TITLE & SURVEY OBJECTION LETTER, INSTRUCTION LETTER ...€¦ · TITLE & SURVEY OBJECTION LETTER, INSTRUCTION LETTER: GUIDELINES AND SOLUTIONS . G. ROLAND LOVE, Dallas . Independence

TITLE & SURVEY OBJECTION LETTER, INSTRUCTION LETTER: GUIDELINES AND SOLUTIONS

G. ROLAND LOVE, Dallas Independence Title Company

State Bar of Texas 41ST ANNUAL

ADVANCED REAL ESTATE LAW July 11-13, 2019

San Antonio

CHAPTER 29

Board Certified in Commercial, Farm and Ranch, and Residential Real Estate Law by the Texas Board of Legal Specialization, and admitted to the U.S. Patent and Trademark Office.

Currently Vice President, Business Alliances and Field Operations, Independence Title Company

Representative Experience • Past President of Texas region of a large title agency, including homebuilder, retail and fee attorney operations, encompassing financial planning and monitoring operations, employment issues, acquisitions and mergers, business development, coordination with home builder and lender, and daily problem solving and closing deals. • Shareholder and Attorney, Winstead PC • Real Estate curative matters • Title and real property disputes • Title insurance coverage • Regulatory matters before the Texas Department of Insurance • Extensive appellate practice throughout the state • Experience in all aspects of title industry, including entities,

escrow, title insurance and RESPA • Intellectual Property litigation and licensing

Professional & Community Involvement • AIDS Interfaith Network (AIN) (Advisory Committee) • College of the State Bar of Texas (Fellow) • Consumer Credit Counseling Service of Greater Dallas (Now Transformance) - (Board of Trustees) • Dallas Bar Association (Certified Mediator; Past Chair, Legal Ethics Committee and Law in the Schools Committee) • Dallas Bar Foundation (Life Patron Fellow) • American College of Real Estate Lawyers (Fellow) • Dallas Inter Soccer Club (Director and Manager) • Dallas Volunteer Attorney Program – Lawyers for Affordable Housing (Mentor) • Episcopal School of Dallas (Director) • North Texas Housing Coalition (Director) • Park Cities YMCA (Board of Directors; Sports Committee) • St. Michael's School (Vice President, Board of Trustees) • State Bar of Texas (Real Estate, Probate & Trust Law Section, Council Member and Chair 2016-2017) • State Bar of Texas (Special Prosecutor) • State Bar of Texas Title Examination Standards Board • State Bar Board of Legal Specialization (Examiner) • Tarrant County Bar Foundation (Fellow) • Texas Bar Foundation (Life Fellow) • Texas Bar CLE, Advanced Real Estate Drafting Course (Chair) • Texas Land Title Association (Chair, Legislative Committee; Chair, Title Insurance: A Primer For Lawyers; Past Chair, Defense Counsel Committee; Director and Vice-Chair,

PAC; Instructor)

G. Roland Love

Dallas c: 214.202.1959 e: [email protected]

Southern Methodist University, Dedman School of Law • J.D., 1977 • Editor, Southwestern Law Journal • Thomas P. McElroy Award,

Texas Civil Practice • Texas Bar Foundation

Outstanding Law Review Article Award

Texas A&M University • B.S., Electrical Engineering,

1974 • summa cum laude • College of Engineering

Outstanding Senior Award • Department of Electrical

Engineering Bolton Award • National I.E.E.E. Outstanding

Student Paper

• Texas Land Title Institute (Chair - 17 Years) • Texas Land Title PAC (Vice-chair, Board of Trustees) • Texas Real Estate Commission (Instructor) • The 500, Inc. (Director) • United Way – Tocqueville Society (Member); Advocacy Committee (Chair 2017) • YMCA Indian Guides Program (Nation Chief) • YMCA Partners with Youth Sustaining Campaign (Chair) • YMCA Youth Sports Program (Director and Coach)

Awards & Recognition • AIN – Crystal Hope Award • Best Lawyers in America • Dallas Inter Soccer Club - Volunteer of the Year • Texas Bar Foundation Outstanding Law Review Article Award • Texas Land Title Association Title Person of the Year (2018) • Texas Land Title Association Peggy Hayes Teaching Excellence Award • Texas Land Title Association President's Award (2005, 2014) • Texas Land Title Association Professional Excellence Award • Texas Land Title Association Special Certificate of Appreciation (2013) • Texas Super Lawyers, Real Estate, Commercial Litigation, Texas Monthly, 2005-2013 • United Way – Advocate Award (2018)

Admitted to Practice • Texas, 1977 • U.S. Patent and Trademark Office • U.S. District Courts for the Northern, Southern, Eastern and Western Districts of Texas • U.S. Court of Appeals, Fifth Circuit • U.S. Court of Appeals, Eleventh Circuit • U.S. Supreme Court

Personal Interests Tennis, skiing, fishing and sailing; active as a community volunteer with a number of organizations focusing on individual financial counseling, housing, education, and children.

Title & Survey Objection Letter, Instruction Letter: Guidelines and Solutions Chapter 29

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TABLE OF CONTENTS

I. INTRODUCTION. ....................................................................................................................................................... 1

II. OVERVIEW OF TEXAS TITLE INSURANCE. ....................................................................................................... 1 A. Regulatory. ................................................................................................................................................. 1 B. Texas Title Insurance Coverage. ................................................................................................................ 2 C. Endorsements ............................................................................................................................................. 2

III. TITLE AND SURVEY REVIEW. .............................................................................................................................. 2 A. In General. .................................................................................................................................................. 2 B. Materials for Title and Survey Review. ..................................................................................................... 2 C. Review of the Commitment. ...................................................................................................................... 2

1. Schedule A – Commitment. ............................................................................................................... 2 2. Schedule B – Exceptions from Coverage. .......................................................................................... 3 3. Schedule C – Curative Matters. .......................................................................................................... 6 4. Schedule D - Disclosures. .................................................................................................................. 6 5. Express Insurance. .............................................................................................................................. 7 6. Arbitration. ......................................................................................................................................... 7 7. Title Update. ....................................................................................................................................... 7

D. Review of the Survey. ................................................................................................................................ 7 E. General Information. .................................................................................................................................. 7

1. Certification. ....................................................................................................................................... 8 2. Property Description. .......................................................................................................................... 9 3. Exceptions to Title. ........................................................................................................................... 10 4. Building Lines and Set-Back Lines. ................................................................................................. 11 5. Streets and Rights-of-Way. .............................................................................................................. 11 6. Structures and Improvements. .......................................................................................................... 11 7. Encroachments. ................................................................................................................................ 12 8. Utilities. ............................................................................................................................................ 12 9. Flood Zone Information. .................................................................................................................. 12 10. Other Items to Consider. ................................................................................................................... 13 11. ALTA/NSPS Land Title Surveys and Standards. ............................................................................. 13 12. Purpose. ............................................................................................................................................ 13 13. Request for Survey. .......................................................................................................................... 13 14. Surveying Standards and Standards of Care. .................................................................................... 13 15. Records Research. ............................................................................................................................ 14 16. Fieldwork. ........................................................................................................................................ 14 17. Plat or Map. ...................................................................................................................................... 15 18. Certification. ..................................................................................................................................... 15 19. Deliverables. ..................................................................................................................................... 16 20. Table A. ............................................................................................................................................ 16

F. Conclusion. ............................................................................................................................................... 18

IV. OTHER TITLE, SURVEY AND PROPERTY ISSUES. ......................................................................................... 18 A. Insured Closing Letters. ........................................................................................................................... 18 B. Pro Forma Policy. ..................................................................................................................................... 18 C. Taxes. ....................................................................................................................................................... 18

1. Tax Certificates. ............................................................................................................................... 18 2. Roll-Back Taxes. .............................................................................................................................. 18

D. Zoning Letters/Zoning Ordinances. ......................................................................................................... 18 E. Matters Known to the Insured. ................................................................................................................. 18

V. SAMPLE OBJECTIONS AND SOME PRACTICAL RESPONSES ..................................................................... 19

VI. INSTRUCTION LETTER. ........................................................................................................................................ 21


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VII. CONCLUSION: .......................................................................................................................................................... 22

APPENDICES .......................................................................................................................................................................... 23 Appendix 1 Promulgated Form of Commitment T-7 ................................................................................... 23 Appendix 2. Title Commitment and Exception Document Review Checklist .............................................. 29 Appendix 3. Common Endorsements ............................................................................................................ 33 Appendix 4. Texas Endorsement Guide ........................................................................................................ 35 Appendix 5. Texas Affirmative Coverage ..................................................................................................... 45 Appendix 6. Survey Checklist ....................................................................................................................... 47 Appendix 7. Property Descriptions ............................................................................................................... 51 Appendix 8. Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys ...................... 55 Appendix 9. Certificate Forms ...................................................................................................................... 69 Appendix 10. Insured Closing Letters ............................................................................................................. 77 Appendix 11. Sample Title/Survey Review Memorandum............................................................................. 85 Appendix 12. Sample Objections .................................................................................................................... 93 Appendix 13. Hypothetical Transaction Commitment .................................................................................. 105 Appendix 14. Form of Purchaser's Title/Survey Objection Letter ................................................................ 119 Appendix 15. Form of Lender's Title/Survey Objection Letter ..................................................................... 125 Appendix 16. Instruction Letters ................................................................................................................... 141


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TITLE & SURVEY OBJECTION LETTER, INSTRUCTION LETTER: GUIDELINES AND SOLUTIONS I. INTRODUCTION.

The title commitment and survey are typically products of a purchase and sale agreement or a lending transaction – often both. The purchaser and lender will be provided with these with a limited time to review and object. This paper addresses many of the common concerns found in a title commitment or survey and objections and solutions. In addition, as part of the closing, an instruction letter is appropriate to set out the final closing and title policy requirements, together with any deliverables and funding. Of course, there are times when only a title commitment and/or survey is being reviewed, and the materials herein should be helpful.

The obvious, but still often overlooked, initial issue is to be sure that the time frame for review and objection only begins when both the title commitment and survey have been received. Counsel should be sure that the time allotted is sufficient. And, if delivery of the title exception documents is important, be sure that is part of the time equation. If there is an existing survey to be used, there should be a time limit to provide it and gain approval as to its quality. If the title insurance underwriter or a party does not approve the survey, there needs to be a contractual provision as to a time period to obtain and provide a new survey, and who pays for it. The title review period should not begin until all of the needed items have been provided, Finally, the agreement should address any time or obligation on the seller or borrower to cure and what happens if that does not happen.

Some additional title review considerations include allowing the title review to include all matters of record and matters shown on the survey. Physical and operational issues should be a part of a separate feasibility due diligence period. The agreement should also be written such that an objection letter extends the time to terminate the agreement.

Upon receipt, be sure the title commitment is complete, including the jacket and schedules A, B, C, and D, and it is signed. In addition, make sure Schedule A correctly identifies the parties, the dollar amounts, and the real property and estate involved. A commitment is only binding for 90 days, so periodic updates and reissuance may be appropriate.

Likewise, the survey needs to be in final form. Has it been signed and properly certified? Is it dated? Is it the correct property? The surveyed property and the title searched estate should match.

Also, immediately check through the documents provided. Are they complete? Are they legible? The review period should not commence until legible copies

are in hand, or at a minimum the review period should be extended as to that document and its effect.

Assuming one now has the title commitment, survey, exception documents, and maybe a UCC search, if relevant, all in hand, the review process can begin. Be sure the survey reflects the location of all encumbrances shown in Schedule B and C as may be applicable.

In comparison to every other state in the union, all of which utilize the American Land Title Association ("ALTA") system of title insurance and insuring forms, the Texas title insurance industry is highly regulated with respect to forms and premiums. Thus, a Texas title company cannot provide any discounts, rate reductions, nor any commitment or policy form changes except as expressly promulgated or approved by the Texas Insurance Commissioner. However, a good understanding of the title commitment/policy and the survey can greatly expand coverage and protection for the purchaser and/or the purchaser's lender. Moreover, as an important part of the due diligence process, it is generally the responsibility of the purchaser's and/or the lender's attorney to (i) review the title commitment and the survey in detail; (ii) provide appropriate objections and comments thereto pursuant to the client's objectives, often in the form of a written title and survey objection letter; and (iii) work with the title company, the surveyor and the seller to ensure that the client receives the maximum coverage and protection (subject, of course, to various cost considerations) that is available under Texas law.

II. OVERVIEW OF TEXAS TITLE

INSURANCE. These materials are clearly not intended to serve as

an exhaustive review of the title and survey issues to be considered in connection with the acquisition of real property; however, a general review of the basic framework of Texas title insurance and some related ALTA comparisons should be instructive to attorneys in the context of reviewing title and survey and preparing effective objection letters.

A. Regulatory.

Texas title insurance is regulated by Title XI of the Texas Insurance Code. Pursuant to Section 2551.003, the Texas Department of Insurance promulgates the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (the "Basic Manual"). The issuance of commitments and title policies by Texas title insurance companies is completely regulated and controlled by the Basic Manual. The Basic Manual, which is periodically amended includes, among other things, (i) Procedural Rules, (ii) Rate Rules, (iii) the forms of commitments, policies, coverage and endorsements, (iv) claim procedures, and (v) the bulletins issued by the Texas Department of Insurance. As noted, Texas title


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companies are prohibited from utilizing any other title insurance forms.

B. Texas Title Insurance Coverage.

Prior to the issuance and delivery of a title insurance policy, the title company issues a Commitment For Title Insurance (the "Commitment"). As provided in Procedural Rule P-18 of the Manual, the title company is required to issue and deliver the Commitment to proposed insureds in the approved form. P-18 provides additional requirements and obligations of the title company pertaining to issuance, delivery and expiration information. For all contemplated transactions, the liability and obligations under the Commitment end ninety (90) days after the effective date, or when the contemplated Policy is issued. In no event should the Commitment be used in lieu of a policy, as it provides no coverage, but in appropriate situations a T-13 Interim Construction Loan Binder may make sense. Therefore, during the review period, make sure the Commitment's effective date is updated. The promulgated form of Commitment (Form T-7) is attached hereto as Appendix 1. The Commitment, easily the most important document in a typical review of title and survey, will relate to the issuance of a specific form of title insurance policy (a "Policy"). It is important to note that although the form of Policy differs depending on the party and/or the type of transaction being insured, there is only one form of Commitment and each party to the transaction (i.e., both the purchaser and the lender) will receive identical Commitments. The primary promulgated forms of title insurance policies include: (i) the Owner's Policy of Title Insurance (Form T-1) ("Owner's Policy"); (ii) the Residential Owner's Policy of Title Insurance (Form T-1R), applicable to single- family residential properties; (iii) the Loan Policy of Title Insurance (Form T-2) ("Loan Policy"); (iv) the Texas Short Form Residential Loan Policy of Title Insurance and Addendum (Form T-2R); and (v) the Loan Title Policy Binder on Interim Construction Loan (Form T-13). For further reference, all forms and rules can be found on the Texas Department of Insurance's website at www.tdi.texas.gov. C. Endorsements

Owner and Loan Policies may also be endorsed with permitted endorsements promulgated by the Texas Department of Insurance. Of course, an endorsement overrides exceptions and exclusions to coverage and may provide specific coverage where not otherwise available. Endorsements are discussed in more detail later in this paper in dealing with and addressing Schedule B and Schedule C exceptions and protecting the borrower or lender.

III. TITLE AND SURVEY REVIEW. A. In General.

Unlike a homeowner's, fire and extended coverage, or life insurance policy, a title insurance policy is, for the most part, the final (product) policy to be issued in strict compliance with the commitment. In other words, the coverage will not be reviewed and available for updates and/or revisions on an annual basis. In this regard, the review period allows the insured(s) the opportunity to obtain the maximum coverage and protection of the investment or collateral. However, sometimes the importance of the Commitment, and the review thereof, is overlooked within the overall scope of the purchase and/or loan transaction. The review, and objection(s) if warranted, truly deserve the same level attention to detail as the other important components of a real estate transaction, such as the physical, financial, and environmental due diligence. Utilized properly, review of the commitment and survey can provide protection and save costs through the period of ownership or life of the loan. The period prior to closing is really the only opportunity to achieve this.

B. Materials for Title and Survey Review.

As noted, prior to proceeding with the title and survey review, it is very helpful to have the following: (i) a complete, current Commitment issued subsequent to the title company's review of the survey; (ii) a current survey, that includes the surveyor's review of a current Commitment; (iii) complete copies of the documents listed as exceptions or curative matters in the Commitment; (iv) a legible, complete copy of the plat of the property if the property is platted; and (v) all zoning information applicable to the property including the zoning map and zoning ordinance.

C. Review of the Commitment.

The Commitment must include the following: (i) jacket or cover page; (ii) Texas Title Insurance Information Form; (iii) Bilingual Notice; (iv) Deletion of Arbitration Provision; (v) Schedule A;(vi) Schedule B; (vii) Schedule C; and (viii) Schedule D. Some important information that an attorney needs to know in order to conduct a proper and complete review of a Commitment and the associated title exception documents is discussed below. See Appendix 2 for a Title Commitment and Exception Document Review Checklist.

1. Schedule A – Commitment.

Generally described, Schedule A identifies the Commitment by number and sets forth the effective date, the GF (or guaranty file) number, the issue date, the type of Policy to be issued pursuant to the Commitment, the name of the proposed insured, the interest in the land covered by the Commitment (i.e., fee simple, leasehold, life estate, etc.), who owns record title

http://www.tdi.state.tx.us/title/titleman

http://www.tlta.com/


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to the land covered by the Commitment, and the legal description of the land covered by the Commitment. The Commitment is not valid unless your name and the policy amount are shown in Schedule A, and an authorized representative of the title company has countersigned.

a. Effective Date.

