Whether you’re buying a piece of real estate, or lending money via a mortgage on it, do you need a survey?
It depends (that’s what most lawyers’ answers start with!). But on what?
Traditionally, real estate lawyers undertook a series of investigations – title and off-title – to provide their purchaser and lender clients with an opinion on whether title was good and marketable. Lawyers generally offer an opinion as to the quality of title but not the extent of title, because without a survey, the lawyer can’t determine the property boundaries, on-site dimensions of any structures, the distances of each structure from the lot lines, the location of other improvements, and so on. A survey lays out the physical attributes of the land, including a confirmation that the house or other structure being purchased is located within the boundaries of the legal description of the title.
With the advent of title insurance, many consider the title insurance policy to be a substitute for an up-to-date survey. As beneficial as title insurance is, this is a misguided view.
When purchasers are told that their lender requires a new survey or a title insurance policy, most will choose a title insurance policy on the basis of cost alone. A title insurance policy costs much less than a survey and offers other important coverage which makes it beneficial even if a survey is available.
Title insurance provides some indemnification for some issues but is not an equivalent to getting an up to date survey. Most title insurance policies offer protection for some types of regulatory violation, variation or other adverse circumstance that would have been disclosed by an up-to-date survey. Also, the policy might protect the insured party against the risk of loss arising out of any encroachment or setback deficiency which the purchaser is later forced to remedy by a court or other authority after the policy date, although those relating to a fence or boundary are frequently excluded from coverage.
Title insurance policies, however, have a number of terms and conditions which might temper or limit coverage: they typically exclude any title risk which is created, allowed, accepted or otherwise agreed to by the insured; or which is known by the insured but not by its lawyer handling the transaction and not disclosed by the registered title.
In addition, title insurers, like any insurer, may respond to a claim under the policy in several different ways, some of which may not be particularly satisfactory to the purchaser. On the one hand, mortgage lenders are usually fully satisfied by the protection offered by a title insurance policy because they receive money to reimburse their loan. Purchasers, on the other hand, have more at stake, in that they likely live on the property or have purchased it for a specific purpose or feature, and if that purpose or feature is compromised or denied (e.g., removal of a deck which was built without a building permit), the purchaser will not be satisfied with the outcome. Title insurance policies are like any other insurance policy in that they will offer more coverage and more extensive coverage for the risks which are less likely to happen, and less coverage for those risks that are more likely. It is much more likely that a purchaser is going to make a claim with respect to a title or use issue than it is that the mortgage lender would make a claim for such matters. Therefore, the lender gets better coverage.
That is why getting a survey depends on what the purchaser wants and needs. A purchaser may want to confirm a future use (e.g., building an addition, garage or swimming pool) and needs to know the size of the lot, setback requirements and location of the existing improvements in order to ensure the future plans are feasible. A purchaser needs to know that he/she gets what was contracted for in the agreement of purchase and sale, and that there are no future issues to deal with (e.g., deficient setbacks requiring getting a minor variance). The policy might provide coverage in the event of an issue arising but the purchaser may perceive or be told by others that the lawyer did not do the conveyancing work properly.
Most people do not realize that a lawyer cannot glean any information about the physical layout of the lands being acquired from the sources of information available to the lawyer, and that only a survey provides this information. The location of the boundaries, driveways, paths, parking areas, any improvement on the land, and any encroachments, easements and right of ways and other information can only be reflected on a survey. Without this document, the amount of information which is available is limited, and that lack of information may impact their use and future plans.