Title and Survey Review: Key Considerations for Real Estate Acquisitions
Conducting a thorough title and survey review is a fundamental step in the process of acquiring real property. Overlooking potential title defects or survey discrepancies can result in costly legal disputes, project delays, or restrictions affecting the intended development of the property. This article identifies the key considerations that real estate developers should address when reviewing title and survey documents to ensure a legally sound acquisition of real property.
Title Review: Verifying Legal Ownership and Identifying Title Defects
During the acquisition process, developers should receive a title commitment from one of the many national title insurance agencies. The title commitment outlines the ownership of the property, items that the title company requires to be satisfied prior to or contemporaneously with the closing of the purchase and sale of the property, and items that affect the title to the property.
The primary objective of a developer during the title review process is to ensure that the property has clear and marketable title, free from encumbrances that could complicate the project.
Key aspects of the title review process include:
Ownership verification: Verifying that the seller is the fee simple owner of the property and has the legal authority to transfer ownership.
Reviewing Title Requirements: Ensuring that all title requirements are satisfied at or prior to closing of the purchase and sale of the property. Title requirements can include items such as executing and recording the deed and/or mortgage, paying off liens, judgments, taxes, and assessments of record, providing supporting documentation relating to entities and their standing with the state, and executing affidavits to verify information such as ownership and use rights, the status of liens and other encumbrances, and the individuals with the authority to execute closing documents.
Reviewing Title Exception Documents:
Identifying liens and encumbrances such as mortgages, construction or mechanics liens, judgments, taxes, and other claims that could impair title to the property.
Reviewing easements and restrictions such as access and utility easements, third party access and use rights, and restrictive covenants that could affect the intended development of the property.
Reviewing Legal Description: Confirming that the property’s legal description is correct and aligns with the survey.
Survey Review: Assessing Property Boundaries and Physical Features
During the acquisition process, developers should obtain an ALTA/NSPS Land Title Survey from a licensed surveyor. The survey should at minimum provide a map of the property that delineates its boundaries, physical features, improvements, encroachments, and easements. The objective of a survey review is to help developers avoid boundary conflicts and ensure that the property is suitable for the intended development.
Key items to address in a survey review include:
Identifying encroachments that extend onto the property from neighboring properties. Common encroachments include structures, fences, walkways, and driveways.
Identifying the location of easements on the property that may impose restrictions on development.
Identifying ownership, access, and use rights of any improvements shown on the survey.
Reviewing and comparing the recorded legal description of the property and the boundaries of the property shown on the survey.
Cross referencing the survey with the title commitment to detect any discrepancies.
Title and survey review is an essential step in the overall acquisition process. Title issues such as unpaid liens, easements, third-party rights, use restrictions and boundary disputes can hinder a project. Proactively addressing title issues will help developers ensure that they receive clear and marketable title to the property and that the property will be suitable for the intended development from a title perspective. Developers should always engage an experienced real estate attorney to perform a comprehensive title and survey review to identify and clear any title defects prior to closing.
If you would like to discuss how ShuffieldLowman can help your real estate development company, please contact Joel Ramos II at jramos@shuffieldlowman.com or another member of the ShuffieldLowman Real Estate team.