A Commitment is effective only through the date that the title plant is posted. This will typically be seven to ten (7-10) days earlier than the date on which the Commitment is issued. The difference between the effective date and the "issued on" date is a result of the lag time for the indexing or posting of documents which have been recorded and the capture of this information by the title company's records (plant). This "gap period" is insured at closing to the insured party(ies) through the date of recording of the title documents in connection with the transaction. However, any matter filed after the effective date of the Commitment but before the Policy date may become an Exception in Schedule B if not also addressed. See Schedule C, paragraph 4.

b. Policy Amount.

Whether representing a purchaser or a lender, ensure that the insured dollar amount is correctly reflected on the Commitment and is representative of the contemplated transaction(s). For instance, Texas title regulations allow issuance of a Loan Policy, in an amount not to exceed 125% of the original principal loan amount, to cover interest on a debt, such as a variable rate mortgage. See Texas Title Insurance Manual, Section III, R-4. The regulations also allow issuance of an Owner's Policy to include the cost of immediately contemplated improvements. See Texas Title Insurance Manual, Section III, R-3(B)(3). These are just two examples showing the relevance of verifying the information.

c. Proposed Insured.

Whether representing a purchaser or a lender, ensure that the name of the purchaser and/or lender are correctly identified on the Commitment.

d. Legal Interest.

In addition to ensuring that the Commitment accurately reflects the estate being conveyed, ensure that any easement which benefits the property and is created as a part of the transaction is properly described (in Schedule A.2) and insured as a part of the legal description (in Schedule A.4). Likewise, review the exception documents carefully to determine whether or not they include any easements benefiting the property which should be described and insured as a part of the legal description.

e. Record Owner. If representing a purchaser, ensure that the name of

the record owner of the property is the same as the name of the seller in the contract for sale. If representing a lender, require that the borrower be the owner in fee prior to or at closing of the loan.

f. Property Covered by the Commitment; Legal

Description. In all cases, ensure that all of the property being

purchased is included in the Commitment and check to ensure that the legal description is correct (i.e., it should match the legal description on the survey and the legal description in the contract and/or the deed of trust – if there is any variance, the differences need to be resolved prior to closing). Also, ensure that the property does not consist of a portion of a legally platted lot. If the property is inside the city limits, the property may have to be replatted into a legal lot before a building permit may be obtained. Of key importance is that the new lot will have to comply with all of the City's current codes and ordinances.

2. Schedule B – Exceptions from Coverage.

Schedule B describes the exceptions from coverage. The exceptions will include the eight preprinted "standard exceptions" and will also include all other matters identified as affecting the insurance coverage of the Policy. The eight standard exceptions are restrictive covenants, (ii) survey, (iii) homestead and community property, (iv) stream and water rights issues, (v) taxes and assessments, (vi) documents creating the insureds' interest in the land, (vii) construction, and (viii) subordinate liens and leases (each of the standard exceptions are discussed in more detail below). Because Schedule B reflects the various exceptions to coverage (in addition to the preprinted standard exceptions) that the title company will take when issuing the final Policy, it is of the utmost importance that the attorney for the purchaser or the lender carefully review each of the documents listed as exceptions so that the effect of the document/exception (if any) may be addressed with the client upfront. Preventing surprise and assuring an informed purchaser or lender is one of the most important reasons for conducting sufficient due diligence.

a. Schedule B.1 – Restrictive Covenants.

Procedural Rule P-4 governs revisions to the exception for restrictive covenants. The title company may make the insuring decision to delete the reference to a restrictive covenants altogether if (i) the restrictive covenant is void and unenforceable by statute; (ii) it has been effectively released; (iii) it has been cancelled by final judgment; or (iv) it has been consistently violated for more than four years. If no restrictions affect the


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property, the title company should delete the exception in its entirety.

b. Schedule B.2 – Survey Exception.

This exception eliminates coverage for boundaries, shortages in area, encroachments, protrusions, or overlapping of improvements. Procedural Rule P-2 allows for deletion of this exception to delete all, save "shortages in area," under certain circumstances in both the Owner's and Loan Policies. The amendment is made to the Loan Policy without additional premium. If requested, and approved for amendment in an Owner's Policy, the amendment is available upon payment of (i) 15% of the Basic Rate in an Owner Policy (T-1), or (ii) 5% of the Basic Rate in a Residential Owner Policy (T-1R), with a minimum premium of $20.00. See Rate Rule 16 of the Texas Basic Manual. At the request of the Insured (lender, borrower or purchaser) a title insurance company may accept and rely upon an existing survey and not require a new survey when providing this amendment. In this case, the title company will generally require that (i) the survey be no more than one generation old (i.e., it was prepared for the current owner), and the current owner sign an affidavit (see Form T-47 Residential Real Property) stating that no improvements have been constructed on the property (or on adjoining properties near the property's boundary) since the date of the prior survey. The title company may also allow surveys with changes if the specific change is stated and approved by the title company. If the title company allows this amendment, the final policy or policy will take specific exception to those matters shown on the survey in place of the broad exception. In a practical sense, while the lender may have requirements regarding the survey, it will defer to the title company's decision regarding the survey due to the coverage afforded to the lender in the policy. In other words, the lenders typically rely upon the title company's willingness to amend the exception to satisfy any requirements they may have regarding the survey.

c. Schedule B.3 – Homestead Rights.

This exception applies only to the Owner's Policy and cannot be deleted.

d. Schedule B.4 – Water Rights.

This exception applies to the Owner's Policy and the Loan Policy and cannot be deleted. It basically excepts coverage only for the effects of water.

e. Schedule B.5 – Standard Exception Relating to

Taxes. Procedural Rule 20 of the Texas Basic Manual

currently provides, in general:

i. Taxes for the Current Year. The title company may not insure that taxes for the

current year are paid, unless: (a) the taxes are paid or collected at closing; (b) there is an escrow account with the payoff lender and the taxes have been paid; or (c) sufficient indemnity is provided and the title company escrows the money until proof of payment is received. If the taxes for the current year have not been assessed by the taxing authorities, the company may not insure all taxes for the current year are paid.

ii. Rollback Taxes.

Upon payment of the required premium under R-19, the words: "and subsequent taxes and assessment by any taxing authority for prior years due to change in land usage or ownership", contained in the standard tax exception may be deleted. Rollback commonly refers to a subsequent assessment of taxes by the taxing authorities upon the change in usage of the land based upon an agriculture or open-space valuation given to the land. This amendment of the standard exception is only available on a Loan Policy or Interim Binder. This deletion may only be provided if there is no agricultural or open-space valuation, or the rollback taxes have been assessed.

iii. Taxes Not Yet Due and Payable.

If the company is satisfied that all taxes are paid except for the year of the issuance of the policy, where the taxes are not yet due and payable, they may add the specific year, followed by "not yet due and payable." Additionally, if the company determines that some, but not all of the taxes are not yet due and payable, the company may add the "not yet due and payable language and limit it to the applicable taxing authority or authorities only. Under R-24 the charge for this is $5.00. This amendment is only available on a Loan Policy or Interim Binder.

f. Schedule B.6 – Terms and Conditions in Vesting

Documents. This exception applies to both the Owner's Policy

and the Loan's Policy and cannot be deleted. However, it generally means that the title policy does not insure against matters placed in the deed or the deed of trust.

g. Schedule B.7 – Mechanic's Liens.

This exception applies only to a Loan Title Policy Binder on an Interim Construction Loan (i.e., the lender's binder in connection with residential construction loans). It may be deleted if the title company is satisfied that construction has not commenced prior to the recording of the lender's mortgage. See Procedural Rule P-8 for more information.


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h. Schedule B.8 – Subordinate Liens and Leases. This exception applies only to the Loan Policy (T-

2). When a Loan Policy is issued to insure the validity and priority of a lien, the issuing title company is not required to itemize liens and leases that affect the title, which are subordinate to the lien insured, unless requested to do so in writing by the insured. In this instance, Schedule B, Paragraph 4 of the Loan Policy may be deleted, and the subordinate lien(s) and lease(s) will be excepted in Schedule B and the company may insure that such lien(s) and lease(s) are subordinate. See Procedural Rule P-11.b(8). However, when issuing a Title Policy Binder on Interim Construction, the title company is required to show all subordinate liens in Schedule B-Part 2 of the binder. In the case of the Binder, a statement may be included that such lien(s) is subordinate.

i. Schedule B.9.

This numbered exception is for informational purposes to set out the application of the exceptions under Schedule B for the Texas Short Form Residential Mortgage Policy of Title Insurance (T-2R).

j. Schedule B.10 – All-Inclusive Exception.

All matters found by the title company to affect title to the property will be listed under this exception (or as separately numbered exceptions). If there are no additional matters affecting title, the title company must delete this exception. Often, whether or not additional matters are listed on Schedule B is subject to negotiation. It is in the proposed insured's best interest to have broad exceptions removed altogether, or in the least, modified to describe specific exceptions, such as those shown on a survey or evident by inspection of the property. Some common additional exceptions are discussed below.

k. Rights of Parties in Possession.

Rights of Parties in Possession means one or more persons who are themselves actually physically occupying the property or a portion thereof under a claim of right adverse to the record owner as shown in Schedule A. If the title company makes this general exception, the insured must execute a written statement waiving inspection of the property and accepting the policy subject to the exception. In a commercial transaction, the language may look more like: "tenants in possession, as tenants only, without rights or options to purchase the insured property". In order to remove this exception, the insured can request an inspection by the title company. The company may charge its reasonable and actual costs for an inspection, if performed. If the title company is hesitant to include a lender's requested language, the purchaser/borrower may furnish the title company with copies of the leases for review. The company may require an Affidavit

regarding the non-existence of leases in order to remove the exception.

l. Visible and Apparent Easements/Rights of Way.

Procedural Rule P-5 prohibits exceptions such as this if general in their terms. Most are eliminated upon review of the survey.

m. Broad/General Exceptions.

Procedural Rule P-5 prohibits exceptions such as this which are general in its terms. Most are eliminated upon review of the survey.

n. Plat Created Exceptions.


o. Encroachments.


p. Blanket Easements.

In general, you will want each easement that is excepted to on the Commitment to be visible and located on the survey. In some cases, the description of an easement may be "blanket in nature" over a large tract or survey of land and the legal description contained in the easement does not allow the surveyor or other parties to determine the exact location of the easement on the survey. This is most common with older easements granted to pipeline companies on rural property. Should you encounter these exceptions, you may start by requesting a relocation, limit in size, a more accurate definition of the location, and/or secure a release of the easement prior to closing. In general, once a pipeline is in place (as contemplated by the easement), the presumption is that the easement runs 25 feet to either side of the actual pipeline. Tex. Nat. Res. Code § 111.0194.

q. Oil, Gas and Mineral Reservations And/Or Leases.

If there is no evidence of drilling and any mineral reservations, severances, and/or leases contain waiver of the surface rights, these types of exceptions should not cause the purchaser or the lender too much pause. It is also prudent to review local drilling ordinances, but remember ordinances can be changed. Platted areas with designated drill sites can also eliminate drilling concerns.

r. "As Shown on Survey" Language.

Ancillary to the requirement that all exceptions be shown on the survey (see below for discussion), many purchasers and lenders will want to request that the title company note after each appropriate item that it is "as


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shown on the survey" or "as noted on the survey" (if a particular exception affects the property but cannot be plotted on the survey for one reason or another). In addition, it is becoming increasingly common for purchasers and lenders to request that the language be "limited as shown on the survey" or "limited as noted on the survey", thereby providing assurance against loss in the event that an exception item is located other than as drawn on the survey. If this language is requested, the survey will need to be specifically identified by surveyor, job/project number, date, and last revised date (if applicable).

3. Schedule C – Curative Matters.

Schedule C generally contains the requirements and conditions that must be satisfied in order to issue the Policy. Typically, the seller is required to take care of the items listed.

a. Standard Requirements.

In addition to requirements that are specific to the transaction at hand (see below), Schedule C will include the following four standard requirements which relate to (i) the execution and notarizing of documents to be recorded (see Schedule C.1); (ii) provision of evidence that (a) there are no parties in possession, (b) all taxes have been paid, (c) all improvements have been completed and all contractors and suppliers have been paid, (d) there is legal access to the land covered by the Commitment, and (e) the deed of trust is valid (if applicable) (see Schedule C.2); (iii) payment of the required consideration (see Schedule C.3); and (iv) resolution of any matter that arises or is filed subsequent to the effective date of the Commitment (see Schedule C.4).

b. Transaction-Specific Requirements.

Though basically covered in the preprinted language of Schedule C, some title companies elect to specify the documents needed to effect the ownership and estate to be insured under Schedule A. For instance, in a sale transaction, the company may include the following. "The company requires the recordation of a warranty deed from record title holder to proposed insured". A title company may insert the specific names of the parties.

c. Legal Matters.

Schedule C should be examined closely to ensure that there are no existing lawsuits, judgments, or mechanic's liens which affect the property. If there are, these items will need to be addressed prior to closing. d. Items Not Removed.

Any title matter that is listed on Schedule C and not resolved prior to issuance of the Policy will be included as an exception to title in Schedule B of the Policy

issued. Accordingly, you should always review Schedule C in detail to ensure that all items listed thereon will be satisfied and released prior to closing. Also ensure that there are no existing lawsuits, judgments or mechanic's liens, and require that existing liens will be released, unless subordinated or otherwise accepted or addressed.

4. Schedule D - Disclosures.

Schedule D discloses information regarding title company ownership, estimated title premiums, and the title premium splits and divisions among the underwriter, agent and other parties. The premium calculations and the schedule of parties should be completed in its entirety pursuant to Procedural Rules P-21 and P-22, and §§ 2702.051-2702.053 of the Texas Insurance Code.

a. Endorsements.

Endorsements are promulgated forms which modify coverage to address specific areas of concern to the purchaser or the lender. Some endorsements are unique to the policy form being used (e.g., an increased value endorsement is only used in connection with an Owner's Policy). Procedural Rule P-9 is the principle rule addressing endorsements; however, other rules may also require the use of specialized endorsements dealing with the subject matter of that rule. A few of the most common endorsements are discussed below. See Appendix 3 for a more exhaustive list of common endorsements. See Appendix 4 for a list of endorsements available in Texas and comparable to other state endorsements.

b. Minerals.

Coverage involving drilling and exploration can be obtained through a series of T19 endorsements. The T19 endorsement is for loan policies and is part of a more comprehensive endorsement and coverage. Paragraph 4 of the T19 does protect against damage to improvements including landscaping resulting from the future exercise of rights to use the surface by the mineral owner. The T19.1 is available for all Owner's title policies and has similar protection in Paragraph 3, though landscaping is not protected. More recently the Texas Department of Insurance promulgated forms T19.2 and T19.3 to deal specifically with damage from exploration and production. These two endorsements were intended to deal with situations where the title company takes a general exception to minerals in Schedule B, bu they are seeing broader use. A general exception in Schedule B is permitted by Rule P-5.1. T-19.2 deals with one acre or less improved tracts, or mixed use, while the T-19.3, which is limited to damage to permanent buildings, deals with larger tracts of land. There is no charge for the T-19.2 and T-19.3 endorsements for Loan Policies,


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but the title company may also decline to give these coverages.

c. Access.

The access endorsement T-23 is provided by Procedural Rule 54 and may be desirable if assurance of specific access is desired. The title policy provides insured access but does not provide for coverage for a specific point of access. The T-23 endorsement can provide that coverage. The property must be improved.

d. Contiguity.

If multiple tracts are involved in a non-residential situation, the T-25 and T-25.1 as provided by Procedural Rule 56 may be very valuable. The T-25 endorsement provides coverage that boundary lines of two or more tracts are contiguous, while the T-25.1 expands that further to insure against gaps, strips or gores. This endorsement is useful in situations where there are irregular tracts.

5. Express Insurance.

"Express Insurance" pursuant to Procedural Rule P-39 is only available for those specifically described liens, encroachments or title defects that do not fall within the scope of the coverage of other affirmative endorsements. See Appendix 5 for more information regarding affirmative coverage endorsements and express insurance in Texas.

6. Arbitration.

Arbitration provisions for policies up to $2M in the T-1 and T-2 policies may be deleted pursuant to Procedural Rule P-36.

7. Title Update.

This is also commonly referred to as a bring-to-date (BTD). The purchaser/borrower, lender, and surveyor should be provided with an original, signed Commitment each time the Commitment is revised and/or updated. This should be done as near to closing as reasonable to check for any new encumbrances, tax liens, leases, and the like.

D. Review of the Survey.

The primary purpose of a survey is to identify and locate on the ground the effect of the various record and non-record matters affecting the property. Efforts to discuss exactly what to look for in a survey usually end up with an unstructured discussion covering a disconnected series of "what about this" and "what about that" questions arising from transaction-specific occurrences. Accordingly, critical considerations can sometimes be overlooked. The items discussed below represent a series of requirements that have been determined, over the years, to be of importance in the review of almost every survey. Careful consideration of

these items are critical to conducting a proper and complete review of a survey as an important part of the due diligence process. See Appendix 6 for a survey checklist.

E. General Information.

a. Identifying Information. The Surveyor's Name, Phone Number, and Address.

(1) The surveyor's job number. (2) The type of survey (i.e., boundary or

completion). (3) A general description of the property

being surveyed. (4) Scale and bearing. In other words, how

far is that really and which way is North? Both are very critical to obtaining a complete understanding when reviewing a survey.

(5) Surveyors signature and seal. It should go without saying that every survey must be made by a registered land surveyor. In addition, each survey must have the surveyor's original signature and the surveyor's seal affixed. As a practical matter, it can be cost effective to request a preliminary survey (i.e., unsigned and uncertified) to circulate to all interested parties. The collected comments to the preliminary survey can then be submitted to the surveyor with the goal of obtaining a signed and sealed survey that is acceptable to all parties involved, without the need for numerous revisions.

b. Dates.

(1) The date of the survey. The date of the

survey is fixed by the surveyor's field work and should be current (i.e., no more than 30 days before being submitted to the parties). Surveyors who come forward from their prior work are many times asked to keep costs to a minimum, and will sometimes re- certify as of a more current date. You should not, however, expect a surveyor to certify that an "on-the- ground" survey was made at any time other than the date it was actually done. Some lenders have requirements that state that the "on-the-ground" date is as critical as the "certification" date. That information should be communicated to the surveyor, and you can expect the surveyor's fees to


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be consistent with the requirements given.

