When acquiring commercial real estate, it is important to conduct due diligence to ensure there are no surprises that will affect the value or use of the property.  One aspect of the due diligence process is considering obtaining an ALTA Survey.  The two main reasons for obtaining an ALTA Survey are (i) to satisfy the title insurer’s requirements for the issuance of ALTA title insurance coverage for Survey Risks (defined below), and (ii) to specifically locate both record and non-record matters that affect the property, which can be critical for evaluating whether or on what terms to proceed with an acquisition.  This is particularly important when the preliminary title report raises many or difficult-to-locate easements or other similar exceptions, or when the facts on the ground seem complicated.

An ALTA Survey is a survey prepared by a licensed surveyor in accordance with detailed standards adopted by the American Land Title Association (ALTA) and the American Congress of Surveying and Mapping (ACSM).  An ALTA Survey maps the property’s boundaries, the location of the improvements on the property, including buildings and other structures, fences, utility lines and installations, trails, paths and roads, etc., and the location of all access, utility and other easements recorded against the property.

For commercial real estate, title companies typically require an ALTA Survey before they will commit to issue title insurance covering the following “Survey Risks:”  (1) encroachments, boundary line disputes, or other matters or circumstances that would be disclosed by an accurate survey and inspection of the property; and (2) easements or claims of easements not shown by the public records.  In some states, and for certain property types, a less detailed (and less expensive) form of survey, or an improvement location certificate, may suffice to obtain title insurance coverage for Survey Risks.

When to conduct an ALTA survey?

An ALTA survey will identify and locate:

• Buildings, fences or other improvements from neighboring properties that encroach onto the property being acquired;
• Buildings, fences or other improvements located on the property being acquired that encroach onto neighboring properties;
• Buildings, fences and other improvements located on the property being acquired that encroach onto existing easements (utility, access, etc.) located on the property being acquired;
• Existing record easements that might have an adverse impact on the use or future (re)development of the property being acquired; and
• Potential easements or claims of easements not disclosed in public records but indicated by facts on the ground that might adversely impact the property being acquired.

An ALTA Survey is not legally required and is not always necessary. It is important to balance the potential risks against the expense of due diligence. For example, if you are acquiring a 30-year-old apartment building in a well-developed urban area, a visual inspection does not raise any concerns about potential boundary disputes or encroachments, and the preliminary title report does not disclose any easements or other record matters of concern, you might feel comfortable forgoing an ALTA Survey and title insurance coverage for Survey Risks. In some cases, you may be able to convince your title insurer to provide coverage for Survey Risks based on a less expensive form of survey or on an improvement location certificate. In general, how detailed and how expensive a survey you need is a question best answered after a site inspection and review of the preliminary title report.

 

If you have any questions or comments, email Rick.

Disclaimer: This article is provided by Angel Law Offices for general education purposes only.  The information should not be relied on as legal advice, nor does it serve to create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.