Bock & Clark 2022 March eNewsletter

Why Do We Call It an ALTA/NSPS Survey?

Surveyor Equipment in a field ALTA is an acronym for the American Land Title Association and NSPS stands for the National Society of Professional Surveyors. In 1962, the two industries came together for the first time to design a survey product that would rely on the land surveyor to report, offer an opinion and certify to relevant issues about a property to the title insurer. The surveyor’s responsibilities are set forth in the Minimum Standard Details Requirements for ALTA/NSPS Land Title Surveys. The requirements have been revised about ten times since their inception to the current requirements that took effect in 2021.

The main purpose of the ALTA Survey product is to provide the title insurer with a document to review that will assist in making decisions about deleting the standard survey exceptions from the issuance of their title policy. Based on what is then reported on the survey, the insurer may also add specific exceptions to the matters shown. The standard exceptions are (but not limited to):

  1. Any facts, rights, interests, or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof.
  1. Any encroachments, easements, discrepancies, conflicts in boundary lines, variations or shortages in area or content or any other facts which an accurate survey would disclose.
  1. Any lien, or right to a lien, for services, labor or materials heretofore or hereafter furnished, imposed by law and not shown by the public records.
  1. Any Rights or claims of parties in possession of all or any part of the premises.

A commercial real estate transaction involves many parties with varied interests in the property. Although the main intent of the survey benefits the needs of the title insurer, the information revealed on the survey can address many questions or concerns about the property. The presented ALTA/NSPS Land Title Survey is a picture of the property showing (1) the surveyor’s findings about the property boundaries, (2) the easements and survey related exceptions to coverage cited in the title commitment or known to the surveyor, and (3) the improvements, visible utilities, and many significant observations within the insured estate (the property). Depending on the defined scope, the survey can reveal specifics about the property relating to zoning issues, flood hazard matters, access to public roads, evidence of possible encroachments, parking configurations, etc.

The lender and buyer are concerned with the present and future use of the land and all restrictions, encumbrances, and benefits or issues that come with owning or mortgaging the property. The survey reports observed indications of these matters so the lender or buyer can evaluate the risks and seek any assurance from their title policy coverage.

The title insurer is asked by the lender and/or buyer to provide insurance against potential use losses or claims against the land that may arise after the purchase of the property. Such coverage includes, but is not limited to, protection for the lender or buyer against (1) boundary line conflicts with adjoining properties, (2) encroachments onto and from adjoining properties, (3) rights of third parties usually in the form of easements, leases, or other encumbrances, (4) the contiguity, or lack thereof, of multiple parcels that combine to form the property, (5) access to public highways, and (6) matters on the property that may affect zoning issues or compliance. The insurer then uses the survey to assess the risks and to determine what exceptions from coverage must be included within their policy.

The seller of a property also uses and relies upon the ALTA/NSPS Land Title Survey as protection against potential claims from the buyer after conveyance. The seller is frequently asked within a purchase agreement to guarantee all improvements are located within property boundaries, all improvements comply with current zoning regulations, others do not have rights to the property other than those disclosed in the form of easements, leases, or other encumbrances, and no boundary line conflicts exist with adjoining owners. A current survey could serve as a validation of this guarantee or report any discrepancies.

The surveyor has a complex set of responsibilities when preparing an ALTA/NSPS Land Title Survey to satisfy all users. Additionally, the buyer, seller, and lender typically engage counsel to represent their interests. Although one transaction party is responsible for paying fees and engaging the surveyor, the surveyor’s obligations extend to multiple parties. It is good practice to discuss the scope of the survey with all concerned parties prior to engaging the surveyor. If necessary, the surveyor can be asked to name those parties in the survey certification. In doing so, the final survey can then satisfy the needs of all parties involved.

PCAs: What’s the Need?

Woman onsite conducting a property condition assessment When evaluating a commercial real estate transaction, whether for acquisition or refinancing purposes, it is necessary to make sure that all due diligence is in order and up to date. Means of reporting can include zoning reports, surveys, environmental assessments and property condition assessments (PCA), sometimes referred to as property condition reports (PCR). When financing is involved, it is frequently the lender who requires these items.

In preparation for the transaction the Phase I and ALTA Survey are usually requested early on. The PCA may sometimes be left until the last minute or even overlooked. However, it is in the best interest of both the purchaser and the lender to require some type of physical assessment to ensure that the real property and its improvements are in acceptable condition. The PCA serves as the tool for identifying any major deficiencies that would require immediate or near-term repair or replacement which factor heavily into determining whether or not to proceed with the transaction.

If a PCA is requested, what exactly would be provided in the report? What is the “scope of work”? That may depend on what is requested but standard scope, as outlined in ASTM E 2018-15, usually includes a representative walk-through where the Field Observer will note any material or physical deficiencies of deferred maintenance for the following items:

  • Site improvements
  • Structural Framing and Building Envelope
  • Facades: non-invasive, visual only
  • Roofs: non-invasive, visual only
  • Mechanical/Plumbing/Electrical
  • Elevators
  • Life Safety/Fire Protection
  • Interior Elements: in typical common areas
  • ADA Evaluation

Once the walk-through is complete, the physical deficiencies and deferred maintenance are identified and an opinion of probable cost is provided. Identified issues are separated into two categories: Immediate Need and Short-Term Costs. In addition, a Replace Reserve Table is generated, which projects replacements over the loan term. The full scope of the PCA should be reviewed by all transaction parties in advance to avoid any last-minute delays. If the above listing does not give the purchaser or the lender the level of comfort needed to proceed, additional items can be negotiated with the provider when requesting a quote for service.

To provide the greatest level of understanding of a property, a PCA can be ordered in combination with a Phase I. Engaging the services of a qualified professional to complete the property assessment goes a long way in alleviating concern for unexpected surprises throughout the transaction. For more information on NV5/Bock & Clark’s assessment services call 1-800-787-8397 ext. 854 or email jamie.ziemba@nv5.com.

NV5/BOCK & CLARK NEWS & UPCOMING EVENTS:

  • NV5/Bock & Clark has switched to a digital platform for its customer feedback. All feedback surveys will now be sent through email. We would appreciate hearing from you as it helps us enhance our service capabilities. Respondents will also be entered into a drawing for a $250 VISA card.
  • We are proud to be a sponsor of this year’s Terminal Property Exchange Conference being held May 1-4.