(2) Date last revised. The latest revision date, if applicable, should always be included on a survey. This date will likely be referenced on the Commitment when describing specific exceptions (i.e., "as shown on survey dated last revised").

c. Legend.

Although there are many abbreviations which are readily understood by the real estate practitioners (i.e., f.i.r. = found iron rod; s.i.r. = set iron rod; p.o.b. = point of beginning; etc.), anything which removes confusion and doubt is welcome. Accordingly, each survey should include a clear legend explaining any abbreviations, symbols (i.e., fences, trees, etc.) and/or fill techniques (i.e., cross-hatching, shading, etc.) used by the surveyor in preparing the survey.

d. Scale; Bearing.

See Appendix 7 (discussing the technicalities of property descriptions) for more information regarding scale and bearing.

1. Certification. New 2016 Minimum Standard Detail

Requirements for ALTA/NSPS Land Title Survey (the "2016 Standards") were adopted by the American Land Title Association and the National Society for Professional Surveyors effective on February 23, 2016. Any survey which is to be certified or recertified using ALTA/NSPS standards, on or after February 23, 2016, should use the 2016 Standards.

The 2016 Standards primarily revised Exhibit A, a table of optional survey responsibilities and specifications, including twenty (20) items to be negotiated. There are eight (8) numbered sections and Table A which constitute the 2016 Standards. These eight sections are: Purpose, Request for Survey, Surveying Standards and Standard of Care, Records Research, Field Work, Plat or Map, Certification and Deliverables, together with Table A, Optional Survey Responsibilities and Specifications, are attached to and made a part of the 2016 Standards. Each of these will be addressed in detail below.

For reference purposes, the 2016 Standards are attached as Appendix 8. A marked version of the 2016 Standards showing significant changes from the 2011 Standards is available on the American Land Title Association website and the NSPS website. www.alta.org/forms; www.nsps.us.com. Many real

estate attorneys will find changes not reflected in the markings which they will find significant.

Under the 2016 Standard, the only certification allowed on the face of an ALTA/NSPS Land Title Survey is the Certification in Section 7, except as required by law or regulation. Some state surveying boards, for example, require specific wording for Certification. The ALTA/NSPS Certification is attached as Appendix 9. The Certification in Section 7 is sufficient in most cases, and this standard "short- form" Certification covers every issue that the Surveyor can actually and honestly certify to by stating that the Survey was conducted in accordance with the Standards. The wording in Section 7 of the 2016 Standard is essentially a statement from the title industry and the surveying profession that title insurance coverage can be provided without additional or alternate Certification. For those Clients who require an additional or alternate Certification, it is permissible to negotiate with the Surveyor to provide another additional and separate Certification and cross-reference it to the Survey. In lieu of an additional or alternate Certification, Lenders may simply use the standards (including Table A, and Table A, Item 21, if necessary) as the basis for their requirements.

Also attached are State of Texas Surveyor certification forms and two generic forms. The State of Texas forms are not new, but are forms suggested by the Texas Society of Professional Surveyors. They are based on the standards and specifications adopted by TSPS and reference the category of survey requested. The categories are set out in the TSPS Manual of Practice. A category 1.A is a high quality survey and often requested in Texas. The Condition number, I- IV, establishes tolerances and is largely based on the location of the property, ranging from urban business district to rural. Note also that Tex. Admin. Code Title 22, Rule §663.18(e) provides:

Registered professional land surveyors may certify, using the registrant's signature and official seal, services which are not within the definition of professional land surveying as defined in the Act, provided that such certification does not violate any Texas or federal law.

The generic survey certifications are similar to those developed by lenders over time. The certification often includes data that extends beyond the scope of a typical survey and plat. It is a good comparison and checklist, and may serve as a basis for a separate agreement with a surveyor providing an ALTA/NSPS certification.

Certifications may vary by transaction depending on the nature in which the survey is intended to be utilized. In general, however, the certification should be to all parties having an interest (i.e., seller, purchaser/borrower, lender, and title company – including the underwriter and agent). The form of

http://www.alta.org/forms

http://www.nsps.us.com/


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certification requested by the parties, particularly by lenders, has become a matter of some concern and possibly the subject matter of negotiations between the surveyor and the parties to whom the survey is certified. At the same time the ALTA/NSPS structure is intended to bypass these negotiations to a large extent, and provide a certificate universally accepted by parties, surveyors, and the title insurance company. Keep in mind that the content of the certificate determines the degree of investigation of the site, and in many instances the surveyor is simply unable to perform the necessary investigation to support the contents of the form of certificate being requested.

2. Property Description.

The full legal description (i.e., the metes and bounds) of the property must be shown on the survey. The address of the property may be included in the survey, only if the address is disclosed in Record Documents, or observed while conducting the survey. The legal description must be identical to that shown on the Commitment. Any discrepancies need to be corrected or explained (discussed in more detail below). If the property is described as being on a recorded plat or map, the survey must contain the recording information for the plat or map and a legend relating the property to the plat or map, and the surveyor must certify that the land which has been platted or mapped is the same land as that described on the survey. In addition, any portion of the property that is subject to a ground lease must be specifically shown and identified as the ground lease parcel. In general, look for the following: (i) conformity between the description of the property as it appears of record (usually taken from the vesting deed), the description of the property on any recorded plat or map of the property, and the description of the property as determined by the surveyor and set forth on the survey; (ii) the location of the property in relation to some larger area in which the land is located; and (iii) the internal relationship of various interests in the property.

a. Point of Beginning.

The survey should clearly reflect the "point of beginning" for the legal description (i.e., the point at which the metes and bounds description of the property begins). Often, there will be a "point of commencement" as well, which takes the viewer from a known monument or point to the point of beginning.

b. Perimeter Property Lines.

All perimeter property lines must be specifically identified on the survey by courses and distances. In addition, the survey should specifically show the relation of the "point of beginning" to the monument from which it is fixed (thus the "point of commencement). A clear definition of the perimeter,

with courses and distances shown, will very quickly disclose conflicts which might be a problem, especially with respect to easements and access. As noted in the related discussion of Policy coverages and endorsements, the contiguity of perimeter lines with street right-of-way lines and easements is crucial to the determination of the degree of coverage available as to matters of access (or more correctly, the title company's willingness to insure without an exception for lack of access).

c. Property Description Discrepancies.

It is not uncommon for there to be variances between the vesting deed legal description, the plat description, and the survey legal description. The practical tendency is to accept the survey legal description as the best contemporary description of the property, especially once any variances or discrepancies have been identified and resolved. The prevailing practice among lenders, in particular, is to use the survey legal description on their loan documents and to instruct the title company to be in a position to insure that description. Typically, the title company is readily agreeable to this. You may, however, face a reluctant grantor from time to time, who will refuse to convey to the purchaser using any description of the property other than the exact description by which he took title. Assuming that the vesting deed legal description and the survey legal description are at reconcilable odds with each other, the title company can be asked to insure using a legal description that incorporates the survey legal description, followed with language to the effect of "and being the same property described as follows: . . .".

d. Ground Lease Tracts.

Most surveyors will have no problem identifying ground lease tracts (i.e., pad sites) within a larger tract, assuming that the ground lease used something other than a crude drawing to identify the property subject to the lease. It is also customary, particularly in multiple loan and second- lien situations, to request that the surveyor identify the various encumbered tracts by reference to the recorded deed(s) of trust. The obvious purpose is to provide the parties a visual representation of the end result of their respective purchasing/borrowing and lending efforts.

e. Square Footage/Acres.

The total number of square feet and/or acres contained in the property should be specifically identified on the survey. The total area comprising the property can be of concern to all parties, particularly if pricing or ordinances are affected.


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f. Vertical Relief. Vertical relief with the source of information, contour interval, datum, and originating benchmark identified may be requested for the survey.

g. Wetlands.

The survey may be requested to include the location of wetland areas as delineated by appropriate authorities.

3. Exceptions to Title.

One of the primary reasons for including preparation and review of a survey in the due diligence process is so that the purchaser and/or the lender can specifically locate and analyze all of the easements and other interests in favor of third parties which affect the property. This is a consideration that goes directly to the business points of the transaction.

a. Commitment and Exception Documents.

This should go without saying, but the parties need to ensure that the surveyor has a copy of the Commitment and all of the exception documents for use in preparing the survey. In order to ensure early coordination between the title company and the surveyor, an initial direction to the title company should be to provide the surveyor with a Commitment that addresses not only the property in question, but also any appurtenant easements or other items which might be disclosed by the title search. In addition, having the surveyor prepare a preliminary survey assists the title company clean up the Commitment. For example, the title company may have taken exception to a document that purports to affect portions of more than one tract of land. If the surveyor can locate that exception on a tract other than the tract being insured and/or can demonstrate to the title company that the exception does not affect the tract being insured, the title company will remove the exception from the Commitment.

b. Shown on the Survey.

All exceptions shown on the Commitment must either be (i) shown (i.e., plotted) on the survey, or (ii) identified on the face of the survey as being un-plottable. For any exception (other than a lien) which affects the property but is not plottable, the surveyor should specifically indicate on the face of the survey (i.e., in the surveyor's notes) the reason the exception is not plottable. Some items that fall into the un-plottable category are laundry leases and telecommunications leases. In addition, all items shown on the survey should be referenced with the applicable recording information (i.e., indicating how the item originated). In the event that any exceptions shown on the Commitment are not shown on the survey, you should request that it either be located on the survey or deleted from the Commitment.

c. Easements. i. In General.

Each easement affecting the property (including easements on or over other tracts which benefit the subject property) must be identified on the survey by the recording information for the document creating the easement. With regard to each easement shown on the survey, the surveyor should (i) show both boundary lines, rather than just the centerline, (ii) depict the width by arrows pointing to each boundary line, and (iii) label with the applicable recording information (i.e., the volume/page number or the plat's recording number. The surveyor may be requested to locate improvements within any offsite easements benefiting the surveyed property that are disclosed in the Record Documents and that are observed during the process of the survey. In addition, monuments may be requested (or a reference monument or witness to the corner) at all major corners of any offsite easements benefiting the surveyed property and disclosed in Record Documents.

ii. Platted Easements.

If an easement has been created by or is shown on a recorded plat, the surveyor must certify that the easement shown on the survey is the same as the easement shown on the plat.

iii. Blanket Easements.

If there are blanket easements, these need to be addressed. Blanket easements were common in large tracts of unimproved property during a time when there was significant expansion of pipelines and utilities. If there is a blanket easement and the utility or pipeline has been placed, the companies will generally work with the borrower or lender to restrict the easement. There are also statutory provisions which limit utilities and pipelines in place pursuant to blanket easements. If there is not a utility or pipeline in place in connection with a blanket easement, it is prudent to obtain a definition and limitation of that easement to permit the property to be improved or otherwise better utilized.

iv. Abandoned Easements.

If the Commitment shows an easement that the surveyor is unable to locate on the property, the document purporting to create the easement should be reviewed in detail to determine if it terminates automatically upon abandonment (common for rural service and transmission line easements). If that is the case, the surveyor should be asked not only to advise as to the non-plottability of the easement, but also that there is no physical evidence on the ground of any facilities existing pursuant to the easement, in which case the title company can be asked to remove it.


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4. Building Lines and Set-Back Lines. It is not unusual for surveyors to show building

lines and setback lines on the survey, however, the source of authority for inclusion of said building lines and setback lines are rarely disclosed. Building lines and setback lines can arise via (i) separate declaration, dedicatory language on the recorded plat, or application of current municipal standards to the site. Building lines and set-back lines created by separate declaration should be shown on the survey, but keep in mind that a more restrictive municipal requirement will prevail – likewise, a more restrictive private requirement will prevail over a more lenient municipal requirement. If there is a conflict, both sets should be shown. If building lines and/or set-back lines are shown on the recorded plat (and thus on the survey), but are not included within the dedicatory language of the plat itself, the lines shown are most likely those provided for by municipal standards in place at the time the plat was submitted for approval and filing.

5. Streets and Rights-of-Way.

All streets and rights-of-way on or adjacent to the property should be specifically shown and identified. In particular, the survey should indicate, with respect to each street/right-of-way (i) whether it is public or private, and (ii) the centerline and width. In addition, the survey should confirm that the property has direct access to a public right of way. If information is available from controlling jurisdictions regarding proposed changes in street right of way, those proposed changes may be requested, as well as observed evidence of recent construction on the street or sidewalk. With the advent of access coverage in Texas, the contiguity of the property with abutting public streets is of paramount concern. Texas does not allow assurance that the adjoining streets are public, although a recitation in the survey legal description that a particular line is the same as a right- of-way of a public street is of some comfort (for example, "thence S 45 deg. 13 mm. 43 sec. W, a distance of 435.89 feet along the southwest line of this tract and the northeast line of Main Street (a public street), to a point..."). As mentioned above, if access to a specific street or location of point of access is important, such as in connection with the purchase of land for a shopping center or an apartment complex, it is advisable to obtain T-23 coverage.

6. Structures and Improvements.

All structures and improvements located on the property or on the property's boundary line must be shown on the survey, with horizontal lengths of all sides and the relation thereof by distances to all boundary lines of the property, easements on or over the property, established building and set-back lines, and street lines. The indication of distances from the boundary lines, easements, etc., is crucial to the determination of actual

violations on the ground and any attendant possible zoning violations, as well as allowing the title company to evaluate realistically any risk it is being asked to take in providing affirmative assurances over survey matters. Although the need to address these items on the survey is apparent, recent experience indicates that there may be some debate as to what constitutes an "improvement", especially when the title company is asked to insure over noted encroachments and/or protrusions. In that situation, the title company can be expected to require some comfort from the surveyor and the question of what constitutes an improvement will arise. The most common problems in that regard are sidewalks and driveways, which almost without exception lie over utility easements, underground drainage facilities, and the like. In addition, the advent of covered parking as a salable amenity for apartment complexes has resulted in the construction of parking structures that encroach over building lines, easements, etc. The problem here is that a detailed review, and any attempt to address all of these situations, can create an adversarial situation between surveyor, title company and proposed insured that may not need to exist. The key seems to be a willingness on the part of the purchaser and/or lender to address the problem from a business risk standpoint first, and let the surveyor and title company know up front what will be acceptable.

a. Buildings. i. Area.

The survey should include the square footage of each of the buildings located on the property. The absence of zoning endorsements in Texas makes the square footage of the buildings of primary concern, since a zoning letter or other information regarding zoning requirements will have established the need for this information to determine compliance and to determine if any waivers are needed.

ii.. Height.

The survey should indicate the height of the buildings located on the property.

iii. Relative Location.

The survey should reflect the distances between the property boundary lines and the nearest point on each building located on the property.

b. Parking.

The absence of zoning assurances in Texas establishes the need for parking and related information to determine compliance with current zoning standards. Accordingly, the survey should identify each parking area and should set forth for each (i) the total number of parking spaces, (ii) the total number of regular parking spaces, and (iii) the total number of handicapped parking spaces.


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c. Fences/Power Poles/Walls. Without expressing a legal opinion on the nature or

ownership of any encroachment, the survey should record the dimensions of all encroaching utility pole cross members or overhangs. The survey may be requested to indicate determination of the relationship and location of certain division or party walls designated by the client with respect to adjoining properties (client must obtain necessary permissions). In addition, may determine whether certain walls designated by the client are plumb (client must obtain necessary permissions).

d. Landscaping.

The location of any major trees and/or shrubbery to be protected should be shown on the survey.

e. Other Structures/Improvements.

All other structures and improvements, including sidewalks, stoops, overhangs, and paved areas, must be shown on the survey, with horizontal lengths of all sides and the relation thereof by distances to all boundary lines of the property, easements on or over the property, established building and set-back lines, and street lines. In addition, all curb cuts and driveways should be shown on the survey.

7. Encroachments.

All encroachments of buildings and other structural appurtenances (i.e., loading docks, awnings, canopies, porches, fire escapes, and bay windows) by or on adjoining property, over easements, onto or from abutting streets or alleys, whether surface or subsurface, must be indicated on the survey with the extent of each such encroachment clearly defined. Likewise, any known variance granted by governmental authority for such encroachments must be listed and explained. This requirement speaks to another one of the primary reasons for obtaining and reviewing a survey as a part of prudent due diligence. What is needed is to reconcile this to the recorded documents - if an easement by its terms permits some "overbuilding", the title company should give effect to that permission in its exceptions. Likewise, the granting of permission to build over an easement (common in Harris County) should be noted on the survey and Commitment, and the title company should be requested to give full effect, to the extent of the permission granted. If an encroachment or protrusion is the subject matter of a beneficial grant appurtenant to the property (many cities will grant a license to protrude into public spaces such as sidewalks, alleys, etc.), consider requesting the title company to insure the appurtenant rights.

8. Utilities. a. Utility lines.

The survey should identify all utility lines (i.e., sewer, water, gas, electric, telephone, etc.) as they

service the property and the improvements. The survey should also indicate whether said utility lines are above or below grade. The availability of utility services is typically not the reason for this requirement. More importantly, it is whether utilities serve the site from public or private easements, from public rights-of-way, or across adjoining lands, that is of concern. Whether the utility lines are above or below grade typically goes more towards aesthetic/business concerns. Many surveyors are reluctant to make any statement which will satisfy this requirement - look for water meter boxes, electric meter boxes, etc. as clues.

b. Utility transformers.

The survey should identify any utility transformers located on the property and should specifically make reference to those transformers which are labeled as containing PCBs. Obviously driven by environmental concerns, compliance with this request is easy enough when you are dealing with transformer pads located on the ground. Most surveyors will not make a close inspection of any transformers located on power poles, although some will attempt to take a reading with binoculars.

