From Berman Fink Van Horn
“Do I really need a survey?” is a question I hear from time to time from clients purchasing commercial real estate, most often in the context of the purchase of operating space they are leasing or from first-time purchasers of commercial property. Generally, these clients believe that they either know the property intimately (and all of its flaws) or that their other due diligence will shed light on any problems. Sometimes lenders, unsure of their risk, will ask whether they should require their borrower to perform a survey.
Almost without exception, I strongly advise clients to have a survey performed of the prospective property and encourage lenders to require a survey as a condition to the loan. The type of survey matters too, and an ALTA/NSPS Survey may be worth the extra expense.
Boundary Survey vs. ALTA/NSPS Survey and Benefits
As it sounds, a boundary survey is simply that – a survey drawing of the boundaries of a property based on metes and bounds. Boundary surveys typically will not show any more detail, like fences, improvements, concrete pads, and utilities that exist on the property unless requested.
By comparison, if a boundary survey is a scoop of plain vanilla ice cream, then a full ALTA/NSPS Survey is a hot fudge sundae topped with sprinkles. The benefits of a full ALTA/NSPS Survey are manifold – some quite obvious and others uncovered only with the help of legal expertise. From this point forward, “survey” will refer to a full ALTA/NSPS Survey. Here are a few of the benefits:
- Encroachments. A survey will help you determine whether or not there are any unpermitted or unexpected encroachments or trespasses occurring on the property. These encroachments may be subtle – a neighbor’s fence meandering slightly onto the property – or extreme – a building constructed over one’s property line – and would only have been discovered by survey. Encroachments can give rise to claims of adverse possession and affect the insurability of your property.
- Utilities and other Easements and Improvements. The location of utilities and other easements is critical to your understanding of the property you are about to purchase. The title search will verify the existence of easements in the chain of title, but a survey will visibly show you where on the property those easements exist. The location may affect your planned use or development of the property. For example, does an ingress and egress easement in favor of a neighbor, or an underground sewer easement, exist where you were planning on constructing vertical improvements? These types of issues only can be accurately demonstrated through a survey, allowing you to plan around, or take steps to remediate, potential problems before closing.
- Zoning and Building Setbacks. At the customer’s request, zoning classifications and conditions, such as building setbacks, may be shown on the face of the survey. This allows the user to determine if the existing improvements, or proposed improvements, encroach the setback line. If there is an existing violation, be sure to confirm whether or not the violation has been “grandfathered” in as a pre-existing non-conforming use, or whether a special permit or variance has been issued to allow the erection of the building.
- Is the property described in the purchase agreement the same property shown on the survey? Is the property described in the seller’s vesting deed the same property that is shown on the survey?
- Title Insurance Exceptions. Every title insurance commitment contains what are known as standard exceptions, through which the title insurer excludes coverage if a title issue arises under certain circumstances. Without legal guidance, many of these standard exceptions will make their way into the final title insurance policy at closing. Your attorney, however, should be able to have many of these standard exceptions removed if you obtained a survey of the property, providing you ultimately with a more robust title insurance policy that covers more issues that may arise with respect to the property.
- Affirmative Title Insurance Endorsements. Where title insurance exceptions limit your coverage, affirmative endorsements expand your title insurance coverage. Your attorney will be able to advise you on what endorsements would be most important to request based on the unique characteristics of the property, many of which can only be requested if the purchaser has obtained a survey of the property. For example, with a survey and the assistance of your attorney, you may be able to obtain affirmative coverage insuring: access to your property from a public or private right-of-way; the existence of utility lines and availability of utilities to the property; that the property that the seller owns is the exact same property as the property that was surveyed; and that the property abuts certain other identified properties without gaps or gores.