to remove the exception and, knowing the cost involved in obtaining an easement even if the adjacent landowner agreed to do so, we said “remove the encroachment.” By that point, however, someone had added an aerial view of the property to the file. Upon review of that picture, it was clear the stone area was not a structure, and it was in what appeared to be an uninhabited and wild portion of the adjacent landowner’s large parcel. Due to what we determined was a low risk, we removed the exception from the commitment. Why have the borrower pay for something that didn’t seem necessary?
Well, the client’s underwriter asked us to put the exception for the encroachment back on the commitment. That’s right, they didn’t want us to remove the exception, they wanted us to add it back in. They said they were going to have the borrower obtain an easement for the encroachment. This is the funny in a “why did they do that?” way moment, because with no exception on the commitment, the borrower isn’t required to expend time and money solving a problem for which the title company would be responsible if it became a claim. But, hey, we are not going to complain if a client insists on mitigating our risk, so we added the exception back to the commitment and informed the client to contact us once the borrower and his attorney went through the not inexpensive task of procuring and recording an easement.
Three weeks later we received an amended survey showing the encroachment had been removed. We do not know how much it cost to remove, or if it cost anything, but now after what seems a long and winding road we have a happy client and a happy borrower, and in the end that’s what counts.
What lessons can we take away from this Title Tale? The first is that if it ain’t broke, don’t fix it. Ask a title company to add an exception to the commitment that the title company has already determined is low risk, and you might run into the law of unintended consequences. That doesn’t just apply to survey matters, either. The second lesson is that some survey matters are black, and some are white, but a lot of them are gray. Work with your title company to make your survey problem loos the lightest shade of gray you can. If that doesn’t successfully eliminate the exception, don’t panic. Work with your borrower to come up a resolution that satisfies all parties, like our client in the above example did.