9. Flood Zone Information. a. In General.

The survey must state whether or not the property appears on any (i) U.S. Department of Housing and Urban Development ("HUD") Flood Hazard Boundary Map, or (ii) special flood hazard area map published by the Federal Emergency Management Agency ("FEMA"). If the property appears on a HUD Flood Hazard Boundary Map, the survey should state the map number and whether or not the property appears in the "Flood Hazard Area" shown on the map. If the property appears on FEMA special flood hazard maps, the survey should state whether or not the property lies within a flood hazard area and, if so, further state the flood zone, the applicable map ("FIRM", "FHFBM", "FBFM") and the community panel number. Keep in mind, however, that not all municipalities participate in these federal programs, and the requested information may not be available. Accordingly, the surveyor may not be able to make an affirmative statement to the degree requested, particularly if the underlying information/mapping is not available. In many cases, pricing may be different for land in the flood plain, so this can be quite critical.

b. Sample Language.

"The Property is not located in a 100-Year Flood Plain or in an identified 'flood prone area,' as defined by the U.S. Department of Housing and Urban Development, pursuant to the Flood Disaster Protection Act of 1973, as amended, as reflected by Flood Insurance Rate Map Panel # , dated _______________, which such map panel covers the area in which the


13

Property is situated. The Property is located within Zone ___."

10. Other Items to Consider.

a. Elevation. b. State Platting Statute. c. Streams, Rivers, Surface Drainage Systems. d. Underground Tanks. e. Railroad Tracts. f. Number of Prints Required. g. Professional Liability Insurance.

11. ALTA/NSPS Land Title Surveys and Standards.

The items discussed above are applicable in the review of any type of survey. As noted, the American Land Title Association ("ALTA") and the National Society of Professional Surveyors ("NSPS") have established basic standardized requirements for land title surveys (namely, the Minimum Standard Detail Requirements) to provide consistency across the country. ALTA/NSPS Land Surveys require a higher level of detail and are, accordingly, frequently required by lenders, title companies, attorneys and purchasers of commercial real estate.

a. Analysis of 2016 Standards.

The following is an analysis of the 2016 Standards section by section, noting the changes from the 2011 Standards which will be significant to most practitioners.

12. Purpose. a. ALTA Survey.

Section 1 of the 2016 Standards defines what a survey must include to qualify as an ALTA Survey. Four items are specified: (i) on-site field work, (ii) a plat or map showing results of the field work and relationship to documents provided to or obtained by the surveyor, (iii) any information required in Table A, and (iv) the surveyor's certification.

b. Lender.

The 2016 Standards expressly recognize lenders as one of the parties which will rely upon complete and accurate surveys.

13. Request for Survey. a. Authorization and Specifics.

The 2016 Standards included the requirements that written authorization to proceed must come from the client, and that title insurers are not responsible for the cost of the ALTA survey unless otherwise authorized by them in writing. This section also incorporates the designated optional items listed in Table A. However, the 2016 Standards also provide guidance dealing with

special types of properties to be surveyed, and specifically, lists marinas, campgrounds, trailer parks and leased areas. Special properties need to be the subject of separate discussions and agreements between the surveyor and the client, since these properties have unique issues as to what the surveyor is being requested to depict.

b. Access Authority.

Another new aspect of this section is the placement on the client of the responsibility to obtain permission for the surveyor to enter upon the surveyed property, adjoining properties or offsite easements. Despite the mandate for the client to secure such permission, the written engagement contract between the client and surveyor can shift this burden to the surveyor; however, absent contractual provisions to the contrary, the responsibility and cost of this will lie with the client. As a practice guide, this responsibility should be clearly delineated in the contract and not left to the 2016 Standards for the answer; this will minimize the chance of a surprised client.

14. Surveying Standards and Standards of Care. a. Standards of Care.

This section establishes a national, objective standard of care for preparing an ALTA Survey; however, due to the existence of various other federal, state and local laws, statutes, ordinances and other administrative rules that regulate the practice of surveying in those jurisdictions, the 2016 Standards allow for modification of the national objective standards to recognize such other applicable laws. Although somewhat dated at this time, a compilation of all 50 state laws and other significant agency and federal requirements governing surveying practices are contained in Mitchell G. Williams, Editor, Land Surveys, A Guide for Lawyers and Other Professionals, Second Edition, Chapter 11, Minimum Survey Standards: A Survey of State and Federal Laws and Regulations, by J. Richard White (American Bar Association 2000). In addition to local requirements, the 2016 Standards recognize the existence of unwritten, subjective standards of care in certain locales. See, 2016 Minimum Standards, Section 3.C. Therefore, there are three sets of guidelines applicable to a proper ALTA Survey: (i) the national objective standards contained in the 2016 Standards, (ii) federal, state and local laws, rules and ordinances, and (iii) unwritten, subjective standards of care applicable to the particular location.

b. Boundary Resolutions.

Section 3.D of the 2016 Standards represents an enhanced level of work by the surveyor. It will come as a surprise to most real estate practitioners, however, that under prior survey standards, the surveyor was not required to make a professional judgment on the actual


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boundary line of the surveyed property. See, Bales and Kent, The 2011 ALTA/ACSM Land Title Survey Standards, 25 Prob. & Prop. 12, at 14 (July/August 2011) [Note: The authors of this article were members of joint committee that drafted the 2011 Standards; Gary Kent was the Chair of the committee.]; NEW 2011 ALTA/ACSM Standards – Summary of Significant Wording Changes between 2005 ALTA/ACSM Standards and the New 2011 ALTA/ACSM Standards, www.smith- roberts.com/pdf/2011-alta-summary-of-changes.pdf. Under Section 3.D, an ALTA Survey requires all boundary lines and corners to be established or retraced in accordance with appropriate boundary law principles governed by the set of facts and evidence found in the course of performing the research and survey. Under some earlier standards, the surveyor was required to show the location of existing boundary lines from information provided; however, the existence of gaps and gores (referred to as "overlaps") that might have been discovered by the surveyor were not required to be depicted. The 2016 Standards require the surveyor to disclose such matters to the client and title insurer and work with them to make a professional judgment based upon existing facts and real estate boundary law as to the proper boundary lines and corners. See, 2011 Standards, Section 6.B.vii; Bales and Kent, The ALTA/ACSM Land Title Survey Standards, 25 Prob. & Prop. 12, at 15 (July/August 2011).

c. Measurement Standards.

Section 3.E of the 2016 Standards contains the measurement standards. The terminology is simply to reflect that the measurements have a certain degree of precision and may not be exact. A boundary can be precise because the survey measurements are precise; but the boundary can still be inaccurate because of improper application of boundary law principles. However, even though the terminology describes the relative positional precision of lines and measurements, other provisions of the 2016 Standards address the accuracy of legal boundary determinations. See, Sec. 3(b), supra. Remember that metes and bounds are very low on the priority list for determining boundaries which is: (i) natural monuments, (ii) artificial monuments, (iii) calls for adjoinders, (iv) metes and bounds measurements, and (v) acreage.

As to the accuracy standards, Section 3.E.v specifies the maximum allowable Relative Positional Precision for an ALTA Survey, but recognizes that circumstances such as size or configuration of the surveyed property, relief, vegetation or improvements may result in exceeding the maximum allowable Relative Positional Precision. In such case, this discrepancy must be noted and explained by the surveyor. See, 2016 Standards, Section 6.B.x.

15. Records Research. Under the 2016 Standards, the surveyor must be

furnished with the following types of documents: (i) the most recent title commitment, (ii) current record descriptions of the property to be surveyed (or if it is a new original survey, the description of the parent parcel), (iii) the current record description of adjoining properties, (iv) recorded easements appurtenant to and benefiting the surveyed property, (v) copies of record easements, servitudes and covenants burdening the surveyed property, (vi) documents of record referred to, (vii) documents necessary to ascertain junior or senior relationships with respect to gaps or gores, and (viii) other documents which have appropriate information affecting the surveyed property. It is anticipated that the title company will furnish such items to the surveyor; however, the cost of this will not be borne by the title company. The client and title insurer should have an agreement on this prior to the engagement of survey work. From a practical perspective, if the attorney or client does not have an established working relationship with the title insurer, or if you are addressing property in a different state, the prudent practitioner will obtain a written commitment from the title insurer about the obtainment and delivery of these documents.

With respect to the furnishing of title evidence on adjoinders, the surveyor only needs the legal description and not a complete search of title to the adjoinder. However, from a practical standpoint, with respect to any adjoining property that constitutes an easement appurtenant which benefits the surveyed property, prudent counsel to the acquiring property owner and lender, will probably require a title search for such adjoinder properties. Again, this needs to be addressed at an early point between the client and the title insurer. However, many states require surveyors to conduct their own deed research; therefore, in those states, the 2016 Standards incorporate that local requirement and relieve the client or title insurer from performing such work. The cost for obtaining such documentation is not specified to be that of the surveyor; consequently, practitioners may want to address this cost in the contract with the surveyor.

16. Fieldwork.

This section provides the substantive care of the surveying standards. There are a few items which are important.

a. Access.

The 2016 Standards require that the location and character of vehicular, pedestrian and other access to the surveyed property by parties by other than apparent occupants must be shown. These access rights would include driveways, alleys, private roads, sidewalks, foot paths, curb cuts and other matters observed during the field work. The location requirement is obvious, but the


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character requirement may need elaboration. The surveyor, in noting the character, should explain the usage or other title significant aspects. For example, a drainage ditch may need to be characterized as drainage flow from an adjoining property, a foot path may need an explanation of the properties being served or which use such pathway.

b. Utilities.

Locating and showing observed evidence of utilities is mandatory.

c. Water Boundaries.

The water boundary provision, Section 5.G. requires the location and attributes of water boundaries and features located on the survey to be congruent with the legal description. Water features, such as top of bank, edge of water, high water mark, center of creek, etc., must be shown on the survey and must be consistent between the description and the drawing. Therefore, the limits of water boundaries must be consistent with boundary law principles. Of course, legal principles may require a determination of whether the water is navigable or non-navigable while the 2016 Standards do not specify if the surveyor is required to make such determination; however, since the 2016 Standards require a judgment on the legal boundary, such a determination is implicit.

17. Plat or Map.

Because there are significant differences between the terms "plat" and "map" as used from state to state, too difficult to reconcile, so, the Standards use the dual terminology.

a. Dimensions.

Dimensions shall be in accordance with surveyor's professional opinion as to the needed degree of precision.

b. Legal Description.

New legal descriptions should be avoided unless deemed necessary or appropriate by the surveyor and insurer. Furthermore, the use of new descriptions for a lot and block of a recorded, platted subdivision is also to be avoided. This means that the often used practice of describing a property by its lot and block description pursuant to the recorded plat, and then providing a phrase such as "more particularly described as follows" and then giving a full metes and bounds description should be resisted by a surveyor performing an ALTA Survey.

c. Discrepancies.

Any significant discrepancies in measuring or calculating dimensions should be shown in addition to and differentiated from the corresponding record

dimension. This provision is in keeping with the spirit that the surveyor is to provide an opinion on the correct boundary of the surveyed property.

d. Remainder Properties.

Section 6.B.v adds further detail when the surveyed property leaves a remainder in the parent tract. The 2016 Standards provide that the remainder tract need not be included as part of the ALTA Survey unless necessary to locate lines and corners of the surveyed property, and need not be fully dimensioned or drawn on the same scale as the surveyed property.

e. Gaps and Gores.

The 2016 Standards, Section 6.B.vii, require gaps and gores to be identified and disclosed to the insured and client for determination of the course of action to be taken in showing the boundary line or corner. Nationally, surveying practices are divided as to whether the surveyor should attempt to resolve a gap or gore discrepancy or to simply identify and disclose same. Bales and Kent, The 2011 ALTA/ACSM Land Title Survey Standards, 25 Prob. & Prop. 12, at 14 (July/August 2011). Therefore, this disclosure and consultation requirement needs a collaborative effort by the insurer and the surveyor to determine the legally effective boundary line or corner. Despite this requirement for the conclusion or opinion on the property boundary line, the prudent practitioner should probably insist on having access to all of the facts and information that went into the conclusion to verify concurrence with the conclusion.

f. Title Evidence.

Surveyors should note on the face of the plat or map the title commitment policy number, effective date thereof, and name of the insurer providing the title work.

g. Easements.

With respect to easements, servitudes, rights-of-way and the like, the 2016 Standards require a summary of each.

h. Presentation.

Section 6.D sets out specific requirements for the drawings. 18. Certification. a. Form.

Again, perhaps the more controversial provision relates to the certification of the surveyor, and the requirement that the prescribed certification be the only certification that can be used and that it be unaltered. If a certification on what appears to be an ALTA Survey contains any additional certifications or the prescribed certification is altered in any way, other than as required by the Section 3B standards of practice, the effect is that


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the 2016 Standards are not incorporated into the certification and the survey is not an ALTA Survey. Whether this will be legally enforceable is an open issue and may be determined on a state by state judicial decision basis. If a non-compliant "ALTA Survey" is signed and sealed by the surveyor, which surveyor knew that the standards were not adhered to, would there be state law remedies for fraud or professional malpractice? The prescribed certification form represents the most favorable change in the 2016 Standards from the surveyor's perspective. Clearly, the intent of the drafters was to eliminate the "long form" of certifications required by various lenders and the ensuing lengthy, costly and contentious negotiations. Some of those certifications exceeded the scope of proper surveying to include legal determinations, such as zoning violations, zoning setbacks, encroachments and other matters appropriate only for determination by an attorney or title insurer. Mitchell G. Williams, Editor, Land Surveys, A Guide for Lawyers and Other Professionals, Ch. 9, Robert W. Foster, Certifications from a Surveyor's Point of View, (American Bar Association, 2000); J. Richard White, Surveys: Interplay Between Lawyer and Surveyor, Annual Convention of the American Congress of Surveying and Mapping (1989). See also Appendix 9 Certificate Forms.

b. HUD – Multifamily.

The U.S. Department of Housing and Urban Development has issued Mortgagee Letter 2011-21, dated June 20, 2011, with respect to all FHA approved multifamily mortgages. See, http://portal.hud.gov/hudportal/documents/huddoc?id=11-21ml.pdf. HUD has adopted, effective as of September 1, 2011, the 2011 Standards and revised the HUD's Survey Instructions and Report, Form HUD-92457A-M, http://portal.hud.gov/hudportal/documents/ huddoc?id=92457am.pdf, and the Surveyor's Report, Form HUD-92457M, http://portal.hud.gov/ hudportal/documents/huddoc?id=92457m.pdf. This Survey Report requires an additional certification by the surveyor on a certification separate from the ALTA Survey and is, therefore, in compliance with the 2011 Standards. Additionally, as to the optional Table A survey specifications, HUD will require items 1, 2, 3, 4, 6a, 6b, 7a, 8, 9, 10a, 10b, 11, 12, 13, 16, 17, 18, 19 and 20. HUD also requires that the surveyor indicate the 100 year flood plain and the 500 year flood plain on surveys for Section 811 housing programs.

c. Date.

The surveyor certification was also revised to include both the date of the certification and the date of the field work. This may be confusing at first, particularly in determining the correct date for determining whether a survey is current. However, it is anticipated that the most appropriate date in the

determination of whether the survey is current will be the date that field work was completed. The date of certification, being the other date in the certification, could be many months after the field work and research were completed. Therefore, any intervening matters, such as new documents, encroaching improvements, water courses, trespasses and the like, would not be reflected; reliance on the date of certification will be unwarranted as a general practice.

d. Flood Zone.

At the current time, there are a number of long form lender surveyor certifications which require the surveyor to locate boundaries of the 100 and 500 year flood plains and to certify the location of same on the map or plat based upon the current FIRM map or letter of map revision. This certification may be problematic for those lenders. Such flood locations may be included on the ALTA Survey and noted on the face of the survey, but cannot be included in the certification. Alternatives for this would include a separate certification off of the ALTA Survey or, possibly, the use of the applicable state's survey standards and certifications, in lieu of an ALTA Survey, if those allow the flood zone to be certified. Of course, this needs to be addressed in the engagement letter with the surveyor.

19. Deliverables.

The 2016 Standards allow digital copies of the ALTA survey to be provided in addition to or in lieu of hard copies. The terms of the contract between the surveyor and the client will determine the form in which the ALTA Survey will be delivered. Therefore, both parties to the contract need to be specific as to what is contemplated to be delivered. However, the 2016 Standards also contemplate that this contractual requirement for deliverables may be affected by existing local law where an original signature or embossed seal is a condition to a valid survey.

20. Table A.

Table A includes twenty (20) items to be negotiated. Paragraph 21 is used for additional unidentified topics.

a. Address.

Item 2 makes the address of the surveyed property optional and, if selected, must be included if the address is disclosed in either provided documents or is observable while conducting the fieldwork. This will probably be a relatively standard selected optional item for surveys of improved properties.

b. Vertical Relief.

Any vertical relief shown is required to specify the source information and contour information contained in Item 5.

http://portal.hud.gov/hudportal/documents/huddoc?id=11-21ml.pdf



http://portal.hud.gov/hudportal/documents/%20huddoc?id=92457am.pdf

http://portal.hud.gov/hudportal/documents/%20huddoc?id=92457am.pdf

http://portal.hud.gov/%20hudportal/documents/huddoc?id=92457m.pdf

http://portal.hud.gov/%20hudportal/documents/huddoc?id=92457m.pdf


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c. Zoning. Item 6, relating to zoning, setback lines and the

like, includes no reference to building codes. As to zoning, there are two choices: (i) either a listing of the current zoning classification as provided by the insurer; or (ii) the current zoning classification and building setback requirements, height and floor area restrictions applicable to the classification, as provided by the insurer. The significance of this provision is that the surveyor is not required to make any independent investigation or determination of zoning classifications and requirements; rather, the surveyor merely reflects the information as provided by the insurer (or other parties). Since zoning endorsements are not available on title policies issued in Texas, it is unlikely that title insurers will provide such information. But in "ALTA states," clients or lenders often ask for an ALTA Endorsement 3.1 (Zoning – Completed Structure) from the title insurer; in such a case, the title insurer might be willing to furnish the zoning information it has obtained, typically after extensive and careful research. Regardless of whether a zoning endorsement was requested of or provided by the title insurer, the 2016 Standards do not require that such zoning information be provided by the title insurer. See, www.alta.org/forms, ALTA/ACSM Land Title Surveys – FAQs, Question #6 (Revised 06-06-2011).

So, can this information be provided by a party other than the title insurer, and if so, will use of such information and disclosure on the survey render the survey a non-conforming ALTA Survey? This question is generally answered in the introductory paragraph to Table A which provides that such items can be negotiated between the surveyor and client, and can be qualified or expanded based upon that negotiation. Therefore, a party other than the title insurer (such as the client, its attorney or a third party provider) can supply the information and the survey still qualifies as an ALTA Survey. See, www.alta.org/forms, ALTA/ACSM Land Title

Surveys – FAQs, Question #6 (Revised 06-06-11). In this case, the surveyor may modify the certification to provide that Table A item 6(a or b) was prepared "as negotiated." However, consideration should be given to applicable state law as to whether providing such information would constitute the unauthorized practice of law, depending on who provides the information.

d. Floor Area.

Item 7 does not include any reference to gross floor area of the building. This was eliminated since an indication of gross floor area would have required measurements of the inside of the building.

e. Access; Party Walls. Item 10 addresses the relationship and location of

division and party walls and whether such walls are plumb.

f. Utilities.

With respect to the location of utilities, contained in Item 11, the 2016 Standards require notations with respect to utilities. This notation must indicate that underground utilities will not be exactly located, and are shown based on source information from plans and markings and observed surface evidence. It further advises that for exact locations, excavation may be required.

g. Proposed Rights of Way.

Item 17 included "proposed" changes in street right-of-ways. Such proposals are to be shown only if available from the controlling jurisdiction. Completed roads must be observed.

h. Wetlands.

Item 18 allows a specification for showing wetland areas if they are delineated by a qualified specialist.

i. Off-Site Improvements.

Item 19 provides for the location of improvements within an offsite easement or servitude benefiting the surveyed property. Before checking these optional provisions, the practitioner should be aware of the potential increase in cost and permissions necessary with respect to this work.

j. Professional Liability Insurance.

Finally, Item 2 has been included to require professional liability insurance (i.e., errors and omissions insurance) to be obtained by the surveyor in a designated amount. There are a significant number of surveyors who do not carry such insurance, and the requirement for this may either increase the cost of the survey, delay the time for obtaining the survey (so that the surveyor can obtain such insurance), or prevent the surveyor from agreeing to such engagement. If selected, this provision requires that the insurance be in effect throughout the contract term. According to the ALTA, this term will be whatever is agreed upon by the surveyor and client. See, www.alta.org/forms, ALTA/ACSM Land Title Surveys – FAQs, Question #8 (Revised 06-06-2011). Absent such an agreement otherwise, the applicable statute of repose and statute of limitations would control the period of liability. Attorneys for surveyors should review the applicable E&O Policy provisions dealing with limitations to assure that the contract is consistent with the coverage.





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F. Conclusion. The interplay between the 2016 Standards and the

existing standards in Texas, as contained in the Manual of Practice for Land Surveying in the State of Texas, 11th Edition, adapted by the Texas Society of Professional Surveyors, and in 22 Tex. Admin. Code §633, remains to be developed and should be monitored. The 2016 Standards should be reviewed with respect to engagement letters, retention contracts, and survey reviews.

IV. OTHER TITLE, SURVEY AND PROPERTY

ISSUES. A. Insured Closing Letters.

These types of letters are typically only required by lenders, but are available to purchasers. In the event that the Commitment is issued by an agent of the underwriter, rather than by a direct operation of the underwriter, lenders will typically require that the agent obtain a letter from the underwriter stating that the issuing agent is an approved agent of that underwriter and that the underwriter will stand good for any funds delivered to the agent by the lender. As indicated, an insured closing letter can also be requested by a purchaser or seller who request the coverage prior to closing of the transaction. The promulgated Insured Closing Service form used to satisfy the lender's request is T-50 and is contained in Section V of the Basic Manual, a copy of which is attached. The promulgated form of a Purchaser/Seller Insured Closing Service Letter which is T-51, is also contained in Section V of the Basic Manual, a copy of which is also attached. See Appendix 10.

B. Pro Forma Policy.

Delivery of Pro Forma Policies and Promulgated Forms is provided for in the Basic Manual pursuant Procedural Rule P-52 which states that for purposes of the rule, a "pro forma policy" is an Owner or Loan Policy prepared prior to payment for, issuance and delivery of the policy, with completed Schedules A and B, showing the proposed insured, the amount of insurance, the exceptions that are proposed to be placed in the final policy to be issued, and the name of the title insurance company and title insurance agent. Texas regulation does not allow the delivery to a proposed insured for review a pro forma policy unless (a) the land is not residential real property and has a proposed amount of insurance of $500,000 or more, and (b) each page of the completed schedules conspicuously states "This is a Pro Forma Policy furnished to or on behalf of the party proposed to be insured for discussion only. It does not reflect the present status of title and is not a commitment to insure the estate or interest as shown therein, nor does it evidence the willingness of the Company to provide any coverage shown. Any such commitment must be an express written undertaking

issued on the appropriate forms of the company." The limited scope of the pro forma policy in Texas by rule makes the title commitment the important closing document.

C. Taxes. 1. Tax Certificates.

As a part of your title and survey review, you should request and review all applicable tax certificates to ensure that the property covered by the Commitment consists of one or more separate tax parcels, with no more or less property included as part of the one or more applicable tax parcels. In other words, the property should be taxed as one or more separate parcels, not as a portion of a larger parcel. This can sometimes become an important issue for lenders, who may require that the purchaser/borrower escrow enough money to pay all the taxes included in a tax parcel until such time as the property is assessed as a separate tax parcel.

2. Roll-Back Taxes.

The parties to the transaction need to address responsibility for roll back taxes as a part of the contract. Roll back taxes may arise in the event that the property has been receiving an agricultural use or open space designation. These designations permit the property to be taxed at a lower value and upon a change of use or ownership the taxing entity may seek to recover three to five years taxes depending on the designation. This may be a matter of escrow or other agreement. Often the lender will also require payments into escrow to address the eventuality of a roll back assessment. The tax certificate will set out any special designations resulting in a reduced tax valuation. Most tax certificates will indicate the fair market value and the difference in taxes which may be subject to a roll back assessment.

D. Zoning Letters/Zoning Ordinances.

Zoning is generally not covered by a title insurance policy unless there has been some specific matter related to zoning placed of record, creating a title encumbrance. However, those representing a purchaser or lender always need to review the survey and the zoning ordinances to assure that the contemplated purpose for the purchase can be accomplished and there is no adverse impact on value. In addition, if variances or the like are needed, those typically need to be obtained as part of the closing. This is a very definite and important area to a real estate acquisition which will not be assisted in most cases by review of the commitment. Careful independent review of the zoning ordinances is required.

E. Matters Known to the Insured.

One other title issue to be considered is the existence of matters known to the insured but not to the title company and not of record. These matters will be


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excluded from coverage per the terms and conditions of the policy. It is recommended these be disclosed in writing to the title company to avoid this potential loss of coverage. The title company may also use this information in its title search and resulting commitment.

V. SAMPLE OBJECTIONS AND SOME

PRACTICAL RESPONSES This portion of the paper addresses some typical

exceptions and handling of the title objections with available coverages. A Sample Title/Survey Review Memorandum is attached as Appendix 11. A list of some potential objections is attached as Appendix 12. These are organized by:

Restrictive Covenants Schedule B modifications Mineral Interests Easements Leases Encroachments Access Schedule C compliance Arbitration

There may also be objections specific to the survey as previously discussed. See also Melamed, Objection Letter Update, Texas Land Title Institute, 2015, and Kramer, Responding to the Title Commitment and Survey, 49th William W. Gibson, Jr. Mortgage Lending Institute, 2015.

A hypothetical commitment is attached as Appendix 13 and as will be noted, includes a number of exceptions in Schedules B and C. Reference to that commitment will help understand the hypothetical transaction and the objection and responses below. In general, these same exceptions, objections, and responses would be applicable to any commitment and closing having those same title issues.

Summary of the Hypothetical Transaction.

These sample objections and title company responses arise out of a hypothetical transaction involving the sale of an apartment complex for $8,500,000.00 located on Tract 1, together with an adjoining unimproved Tract 2 that maintains an agricultural exemption. The seller has an existing survey from 2010. The seller does not own 100% of the minerals and has two oil and gas leases (one old and one new). The examination shows both an old blanket easement and a new designated easement. The survey reveals both major (building across property line) and minor (protrusion into the utility easements) issues. Objections to the Commitment are set out

below, with possible responses by the title company.

Easements that benefit the property.

Objection: Items 3 and 4, Schedule A of the Commitment do not include the Reciprocal Easement Agreement and Declaration of Covenants and Restrictions recorded in Volume , Page , Real Property Records of _____ County, Texas (the "Records"), as amended and restated under Document No. _____, and as further amended by that certain First Amendment recorded as Document No. ______, both in the Records. The rights granted by these instruments must be insured to purchaser in the owner's policy to be issued in this transaction (the "Policy"). Response: Agreed, as they benefit the property - With the addition of stating in Item 2 of Schedule A that these will be easement estate tracts instead of fee simple estate tracts.

Survey deletion.

Objection: Item 2, Schedule B of the Commitment should be revised to read "shortages in area" in the Policy. Response: Agreed. Title company must, however, be furnished with an acceptable survey to be reviewed and approved by our examiners. We may not delete the promulgated language from the Commitment, but we may place in Schedule C a statement that when the survey is reviewed and approved we will agree to make the requested deletion in the Policy. Further, if we have approved the survey, we may state in Schedule C that we have approved deletion of the survey exception in the Policy as requested.

Tax exception.

Objection: Item 5, Schedule B of the Commitment should be amended to read in its entirety as follows: "Standby fees, taxes and assessments by any taxing authority for the year 2020, and subsequent years." Purchaser requires the payment of all ad valorem taxes and assessments for all prior years, up to and including the year 2019. Response: Upon payment of the 2019 taxes, this exception may be changed to read "2020".


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However, for an owner's policy we are not allowed to delete the exception for possible roll back taxes, described by the phrase, " . . . and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership . . .". The risk of possible roll back taxes is always borne by the parties and the contract must be examined to determine who will carry forward the risk.

Unrecorded Leases.

Objection: Item 10.a, Schedule B of the Commitment should be deleted from the Policy or replaced with an itemized listing of existing tenants and the term of each of their leases. Response: If the parties have furnished a list of existing leases in the contract, or provided for one, then upon being furnished the list, each lease may be excepted to instead of the general exception to unrecorded leases.

Deleting exception for reciprocal easement.

Objection: Item 10.c, Schedule B of the Commitment should be deleted from the Policy because the easements described therein constitute a part of the property to be insured in this transaction. Response: While as to Tract 3 (the now-added easement estate) this is correct, the easements are still a burden to Tracts 1 and 2 (fee simple estates) and therefore must be listed as applying to those tracts.

Oil and gas leases.

Objection: Item 10.e and f, Schedule B of the Commitment should be deleted from the Policy or the purchaser must be insured against the exercise by the respective lessees of the surface rights associated with the sub-surface mineral rights. With regard to this item, purchaser requires an assignment of the seller's interest in the lease(s) if either or both of the leases have not expired. Response: As to Item 10.e, Schedule B (the 1951 lease), with a properly documented affidavit of non- production, this exception may be removed. As to Item 10.f, Schedule B (the 2008 lease), the term may not have expired. Therefore, this exception must remain unless released by the holder of the

lease. Coverage for T.19.1 as to damage to buildings may only be given if the tracts insured meet the underwriter's criteria for allowing this affirmative coverage. General, if the City of _____________ has a "no drilling" ordinance that would prohibit drilling on the tracts insured, the coverage requested under T-19.1 may be given. P-39a express coverage for this risk is prohibited as to matters that may be insured with the T-19.1 endorsement. The request to require assignment of the seller's interest is a contract matter to be handled by the parties.

Blanket easement.

Objection: Item 10.g, Schedule B of the Commitment must either be deleted or the survey revised to include the location of the easement on the property. Response: The best evidence that can be obtained by the surveyor, owner, and examiner should be utilized to see if any easement exists on any part of the larger tract on which this easement was granted. Also, research should determine the present ownership of the easement, and, if the entity can be contacted, direct information as to the existence or location of the easement should be obtained. If satisfactory evidence of no easement affecting this tract is obtained, the exception can be removed. If inconclusive evidence is offered, the coverage under T-19.1 does provide coverage against damage to buildings on Tract 1. Objection: Item 10.h, Schedule B of the Commitment, buyer objects to the general exception for minerals. Response: This exception is permitted pursuant to Procedural Rule 5.1. However, the buyer and lender may request, under the Procedural Rule 5.1, to issue either the T-19.2 or the T-19.3 endorsements for each tract of land being insured, depending on the exact type of property and the use of each tract. The T-19.2 and T-19.3 are not required to be issued, but are subject to underwriting guidelines. However, the T-19.2 and T-19.3 when provided for Loan Policies will be at no charge. There is a $50 charge for Owner's Policies.

In this case, because Tract 1 is a developed tract with multi-family apartments, the T-19.2 endorsement would


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be available. It would protect against damage to the "improvements (excluding lawn shrubbery or trees)" by anyone outside the owner who has the rights at the time the policy is issued and later damages the "improvements" because they drill for oil and gas, or develop the land for coal or lignite.

As to Tract 2, being an undeveloped tract of land, the T-19.3 endorsement would be available under which protection is limited to damages to "permanent improvements" (excluding lawn shrubbery or trees) on the property, both now, and later.

In addition, the buyer may request for both tracts the T-19.1 endorsement, which has other protections. Note that this provides a greater coverage, as the T-19.1 only covers damage to "permanent buildings. The T-19.1 is a more expensive endorsement.

Protrusion of building.

Objection: Item 10.j, Schedule B of the Commitment lists a protrusion of building over the East property line. This item should be deleted from the Policy. Response: This protrusion is a fact that must result in an exception. The T-19.1 will provide some additional coverage, and the adjoining owner's rights must be evaluated and if a material intrusion exists, deletion of coverage for this exception from the T-19.1 will be made. Alternatively, an easement or encroachment agreement from the adjoining owner for the portion of the adjoining tract encroached upon by the building could be obtained. Then the T-19.1 could be given without deletion for this exception.

Schedule C items.

Objection: All items in Schedule C of the Commitment must be satisfied and deleted at or before closing. Response: Agreed. Survey certificate. Objection: The certificate on the survey is not addressed to the buyer and does not certify that the survey was made in accordance with the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. Buyer will require a revised certificate which meets these objections. Response: Agreed. Also, even though Procedural Rule 2 allows use of an old (2001) survey for a commercial transaction with a T-47 affidavit of someone with knowledge, a

title company typically will not accept a former survey for a significant commercial transaction.

Endorsements.

Objection: Upon payment of the applicable premium at closing, buyer will require the issuance of a T-19.1 Endorsement, a T-23 Access Endorsement, and a T-25 Contiguity Endorsement. Buyer will not accept any deletion of any coverage provided by the promulgated form of each of these endorsements. Response: As to the T-19.1, the response will depend on answers received to other objections. As to the T-23, issuance of this endorsement will require the names of the streets and the surveyor's certificate to include access to the street requested. This endorsement is only available by rule for improved properties; therefore it is only available for Tract 1 in this transaction. As to T-25, issuance of this endorsement will require the surveyor's certificate to assure the contiguity between Tract 1 and Tract 2. In Texas we are limited in insuring with this endorsement to only the facts presented in this case, where both tracts are insured.

Appendices 14 and 15 include some example forms for Objection Letters. VI. INSTRUCTION LETTER.

The "instruction letter" serves a number of purposes, but should not be considered an opportunity to renegotiate the contract or add title coverage outside of requested endorsements. It is an important tool to provide a closing checklist of sorts, or a roadmap, outline deliverables, and assure proper settlement of the consideration and recording of title matters. The instruction "letter" can be a letter, a memo, an e-mail, or even verbal, but better practice is something in writing with some formality.

Three items may be important from the escrow perspective. First, by this point the purchaser and lender should have considered and probably requested closing protection letters. Most lenders routinely request these, but purchasers often do not. These letters from the title insurance underwriter provide assurance that the agent will follow instructions and protect against fraud or other wrongful conduct that causes a loss of funds passing through escrow. Note that the letters need to be signed and carry a limitations period of one year.

The second item of which to be aware is Procedural Rule 35 promulgated by the Texas Department of


22

Insurance. In essence, P-35 states that a title insurance agent may not provide coverage outside the title insurance policy. Thus, an overreaching instruction letter may find itself stamped by the title insurance agent with the verbiage of P-35. Many counsel request that the escrow officer sign the instruction letter, which this author believes unnecessary in view of the purposes served by the letter. However, most escrow officers will acknowledge the letter and its instructions so long as the letter is only instructive, and not an attempt to create some new obligation, such as extracontractual policy coverage.

Third, some circumstances as discussed above permit use of a pro forma policy. If a pro forma is used, an instruction should be included that requires consistency with the final pro forma policy.

Accordingly, the instruction letter should accomplish as least the following:

Documents to be executed and delivered; Issuance of the Title Policy, per the updated title commitment after satisfaction of all Schedule C requirements. No Schedule C requirements are to become Schedule B exceptions; Additional policy endorsements; Lender must have executed settlement statement and delivered funds; Escrow agent must have good funds from lender and borrower sufficient to satisfy contract and close without a shortage; Lender must have provided a final unconditional authorization to proceed with Closing; Order of recording documents; Disbursements of proceeds per executed settlement statement; Funds that must be delivered day of Closing by wire transfer; Deliverables; Miscellaneous items such as timing, time is of the essence, entirety of the agreement; and, Reporting to the IRS, etc.

Note that the parties will often want to approve executed documents before authorizing a release of monies or

recording of title transfer documents. Also, counsel may request that she be contacted immediately if funds cannot be disbursed, documents cannot be recorded, or there is a delay. See Appendix 16 for some example Instruction Letters. In addition, good references beyond the State Bar Forms Manual are Stolle, Bauer, and Phares, Title Company Instruction Letters and Endorsements, 21st Advanced Real Estate Drafting Course, 2010., and Bernhardt, Annotated Review of the “Other” Closing Documents, 29th Advanced Real Estate Drafting Course, 2018. VII. CONCLUSION:

For ease of reference, a sample survey review or memorandum, a sample purchasers title and survey objection letter and a sample lenders' title and survey objection letter are attached as Appendices 14 and 15. Instruction letters are attached as Appendix 16. These are merely proposals and should be readily altered to fit the transaction at hand. However, in general, they provide a template and a good checklist for the attorney representing a purchaser/borrower or the lender. As can be seen from the previous discussion, a careful comparison of the commitment and survey is the first order of business. Many exceptions in Schedule B and Schedule C can be eliminated by review of the documents for location on the survey. It is to be noted that Schedule B should also be reviewed and not overlooked because some exceptions find their way immediately into Schedule B and they are not applicable. Also to be noted, however, and equally important, many exceptions to title are correct or meritorious, but can be addressed by endorsement coverage. While a title company is generally not permitted to insure over a title encumbrance or exception, the title insurance business is still a risk business and coverages can often be obtained to address title risks. In other situations where there may be a perfectly valid legal position that the encumbrance could be defeated or defended against, the risk may be too high for a title insurance company to choose to insure against the title risk in relation to the promulgated premium. In that event, the review of the commitment and the survey will have at least identified the title concern and provided full disclosure to all parties so that an informed decision can be made in connection with the transaction.

APPENDIX 1

PROMULGATED FORM OF COMMITMENT T-7

[Follows this cover page.]

25

Title & Survey Objection Letter, Instruction Letter: Guidelines and Solutions________________________________________________________________________________________________________Chapter 29

26


27


28


APPENDIX 2

TITLE COMMITMENT AND EXCEPTION DOCUMENT REVIEW CHECKLIST


TITLE COMMITMENT AND EXCEPTION DOCUMENT REVIEW CHECKLIST

SCHEDULE A 1. Is the underwriter acceptable?

2. Will co-insurance or re-insurance be required?

3. Is the proposed insured's name correct?

4. Is the name of the fee simple owner the same as the borrower? (Loan Policy)

5. Is the amount of the policy correct?

6. Does the legal description of the property match the survey and/or the deed of trust?

7. Are there any easement estates that need to be insured?

SCHEDULE B 1. Restrictive Covenants and/or Covenants, Conditions and Restrictions ("CCRs")

a. Name of declarant?

b. Expiration?

c. Amendment provisions?

d. Assessments due thereunder?

e. Are the assessments subordinate to the lien of a mortgage?

f. Is development approval required? If so, will an estoppel be required?

g. Requirements for repair/replacement following casualty or condemnation?

h. What parties have the right to enforce?

i. Existing violations?

j. Beneficial easements that need to be insured?

2. Easements

a. Grantee's name?

b. Expiration?

c. Type and width of easement?

d. Right to use surface?

e. Improvements prohibited?

f. Termination rights?

g. Are they located on the survey?

3. Other exception documents

a. Any continuing obligations to landowner? If so, will an estoppel be required?

b. Expiration?

c. Amendment provisions?

d. What parties have the right to enforce?

e. Subordinate to the lien of a mortgage?

f. Termination rights?

31


APPENDIX 3 COMMON ENDORSEMENTS

• Title companies will often ask for additional documentation before issuing theseendorsements; the required documents will typically be listed in the title commitment.

• All endorsements are not available in all states; check with local counsel. When an ALTAendorsement is not available, try to obtain the most equivalent state-specific form.

• CLTA endorsements are available outside of California.• There is usually an additional charge for most endorsements; be certain to confirm the

price for each endorsement.•

ENDORSEMENT (alphabetical order) PURPOSE

Comprehensive Endorsement • Provides insurance against "off-record"matters. It extends the lender's coverageagainst loss or damage in 3 areas: (1)covenants, conditions and restrictions: (2)encroachments or court order or judgmentrequiring removal of encroachingimprovements; and (3) rights to use thesurface of the land for mineral development.

Environmental Lien Protection

• This endorsement insures against the possiblelack of priority of our mortgage by reason of(1) any recorded environmental protectionlien filed under state statutes or in the U.S.District Court for the district in which theinsured land is located (except for any liensspecifically listed in Schedule B) or (2) anyenvironmental protection liens provided for byany state statute in effect on the Policy Date,except for liens provided for in specifically-listed state statutes.

• This endorsement may or may not be availablefor commercial properties; consult with legalcounsel and the title company.

• Unless given other direction by Credit RiskManagement, this endorsement is not to takethe place of our standard environmental duediligence practices.

Survey, Location and Access Endorsements • There are many different endorsements thatpertain to survey matters. Examples include:

• Contiguity Endorsement insuring that theparcels of land in the legal description are, in

33


ENDORSEMENT (alphabetical order) PURPOSE

fact, contiguous to each other (no gaps or strips)

• Encroachment Endorsement. If a survey

reveals an encroachment, the title company can be asked to waive the exception or (more likely) insure over possible loss by an endorsement.

• Access. This endorsement insures that the

insured property abuts a specifically named, physically open street, and has actual access.

34


APPENDIX 4

TEXAS ENDORSEMENT GUIDE


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

A

cces

s End

orse

men

t T

-23

P-54

R

-30

AL

TA

17

& 1

7.1

In

sure

s veh

icul

ar a

nd p

edes

trian

acc

ess t

o on

e pa

rticu

lar s

treet

, roa

d or

hig

hway

whi

ch is

ph

ysic

ally

ope

n. It

is re

quire

d th

at th

e in

sure

d tra

ct a

but t

he st

reet

.

$1

00

Offe

rs th

e sa

me

cove

rage

.

Agg

rega

tion

End

orse

men

t T

-16

P-9.

b(13

) R

-11.

k A

LT

A 1

2

Is a

vaila

ble

in a

loan

pol

icy

only

. If m

ore

than

on

e pr

oper

ty is

bei

ng in

sure

d th

e po

licie

s may

be

aggr

egat

ed in

to o

ne.

$2

5.00

Si

mila

r cov

erag

e; h

owev

er, i

n so

me

stat

es it

is p

ossib

le to

get

cov

erag

e in

ow

ner's

pol

icy.

A

ppor

tionm

ent C

laus

e T

-1

N

o ad

ditio

nal c

harg

e N

ot u

nive

rsal

ly a

llow

ed in

all

AL

TA

stat

es.

Th

e fo

llow

ing

clau

se is

add

ed to

Sch

edul

e B

of a

n ow

ner's

pol

icy:

"the

liab

ility

of t

he C

ompa

ny,

excl

usiv

e of

the

cost

s whi

ch th

e C

ompa

ny is

ob

ligat

ed to

pay

und

er th

e C

ondi

tions

and

St

ipul

atio

ns o

f the

pol

icy,

shal

l not

exc

eed

the

sum

of $

as

to P

arce

l One

of t

he la

nd a

nd

shal

l not

exc

eed

the

sum

of $

as

to P

arce

l Tw

o of

the

land

. Thi

s may

be

used

to in

sure

the

min

eral

inte

rest

s in

addi

tion

to su

rface

as t

wo

parc

els.

In th

ose

stat

es w

here

not

allo

wed

, a

Com

pany

can

issu

e a

tie-in

en

dors

emen

t ins

tead

of a

ppor

tionm

ent.

Are

a an

d Bo

unda

ry

Am

endm

ent

End

orse

men

t Ins

truc

tion

VI (

or st

rike

la

ngua

ge)

P-2

R-1

6 C

LT

A 1

16.1

La

ngua

ge is

del

eted

from

the

polic

y so

that

the

boun

dary

exc

eptio

n re

ads "

any

shor

tage

s in

area

" si

nce

area

is n

ot in

sure

d. A

n ol

d su

rvey

can

be

used

in re

side

ntia

l or c

omm

erci

al w

ith th

e pr

oper

af

fidav

it st

atin

g no

cha

nge.

The

Com

pany

mus

t be

forw

arde

d an

ac

cept

able

cur

rent

surv

ey (n

o tim

e lim

it or

def

initi

on.)

Surv

ey 7

yea

rs o

r les

s on

resi

dent

ial r

efin

ance

mus

t be

acce

pted

w

ith a

n af

fidav

it on

(1) r

esid

entia

l lo

ans,

incl

udin

g pu

rcha

se m

oney

, re

finan

ce, a

nd h

ome

equi

ty an

d (2

) Res

iden

tial o

wne

r pol

icy

(T-1

R),

and

(3) C

omm

erci

al o

wne

r or l

oan

polic

y up

to $

5 m

illio

n.

15%

of b

asic

rate

for o

wne

r pol

icy

and

5% fo

r res

iden

tial o

wne

r pol

icy;

no

char

ge fo

r loa

n po

licy

or b

inde

r.

Sam

e ef

fect

, new

surv

eys a

re o

ften

not

requ

ired.

Ass

ignm

ent o

f Lie

n E

ndor

sem

ent

P-

9b(1

) & P

-9b(

2)

R-1

1.a

CL

TA

104

En

dors

emen

t to

loan

pol

icy

insu

res a

ssig

nmen

t an

d do

wnd

ates

pol

icy

and

dow

ndat

es ta

x co

vera

ge. E

ndor

sem

ent "

shal

l be

effe

ctiv

e w

hen

P-9.

b(1)

– A

ssig

n to

FN

MA

, GN

MA

, or

HU

D (a

ny p

rope

rty) c

an.

P-9.

b(2)

– E

xcep

t one

-to-fo

ur fa

mily

Min

imum

bas

ic p

rem

ium

rate

($27

0) o

r 50

% o

f the

pre

miu

m fo

r the

orig

inal

Lo

an P

olic

y, w

hich

ever

is le

ss.

All

stat

es a

re d

iffer

ent.

Man

y do

not

al

low

and

mos

t tha

t do

offe

r thi

s en

dors

emen

t do

not d

ownd

ate.

37


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

the

note

or n

otes

secu

red

by th

e lie

n in

sure

d ha

ve

been

del

iver

ed to

the

insu

red

nam

ed h

erei

n."

resi

dent

ial p

rope

rty, a

ssig

n to

oth

ers

pers

on (c

anno

t iss

ue it

one

-to-fo

ur

fam

ily.)

Co-

Insu

ranc

e E

ndor

sem

ent

T-4

8 P-

6 Se

e Pr

oced

ural

Rul

e A

LT

A 2

3-06

Whe

n a

com

pany

ele

cts t

o is

sue

a po

licy

for a

le

sser

am

ount

than

the

who

le ri

sk.

In T

exas

if th

e ris

k is

grea

ter t

hen

$15,

000,

000

treat

ed a

s one

pol

icy

for

prem

ium

if le

ss th

an $

15,0

00,0

00

prem

ium

is c

alcu

late

d as

sepa

rate

po

licie

s.

C

ompl

etio

n

P-8

A

vaila

ble

in m

ost A

LT

A st

ates

.

This

is n

ot a

vaila

ble

in T

exas

. Afte

r com

plet

ion

it is

pos

sibl

e to

end

orse

a lo

an a

nd a

n ow

ner p

olic

y to

elim

inat

e th

e m

echa

nic's

lien

exc

eptio

n.

Issu

e up

on c

ompl

etio

n of

im

prov

emen

ts, o

wne

r's a

ccep

tanc

e, a

nd

satis

fact

ory

evid

ence

of p

aym

ent o

f bi

lls.

No

char

ge

It in

sure

s wor

k is

com

plet

e an

d no

m

echa

nic's

lien

s are

file

d.

Con

tigui

ty E

ndor

sem

ent

T-2

5 an

d T

-25.

1 P-

56

R-3

2 C

LT

A 1

16.4

T-2

5 In

Tex

as in

sure

s tha

t sep

arat

e pa

rcel

s de

scrib

ed in

the

endo

rsem

ent a

re c

ontig

uous

with

no

strip

s, ga

ps o

r gor

es.

T25

.1 D

oes t

he sa

me

for i

rregu

lar p

arce

ls.

$1

00

Sam

e as

in T

exas

.

Env

iron

men

tal P

rote

ctio

n T

-36

P-9.

b(9)

R

-11.

g A

LT

A 8

.1 /

CLT

A 1

10.9

Cov

erag

e in

Tex

as li

mite

d to

resid

entia

l pr

oper

ties (

not o

nly

one-

to-f

our f

amily

) pro

tect

s on

ly a

gain

st fil

ed li

ens a

nd a

gain

st p

riorit

y of

fu

ture

reco

rded

env

ironm

enta

l pro

tect

ion

liens

pu

rsua

nt to

exi

sting

stat

e sta

tute

s (e.

g., "

supe

r lie

ns")

.

May

be

issu

ed o

n la

nd u

sed

or to

be

used

for r

esid

entia

l pur

pose

and

is n

ot

limite

d to

a o

ne-to

-four

fam

ily la

nd

(e.g

., m

ay b

e us

ed o

n ap

artm

ents

). C

ited

exce

ptio

ns a

re a

ppro

ved

by

FNM

A.

$50.

00

Sim

ilar i

n ot

her s

tate

s, m

any

stat

es c

an

give

cov

erag

e fo

r oth

er p

rope

rties

.

Firs

t Los

s End

orse

men

t T

-14

P-9.

b(11

) R

-11.

i F.

A. 5

0

Ava

ilabl

e in

a lo

an p

olic

y w

hen

loss

is se

cure

d by

m

ultip

le p

arce

ls of

real

pro

perty

. It a

llow

s re

cove

ry o

n lo

an p

olic

y w

ithou

t req

uirin

g fo

recl

osur

e of

the

othe

r col

late

ral.

$2

5 Si

mila

r for

m.

Incr

ease

d V

alue

End

orse

men

t T

-34

P-9.

a(2)

R

-3.c

C

LT

A 1

07.2

Ava

ilabl

e fo

r an

owne

r pol

icy

incr

easin

g th

e am

ount

of i

nsur

ance

but

doe

s not

dow

n da

te th

e po

licy

or in

sure

aga

inst

mat

ters

cre

ated

or k

now

n by

the

insu

red.

Evi

denc

e of

the

incr

ease

d va

lue

is

Title

Com

pany

mus

t be

"sat

isfie

d" a

s to

curre

nt v

alue

, but

disc

retio

n is

left

to

the

Title

Com

pany

.

Bas

ic ra

te le

ss b

asic

rate

pre

miu

m p

aid

for O

TP a

nd a

ny fo

r T-3

4 en

dors

emen

ts p

revi

ously

atta

ched

th

eret

o (n

ever

less

than

min

imum

Sam

e as

Tex

as, s

ome

stat

es th

e po

licy

is d

ownd

ated

.

38


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

requ

ired.

polic

y ba

se ra

te).

39


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

L

ease

hold

Loa

n Po

licy

End

orse

men

t T

-5

P-9.

b(5)

CL

TA

119

.1

D

efin

es le

aseh

old

esta

te (r

ight

to p

osse

ssio

n fo

r de

scrib

ed te

rm o

r ter

ms)

is su

bjec

t to

leas

e pr

ovis

ions

lim

iting

righ

t of p

osse

ssio

n (e

.g.,

defa

ult);

pro

vide

s cov

erag

e fo

r the

val

ue o

f im

prov

emen

ts a

nd a

dditi

onal

reim

burs

able

m

ovin

g an

d ot

her e

xpen

ses.

The

valu

e to

es

tabl

ish a

mou

nt o

f the

pol

icy

and

ther

efor

e th

e am

ount

of t

he lo

ss in

clud

es te

nant

impr

ovem

ents

.

Mus

t be

issu

ed o

n lo

an p

olic

y co

verin

g le

aseh

old

esta

te; p

olic

y m

ust e

xcep

t to

"all

term

s, pr

ovis

ions

and

con

ditio

ns o

f sa

id le

ase"

(Sch

edul

e B

pre

sum

ably

al

read

y do

es so

). N

ot d

esig

ned

for

timbe

r "le

ase"

or o

ther

inte

rest

s in

natu

re o

f pro

fit a

pre

ndre

.

No

addi

tiona

l cha

rge.

Sa

me

as T

exas

.

Mec

hani

c's L

iens

End

orse

men

t

P-8

C

LT

A 1

01

N

eith

er th

e ow

ner's

or l

oan

polic

y w

ill in

sure

ag

ains

t unr

ecor

ded

Mec

hani

c's li

ens.

Exce

ptio

n du

ring

cons

truct

ion.

N

o ch

arge

for i

ssua

nce

with

or w

ithou

t ex

cept

ion.

In

surin

g th

e pr

iorit

y of

the

cons

truct

ion

loan

ove

r mec

hani

c lie

ns

can

be g

iven

in m

any

stat

es, b

ut n

ot in

Te

xas.

Oth

er st

ates

ofte

n ge

t inv

olve

d w

ith c

onst

ruct

ion

loan

pro

ceed

s di

sbur

sem

ent.

P-39

Para

grap

h 6

of th

e Lo

an P

olic

y in

surin

g pr

ovis

ions

insu

res a

gain

st "l

ack

of p

riorit

y of

the

lien

of th

e in

sure

d m

ortg

age

over

any

stat

utor

y or

co

nstit

utio

nal m

echa

nic's

, con

tract

or's

or

mat

eria

lman

's lie

n fo

r lab

or o

r mat

eria

l hav

ing

its

ince

ptio

n on

or b

efor

e th

e da

te o

f pol

icy"

. On

an

Ow

ner P

olic

y du

ring

cons

truct

ion

or a

co

nstru

ctio

n lo

an in

sure

d by

a L

oan

Polic

y, th

e po

licy

mus

t add

"any

and

all

liens

aris

ing

by

reas

on o

f unp

aid

bills

or c

laim

s of w

ork

perfo

rmed

or m

ater

ials

furn

ished

in c

onne

ctio

n w

ith im

prov

emen

ts p

lace

d, o

r to

be p

lace

d, u

pon

the

subj

ect l

and.

How

ever

, the

Com

pany

doe

s in

sure

the

Insu

red

agai

nst l

oss,

if an

y, su

stain

ed

by th

e in

sure

d un

der t

he p

olic

y if

such

lien

s hav

e be

en fi

led

in th

e de

ed re

cord

s prio

r to

the

polic

y da

te."

Expr

ess

insu

ranc

e no

t allo

wed

, sin

ce

P-39

is a

llow

ed o

nly

with

P-5

spec

ial

exce

ptio

ns.

40


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

M

iner

als a

nd S

urfa

ce D

amag

e E

ndor

sem

ent

T-1

9 (L

oan

Polic

y)

P-50

a &

P-5

0b

R29

a &

R29

b A

LT

A 9

/ C

LTA

100

(C

ompr

ehen

sive

)

Prov

ides

cov

erag

e fo

r dam

age

to im

prov

emen

ts

(incl

udin

g la

wns

, shr

ubbe

ry, o

r tre

es) l

ocat

ed o

n th

e la

nd c

ause

d by

the

use

of th

e su

rface

for t

he

extra

ctio

n an

d de

velo

pmen

t of t

he m

iner

als

R

esid

entia

l LTP

– 5

% a

nd N

on-

Res

iden

tial L

TP –

10%

Min

eral

s and

Sur

face

Dam

age

End

orse

men

t T

-19.

1 (O

wne

r Po

licy)

P-

50c

R-2

9c

AL

TA

9 /

CLT

A 1

00

(Com

preh

ensi

ve)

Pr

ovid

es c

over

age

for d

amag

e to

impr

ovem

ents

(e

xclu

ding

law

ns, s

hrub

bery

, or t

rees

) loc

ated

on

the

land

cau

sed

by th

e us

e of

the

surfa

ce fo

r the

ex

tract

ion

and

deve

lopm

ent o

f the

min

eral

s.

15

% o

f bas

ic p

rem

ium

with

out s

urve

y co

vera

ge, 1

0% w

ith su

rvey

cov

erag

e ad

ded

simul

tane

ously

Min

eral

s and

Sur

face

Dam

age

End

orse

men

t T

-19.

2 P-

50.1

R

29.1

a

Pr

ovid

es c

over

age

for d

amag

e to

impr

ovem

ents

(e

xclu

ding

law

ns, s

hrub

bery

, or t

rees

) loc

ated

on

the

land

cau

sed

by th

e us

e of

the

surfa

ce fo

r the

ex

tract

ion

and

deve

lopm

ent o

f the

min

eral

s. O

ne

acre

or l

ess r

esid

entia

l or o

ffice

indu

stria

l, et

c.

$5

0.00

fo

r Ow

ner's

Pol

icy:

no

char

ge fo

r Loa

n Po

licy

Min

eral

s and

Sur

face

Dam

age

End

orse

men

t T

-19.

3 P-

50.1

R

29.1

b

Pr

ovid

es c

over

age

for d

amag

e to

impr

ovem

ents

(e

xclu

ding

law

ns, s

hrub

bery

, or t

rees

) loc

ated

on

the

land

cau

sed

by th

e us

e of

the

surfa

ce fo

r the

ex

tract

ion

and

deve

lopm

ent o

f the

min

eral

s. G

reat

er th

an o

ne a

cre

and

uses

not

incl

uded

in

T49.

2 En

dors

emen

t.

$5

0.00

fo

r Ow

ner's

Pol

icy:

no

char

ge fo

r Loa

n Po

licy

41


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

M

odifi

catio

n E

ndor

sem

ent

T-3

8 P-

9.b(

3)

R-1

1.b

CL

TA

100

.4, 1

00.5

and

100

.6

A

vaila

ble

for L

oan

Polic

y on

a p

artia

l rel

ease

, re

leas

e of

add

ition

al c

olla

tera

l, m

odifi

catio

n ag

reem

ent,

rein

state

men

t agr

eem

ent,

or re

leas

e fro

m p

erso

nal l

iabi

lity;

doe

s not

dow

ndat

e po

licy

or in

sure

val

idity

of d

escr

ibed

inst

rum

ent;

simpl

y w

aive

s any

cla

im o

f cov

erag

e te

rmin

atio

n or

that

co

vera

ge "r

educ

ed".

Polic

ies i

ssue

d be

fore

M

arch

1, 1

983

cont

inue

to c

onta

in ti

me

limit

(orig

inal

mat

urity

plu

s sta

tute

of l

imita

tions

). A

po

licy

may

insu

re a

mod

ifica

tion

of th

e lie

n by

de

scrip

tion

in S

ched

ule

A.

Do

not i

ssue

if in

stru

men

t gra

nts l

ien o

r po

wer

of s

ale

if de

bt is

evi

denc

ed b

y "n

ew p

rom

isso

ry n

ote"

(res

tate

d an

te

not o

kay;

how

ever

ext

ensi

ve

amen

dmen

ts a

re o

kay)

, if n

ew p

rinci

pal

debt

exc

ept a

ccru

ed in

tere

st o

r ad

vanc

es p

er o

rigin

al m

ortg

age

or if

cr

oss c

olla

tera

lizat

ion

(but

sepa

rate

m

ortg

age o

kay)

.

$100

plu

s $10

for e

ach

12 m

onth

pe

riod

afte

r firs

t yea

r of m

ortg

age

polic

y (n

ever

to e

xcee

d 50

% o

f pol

icy,

bu

t thi

s won

't oc

cur.)

Mod

ifica

tion

endo

rsem

ent i

s ava

ilabl

e th

at d

oes d

ownd

ate

the

polic

y. A

si

gnifi

cant

fee

is ty

pica

lly c

harg

ed.

Mul

tiple

Lie

ns

R

-4

R-9

C

LT

A 1

05

Th

e Te

xas R

ules

do

not p

rohi

bit t

he in

sura

nce

of

mul

tiple

lien

s on

one

polic

y, a

s wel

l as i

nsur

e (p

ari p

assu

) the

lien

s to

be o

f equ

al d

igni

ty. A

po

licy

may

insu

re a

mor

tgag

e to

the

exte

nt it

se

cure

s spe

cific

inde

bted

ness

. It m

ay a

lso e

xcep

t to

a li

en o

f equ

al o

r hig

her p

riorit

y as

wel

l.

Rec

ogni

zes t

hat t

he p

olic

y m

ay re

late

to

mul

tiple

loan

s. A

dditi

onal

cha

ins m

ay e

xist

(at a

m

inim

um p

rom

ulga

ted

rate

). O

ther

stat

es o

ffer s

imila

r cov

erag

e.

Non

Impu

tatio

n E

ndor

sem

ent

T-2

4 P-

55

R-3

.1

Tex

as m

ost s

imila

r to

:

Aff

irms t

hat c

over

age

will

not

be

deni

ed to

the

insu

red

beca

use

of k

now

ledg

e of

the

exis

ting

or

exiti

ng p

artie

s as o

f the

dat

e of

the

polic

y w

hich

kn

owle

dge

is n

ot k

now

n to

the

new

par

ty. N

on-

resi

dent

ial o

wne

r pol

icy

only

.

O

wne

r pol

icy

only

– 5

%

ALT

A 1

5 –

prot

ects

new

par

tner

s, m

embe

rs a

nd sh

areh

olde

rs

ALT

A 1

5.1

– is

real

ly a

dditi

onal

in

sure

d A

LTA

15.

2 –

is fo

r onl

y a

parti

al

equi

ty tr

ansf

er

Res

tric

tions

, Enc

roac

hmen

ts,

Min

eral

s T

-19

(Loa

n Po

licy)

P-

50a

& P

-50b

R

29a

& R

29b

AL

TA

9 /

CLT

A 1

00

(Com

preh

ensi

ve)

Th

e co

vera

ge c

an in

sure

the

appu

rtena

nt e

asem

ent

in a

ccor

danc

e w

ith th

e ea

sem

ent t

erm

s.

Res

iden

tial L

TP-5

% a

nd

Non

-Res

iden

tial L

TP –

10%

Res

tric

tions

, Enc

roac

hmen

ts,

Min

eral

s T

-19.

1 (O

wne

r Po

licy)

P-

50c

R-2

9c

AL

TA

9 /

CLT

A 1

00

(Com

preh

ensi

ve)

Th

e co

vera

ge c

an in

sure

the

appu

rtena

nt e

asem

ent

in a

ccor

danc

e w

ith th

e ea

sem

ent t

erm

s.

Res

iden

tial 5

%, n

on re

siden

tial 1

5% o

f ba

sic p

rem

ium

with

out s

urve

y co

vera

ge, 1

0% w

ith su

rvey

cov

erag

e ad

ded

simul

tane

ously

.

42


A C

OM

PAR

ISO

N O

F T

LT

A A

ND

AL

TA

EN

DO

RSE

ME

NT

S

CO

VE

RA

GE

T

EX

AS

FOR

M

PRO

CE

DU

RA

L R

UL

E

RA

TE

RU

LE

C

OM

PAR

ISO

N/C

OM

ME

NT

R

evol

ving

Cre

dit/F

utur

e A

dvan

ces E

ndor

sem

ent

T-3

5 P-

9.b(

8)

R-1

1.f

CL

TA

108

.10

Pr

ovid

es th

at lo

an p

olic

y in

clud

es la

ter m

ortg

age

adva

nces

and

insu

res p

riorit

y of

adv

ance

s, if

in

good

faith

and

with

out k

now

ledg

e of

def

ects

or

obje

ctio

ns a

nd su

bjec

t to

fede

ral t

ax li

ens,

real

es

tate

taxe

s and

ass

essm

ents

. The

dee

d of

trus

t se

curin

g th

e de

bt m

ust c

onta

in la

ngua

ge th

at

iden

tifie

s the

deb

t as o

ne th

at a

llow

s par

tial

paym

ent a

nd th

en a

dditi

onal

adv

ance

s.

The

revo

lvin

g lin

e of

cre

dit m

ust b

e in

a

spec

ific

amou

nt su

bjec

t to

fluct

uatio

n an

d m

ay n

ot c

over

hom

este

ad.

$50.

00

Rev

olvi

ng w

ith in

crea

ses i

n lim

it (p

olic

y am

ount

).

Subo

rdin

ate

Lie

ns

P-

22.b

(8)

C

LT

A 1

11

G

over

ned

by R

ule

P11.

6(8)

whi

ch a

llow

s the

is

suan

ce o

f a lo

an p

olic

y th

at in

sure

s the

prio

rity

of a

lien

with

out m

entio

ning

a su

bord

inat

e m

atte

r un

less

requ

ired

to d

o so

by

the

insu

red.

If so

the

follo

win

g la

ngua

ge m

ay b

e ad

ded:

"Com

pany

in

sure

s the

insu

red

agai

nst l

oss,

if an

y, su

stain

ed

by th

e in

sure

d un

der t

he te

rms o

f the

pol

icy

if th

is

item

is n

ot su

bord

inat

ed to

the

lien

of th

e in

sure

d m

ortg

age"

.

Allo

ws d

elet

ion

of p

arag

raph

4 o

f Sc

hedu

le B

of l

oan

polic

y an

d in

sura

nce

as to

prio

rity

over

lien

s and

le

ases

show

n in

Sch

edul

e B

.

No

char

ge

ALT

A p

olic

ies o

ften

list t

he

subo

rdin

ate

item

s on

Sche

dule

B-II

an

d sp

ecifi

cally

stat

es: "

Com

pany

in

sure

s tha

t lie

ns a

re sh

own

on

Sche

dule

B-II

are

subo

rdin

ate

to th

e in

sure

d lie

n".

43


APPENDIX 5

TEXAS AFFIRMATIVE COVERAGES

Access Endorsement – Form T-23. This endorsement may be attached to an Owner's Policy (T-1) or a Loan Policy (T-2) insuring land that is not residential real property and on which improvements exist at the time it is attached or issued. See Procedural Rule P-54 and Rate Rule R-30 ($100.00 per policy). Comparable endorsements are ATLA 17 and CLTA 103.4. This endorsement may be desirable when a specific access is desired as opposed to simply legal access insured by the policy. A survey will be required by the title company for issuance of this endorsement.

Condominium Endorsement – Form T-28. This endorsement may be attached to a contemporaneously issued Loan Policy insuring a loan secured by the condominium unit. The endorsement is not allowed in conjunction with the T-17 Planned Unit Development endorsement, and the property must be residential real property. See Procedural Rule P.9.b(15) and Rate Rule R-11(m) ($0.00). Comparable forms are the ALTA 4 and CLTA 115.1.

Contiguity Endorsement – T-25, T-25.1. This endorsement may be used at the time of issuance of an Owner's Policy or a Loan Policy insuring land that is not residential real property. It insures contiguity of two tracts and insures against gaps, strips, or gores separating contiguous boundary lines. To obtain this coverage this endorsement must be used if applicable. A survey will be required by the title company for issuance of this endorsement. The T-25.1 extends this coverage to gaps, strips, or gores. See Procedure Rule P-56 and Rate Rule R-32 ($100.00 per policy). Comparable endorsements are the CLTA 116.4, ALTA Form 19 and Form 19.1.

Planned Unit Development – T-17. This endorsement may be attached to a Loan Policy insuring residential real property. It assures that the property is not in violation of restrictive covenants affecting the lien and is in compliance with a planned unit development. To obtain this coverage this endorsement must be used if applicable. See Procedure Rule P-9.B(14) and Rate Rule R-11(k) ($25.00; however, if the title company issues T-17 endorsements on two or more policies which are issued simultaneously covering the same property then the premium for said T-17 endorsement shall be charged only once). Comparable forms are ALTA 5 and CLTA 115.2.

Restrictions, Encroachments, Minerals Endorsement - T-19 and T-19.1. The T-19 is available for attachment to a Loan Policy and the T-19.1, which is similar in scope, is applicable to an Owner's Policy. A survey is normally required for issuance of these endorsements. See Procedural Rule P-50 and Rate Rule 29. The premium is on a sliding scale and different for the T-19 and T-19.1. This endorsement is commonly referred to as a "comprehensive endorsement" and insures against covenants, conditions and restrictions; encroachments and protrusions; damages resulting for easements and setbacks; and rights to use the surface of the land for the extraction or development of minerals. Similar forms are ALTA 9, ALTA 9.1, ALTA 9.2, and CLTA 100.2 and 100.10. More recently endorsement forms T-19.2 and T-19.3 have been adopted to deal with situations where the title company has taken a general exception to minerals as provided by Procedural Rule P-5.1. See Procedure Rule P-50.1 and Rate Rule R- 29.1.

Non-Imputation Endorsement - T-24, T-24.1. In connection with concerns relating to imputation of knowledge from officers or principals or from the owner to the lender, the T-24 and T-24.1 endorsement are available and may be appropriate. The T-24.1 endorsement is a new endorsement dealing specifically with mezzanine financing and concerns regarding imputation of knowledge to the lender. This is an endorsement for non-residential property.

Express Insurance pursuant to P-39 is only available for those title matters that do not fall within the scope of the coverage of T-17, T-19/T-19.1, T-23, T-25, and T-28. This coverage is provided by attaching a T-3 endorsement. No premium is charged. Possible Defects P-39(b) — [Examples: Adverse claim to ownership; lis pendens; blanket easement that may not be in use; a lease, option or contract that may have expired; recent gaps in title; or missing heirs.

45


APPENDIX 6

SURVEY CHECKLIST

GENERAL:

a. Survey copies ( needed) obtained b. Legend: (1) Surveyor's name (2) Surveyor's phone number (3) Surveyor's address (4) Surveyor's job number (5) Date or revision date

(6) Revision date (if applicable) (7) Type of survey (boundary or completion) (8) General description of property (9) Scale c. Basis of bearings (which way is North?) d. Property description e. Surveyor's certificate f. Notes g. Legend for all symbols used

LEGAL DESCRIPTION:

a. Caption: (1) State reference (2) County reference (3) City reference (4) Larger parcel reference (with reference to recording data) b. Point of Commencement c. Point of Beginning d. Return to Point of Beginning e. Platted property (Yes ; No ): (1) Plat obtained (2) Description refers to plat by lot, block, subdivision and recording data (3) Description agrees with plat f. Coordination of description: (1) Field notes and drawings (do they match?) (2) Title policy (matches the survey?) (3) Documents (vesting documents/transaction-specific documents) g. Corner monuments h. Ties to adjoining property: (1) Roads, alleys, etc. (Name and width) (2) Subdivisions (Name and plat recording data) (3) Adjacent owners (Name and deed recording data) i. Total gross and net acreage and square footage given (if required) j. Insured easements description

47


CERTIFICATE:

a. Signed b. Sealed c. On-the-ground survey d. Performed by surveyor e. Monuments: (1) actually exist (2) Location, type and size f. No encroachments or protrusions g. No improvements, except as shown h. No visible easements or rights of way i. No visible discrepancies, conflicts, shortages in area or boundary line conflicts j. Improvements: (1) Actually exist (2) Size, location and type (3) Distances and set-backs k. Access l. Recorded documents shown m. Location and size of utility lines (if required) n. Set-back lines (if any) o. No flood hazard, except as shown p. Addressed to: (1) Title Company (2) Lender (3) Borrower (4) Purchaser

DRAWING:

a. Point of Commencement shown and labeled b. Bearing and distance to Point of Beginning from Point of Commencement c. Point of Beginning shown and labeled d. Straight boundary lines: (1) Bearing (direction in degrees, minutes, seconds) (2) Distance (feet and hundredths of feet) e. Curved boundary lines (1-4 below are required): (1) Central angle ("Delta") (2) Arc length (3) Radius (4) Tangent or non-tangent (5) Chord length and bearing (required if non-tangent curve) f. Adjoining property shown and labeled: (1) Roads (widths, names and tie) (2) Subdivisions (name, plat recording data and tie) (3) Owner (name, deed recording data and tie) g. Single perimeter description h. Total gross and net (as required) acreage and square footage; net of: (1) Streets, alleys, railroads and other rights of way (2) Easements (3) Proposed rights of way and easements (4) Flood area, lake, stream or water courses

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(5) Parks or proposed parks (6) Encroachments or protrusions i. Access to public right(s) of way j. Exception documents received (legible) k. Exceptions located and labeled: (1) Name of document, parties or easement (2) Located and shown (3) Dimensions (4) Recording data given l. Set-back lines: (1) Shown (2) Labeled (plat, ordinance or restrictive covenant reference) m. Any necessary or useful access, etc. easements n. Insured easements: (1) Shown and labeled (2) Bearing and distances (3) Coordination of description (title, survey, field notes and documents) o. Improvements: (1) Shown and labeled (2) Horizontal distances shown (3) Vertical distances (height) shown (4) Stories shown (5) Distances to boundaries, easements, streets, set-back lines p. Encroachments of improvements onto: (1) Dimensions (2) Details (3) Type (4) Area involved: (i) Boundary lines (ii) Easements (iii) Set-back lines (iv) Other q. Protrusions from adjoining property: (1) Dimensions (2) Details (3) Type (4) Area involved: (i) Boundary lines (ii) Easements (iii) Set-back lines (iv) Other r. Fences (determine ownership if not on boundary line) s. Proposed improvements: (1) Shown, located and labeled (2) Source of proposal (3) Encroachments t. Utility lines shown and labeled (type and size) u. Parking: (1) Shown (2) Number of vehicular spaces (3) Compliance with zoning requirements v. Multiple tracts: (1) No gaps

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(2) Common boundary line called and tied w. Street address of improvements x. Curbs, driveways and sidewalks y. Any physical objects not reflected in title commitment z. Monuments for corners (type, size and action) aa. Flood plain shown bb. Water courses shown cc. Site Plan

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APPENDIX 7

PROPERTY DESCRIPTIONS

The Property Description.

Complete property descriptions are composed of three basic elements or parts. Sometimes one part may be combined with another, or the three parts could be in an order different than the one set forth herein. The three basic elements are as follows: (1) Caption; (2) Body; and (3) Qualifying Clauses.

Each property description should recite the following:

1. The city, county and state in which the property is located;2. The larger area out of which the subject property is cut, together with a reference to the record of such

larger area if same exists (for most Texas properties this is the reference to the survey and abstractand/or a deed which establishes the larger tract or, in the case of recorded subdivisions, a reference tothe recorded plat);

3. The description of the property itself; and4. Exceptions and some reservations.

A good property description will identify the property in question in unmistakably clear language, leaving nothing that is ambiguous or uncertain as to what is intended.

Terminology.

As you work with surveys and property descriptions more and more, you will see many words and phrases used repeatedly, with the bearings, distances, and curve data being the only variables. This holds true in simple lot and block descriptions, as well as in the case of more complicated metes and bounds descriptions. Some of these words and phrases follow in an effort to improve proficiency in the handling of survey and property description problems, and to assist in communication with surveyors/engineers.

A. Preamble - The introductory portion of the description, usually giving the general area in which the property lies, the city, county, state, and whether the property is a part of some larger defined tract. EXAMPLES (i) "tract or parcel of land out of a 246.00 acre tract of land in the John Mosley Survey, Abstract No. 123, in the City of Dallas, Dallas County, Texas, said 246.00 acre tract being the same tract of land conveyed by deed from Barbara McCormick to Jean Walker, recorded in Volume 78888, Page 1234, Deed Records, Dallas County, Texas, and more particularly described by metes and bounds as follows:"; or (ii) All of Lot 1, Block 2, SHADY ACRES, an addition to the City of Dallas, Dallas County, Texas, according to the plat thereof recorded in Volume 78888, Page 4321, Plat Records, Dallas County, Texas.

B. Said - Used to eliminate repetitive words and phrases, "said" should refer back to a previously mentioned word or phrase, and should be used only when there is no possibility of mistake as to the reference. EXAMPLE "said 246.00 acre tract"

C. Commencing, or Point of Commencement – Used when the "point of beginning" is at least one course away from a monumented point or corner, in which case the description will "commence" at a point, go one or more courses to the "point of beginning", and continue on from the "point of beginning. Even though there is a "point of commencement", the last call should return to the "point of beginning". EXAMPLE "Commencing at the southeast corner of said 246.00 acre tract, being also the southwest corner of a 500.00 acre tract of land conveyed to Jean Walker by deed recorded in Volume 78888, Page 1238, Deed Records, Dallas County, Texas; THENCE N 25 deg. E, along the east line of said 246.00 acre tract a distance of 155.24 feet to a point for corner; THENCE N 15 deg. W, a distance of 178.32 feet to the Point of Beginning of this tract"

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D. Point of Beginning – A monumented corner or an easily identifiable point at a definite location from a known corner or other monument. The last call should always return to the "point of beginning".

E. Ties – Refers to courses ending in known lines or monuments, and very useful in avoiding overlaps and shortages. EXAMPLE " . . . to a point for corner in the West line of Lot 4, Block 52, of said SHADY ACRES subdivision."

F. Parallel - When stating that a line is parallel with and distant a certain footage from a known line, it is not necessary to indicate "at right angles", but the description should indicate if for some reason the measurement is other than at right angles. EXAMPLE " . . . along a line fifty (50) feet from and parallel to the North line of Belt Line Road"

G. Curve Data – As you progress mentally along a boundary line, a curve will usually be first expressed as a curve to the left or to the right, or may be described by reference to a general direction. EXAMPLES " . . . to the point of beginning of a curve to the left" or " . . . to the point of beginning of a curve to the Northeast.

Curves are either tangent or non-tangent. If the reference is to a tangent curve, this means that the straight line along which you were traveling when you got to the curve is tangent to the circle of which the curve is a part. If the reference is to a non-tangent curve, this means that the straight line along which you were traveling intersects the circle of which the curve is a part. The most notable effect of this differentiation is on your ability to visualize the property, and also determines the amount of information required to complete closure.

There are several elements to the description of a curve. These are:

• Radius - which is the distance from the center of the circle of which the curve is a part to the line of curve (want to check a survey? - if you have a curved street that is 60 ft. wide, the radius of outside line should be 60 feet greater than the radius of the inside line);

• Central angle - also called the "delta" of the curve, it is the angle between the radial lines at the beginning and end of the curve (in our example of the 60 ft. wide street, both the inside and outside curves will have the same central angle - it is the difference in radius that accounts for the difference in the arc lengths);

• Length or arc 1ength - the linear distance along the curved line;

• Chord length - the straight line distance from the beginning to the end of the curve; and

• Chord bearing - the bearing of the straight line distance between the beginning and the end of the curve.

Some matters of note:

• The shallower the curve, the more nearly coincidental the arch length and chord length. • If your central angle is 90 degrees, the bearing for the next call (assuming that you are

going from a straight line into a curve and then back to a straight line) should be 90 degrees removed from the prior call (e.g. N 45 deg. E - then through a 90 deg. curve - S 45 deg. E).

• Chord length and bearing is usefully plotting help, but remember that the curved line is the boundary line.

Bearing.

Property boundaries consist of lines, each of which is of a certain length. Also, each straight line runs in a particular direction or, more commonly, has a certain bearing. Very few lines run true North, South, East or West. The amount by which a line varies from true North, South, East or West gives the line its bearing, which is composed of the following:

1. Degrees – There are 360 degrees in a complete circle. Degrees are usually shown as 360 deg. or 360°

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2. Minutes – There are 60 minutes in each degree. Minutes are usually shown as 60 min. or 60' 3. Seconds – There are 60 second in each minute. Second are usually shown as 60 sec. or 60"

A line's deviation from true North, South, East or West is expressed in relation to either true North or true South. For purposes of property description, a full circle is divided into quadrants, each containing 90 degrees (1/4 of 360 deg. in a full circle).

Any bearing for a line that heads in a direction between North and East (the Northeast quadrant) will be called out as North degrees minutes seconds East (or a certain number of degrees, minutes and seconds away from true North towards true East), up to and including N 89 deg. 59 min. 59 sec. E.

Similarly, the bearing for a line heading in a direction between South and East (the Southeast quadrant) will be called out as South degrees minutes seconds East, up to and including S 89 deg. 59 min. 59 sec. E. In following, bearings west of South (the Southwest quadrant) will be called out as South degrees minutes seconds West, and bearings west of North (the Northwest quadrant) will be called out as North degrees minutes seconds West. In each instance the bearing can go up to and include 89 deg. 59 min. 59 sec.

For each bearing in the Northeast quadrant, for example, there is a corresponding bearing in the Southwest quadrant - and likewise for the Southeast and Northwest quadrants. Corresponding, but not the same, since a bearing implies not only deviation from true North or true South, but also direction of movement along that line. For example, a line heading into the northeast quadrant (from the point of beginning) might have a bearing of N 25 deg. E, while the same line, when you are heading into the southwest quadrant would have a bearing of S 25 deg. W. The nomenclature for this situation is "reverse bearing".

Scale.

Since surveys are drawn to scale, it is important for you to locate the scale, and have available a measuring device that will allow you to interpret the scale with a reasonable degree of accuracy. Most of you will not have available to you an engineer's scale; however, it is possible to work with a ruler if you give a moment's thought to the process before you undertake to verify any line length.

The scale should be indicated on the front page of the survey, and can usually be found either within the title block or under the North arrow. If your survey consists of more than one page, note carefully any changes in scale. Scale is expressed as an equation, as follows: 1" = 100", 1" = 200', 1" = 300', etc.

These scale ratios are those most commonly used and can, for the purpose of preliminary survey review, be easily converted for measurement using a standard 12" ruler.

EXAMPLES: • If your scale is 1" = 200', and your line length is 475', you would/should be measuring 2-3/8". • Better yet, you can remember that if your scale is 1" = 100', each 1/4" is equal to 25', and each 1/8" is

equal to 12.5'. • It gets even better! If you can put your hand on a typist's ruler that has inches divided into tenths, and

you scale is 1" = 200', each 1/10th of an inch is equal to 20'.

These examples are not to suggest that grave matters of survey be determined by the use of a desk ruler, but if you are stumbling over a line that for some reason doesn't seem right, or feel that a street width is in error, or the like, you have at your disposal the means to make a preliminary check to determine if there is a possible problem.

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APPENDIX 8

MINIMUM STANDARD DETAIL REQUIREMENTS FOR ALTA/NSPS LAND TITLE SURVEYS


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APPENDIX 9

CERTIFICATION FORM


ALTA/NSPS FORMAT:

To [Borrower/Purchaser] [Lender] [Title Company] [others]:

7. Certification – The plat or map of an ALTA/NSPS Land Title Survey shall bear only the following certification, unaltered, except as may be required pursuant to Section 3.B above:

To (name of insured, if known), (name of lender, if known), (name of insurer, if known), (names of others as negotiated with the client):

This is to certify that this map or plat and the survey on which it is based were made in accordance with the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, jointly established and adopted by ALTA and NSPS, and includes items [Recommended selections:] [1, 2, 3, 4, 6(b), 7(a), 7(b)(1), 7(c), 8, 9, 11, 13, 16, 17, 18, 19 and 20] of Table A thereof. The

fieldwork was completed on .

Date of Plat or Map: (Surveyor's signature, printed name and seal with Registration/License Number)

(Seal) /s/

[Surveyor's printed name]

Registration/License No.:

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TEXAS SURVEYOR'S ASSOCIATION FORMAT (LONG FORM):

SURVEYOR'S CERTIFICATE

To (Name of Client)

(Title Insuror)

and

,

(File No.)

I hereby certify that this survey was made on the ground, that this plat (map or drawing) correctly represents the facts found at the time of survey and that this professional service conforms to the current Texas Society of Professional Surveyors Standards and Specifications for a Category 1A, Condition * Survey.

Surveyor's Seal

(Registered Public Surveyor)

(Texas Registration Number)

TEXAS SURVEYOR'S ASSOCIATION FORMAT (SHORT FORM):

I hereby certify that this Survey conforms to the current Texas Society of Professional Surveys Standard and Specifications for a Category 1A, Condition * survey.

(Registered Public Surveyor No. )

*CONDITION OPTIONS:

Condition I - Urban Business District Condition II - Urban

Condition III - Suburban

Condition IV - Rural

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GENERIC FORMAT:

TO: Purchaser/Borrower] [Lender] [Title Company]

The undersigned Registered Public Surveyor (the "Surveyor") hereby certifies that (a) this plat of survey and the property description set forth hereon are true and correct and prepared from an actual on-the-ground survey of the real property (the "Property") shown hereon; (b) such survey was conducted by the Surveyor, or under his supervision; (c) all monuments, shown hereon actually exist, and the location, size and type of material thereof are correctly shown; (d) except as shown hereon, there are no visible encroachments onto the Property or protrusions therefrom, there are no improvements on the Property, there are no visible easements or rights-of-way on the Property and there are no visible discrepancies, conflicts, shortages in area or boundary line conflicts; (e) the size, location and type of improvements are as shown hereon, and all are located within the boundaries of the Property and are set back from the Property lines the distances indicated; (f) the distance from the nearest intersecting street or road is as shown; (g) the Property has access to and from a public roadway; (h) all recorded easements and other exceptions, as noted in the Title Company's Commitment for Title Insurance No. , dated

, have been correctly platted hereon; (i) the boundaries, dimensions and other details shown hereon are true and correct; and (j) the Property is not located in a 100-Year Flood Plain or in an identified "flood-prone area", as defined by the U.S. Department of Housing and Urban-Development, pursuant to the Flood Disaster Protection Act of 1973, as amended, as reflected by Floor Insurance Rate Map Panel # , dated

, which such map panel covers the area in which the Property is situated.

The surveyor expressly understands and agrees that (a) this Certificate will be relied upon by ("Lender") to extend credit secured by a deed of trust lien covering the Property and by _________________________ ("Title Company") to issue a policy of title insurance insuring the validity and priority of such deed of trust lien; (b) both Lender and Title Company are entitled to rely on this plat of survey as being true and accurate in all respects and upon this Certificate as being true and accurate; and (c) the consideration paid to the Surveyor for the preparation and certification of such survey has been paid, in part, for the benefit of Lender and Title Company and in anticipation of their reliance hereon.

EXECUTED as of , 20 .

Registered Public Surveyor No.

Address:

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The following certification must be included on the plat by the surveyor:

The Survey shall be prepared by a surveyor licensed by the State in which the Property is located, shall be dated no more than thirty (30) days prior to the closing of the Loan and shall contain the following certification:

This survey is made for the benefit of [INSERT EXACT LEGAL NAME OF BORROWING ENTITY], [

Title Insurance Company] and their respective successors and assigns.

I, , a Registered Land Surveyor in the State of , do hereby certify to the aforesaid parties, their successors and assigns, as of the date set forth above, that I have made a careful survey of a tract of land (the "Premises") described as follows:

[INSERT LEGAL DESCRIPTION]

1. The survey reflected by this plat was actually made upon the ground, this is to certify that this mapor plat and the survey on which it is based were made in accordance with the "Minimum Standard Detail Requirements for ALTA/ACSM Land Surveys," jointly established and adopted by ALTA and NSPS in 2016, and includes Items

of Table A thereof. Pursuant to the Accuracy Standards as adopted by ALTA, ACSM and NSPS and in effect on the date of this certification, undersigned further certifies that in my professional opinion, as a land surveyor registered in the State of

, the Relative Positional Accuracy of this survey does not exceed that which is specified therein.

2. The survey and the information, courses and distances shown thereon are correct.

3. The title lines and lines of actual possession are the same.

4. The record description of the subject property forms a mathematically closed figure. [IF NOT, SOSTATE.]

5. The survey correctly shows the location of all buildings, structures and other improvements situatedon the Premises.

6. The number of striped parking spaces located on the Premises is , and, to the extent possible, are graphically shown hereon.

7. All set back, side yard and rear yard lines shown on the recorded plat or set forth in the applicablezoning ordinance are shown on the survey.

8. There are no encroachments onto adjoining premises, streets, alleys or easement areas by anybuildings, structures or other improvements, and no encroachments onto the Premises by buildings, structures or other improvements situated on adjoining premises.

9. All utilities serving the Premises enter through adjoining public streets and/or easements of record;that, except as shown, there are no visible easements or rights of way across the Premises; that the property described hereon is the same as the property described in [ Title Insurance Company] Commitment No. with an effective date of

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, 20 and that all easements, covenants and restrictions referenced in said title insurance commitment, or easements which the undersigned has been advised or has knowledge, have been listed and plotted hereon or otherwise noted as to their effect on the subject property.

10. The survey shows the location and direction of all visible storm drainage systems for the collection and disposal of all roof and surface drainage.

11. Any discharge into streams, rivers or other conveyance system is shown on the survey.

12. Said described property is located within an area having a Zone Designation by the Secretary of Housing and Urban Development, on Flood Insurance Rate Map No. , with a date of identification of , 20 , for Community Number , in County, State of , which is the current Flood Insurance Rate Map for the community in which the Premises is situated.

13. The Premises has direct physical access to , a public street or highway.

Name: Reg. Land Survey No.

Date: , 20

[Seal]

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APPENDIX 10

INSURED CLOSING LETTERS


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APPENDIX 11

SAMPLE TITLE/SURVEY REVIEW MEMORANDUM


MEMORANDUM

TO:

FROM:

DATE:

RE: Title/Survey review; (the "Property"); File No.

I have reviewed (i) the Commitment for Title Insurance dated effective , issued by , under No. (the "Commitment "), and (ii) the survey dated , last revised (the "Survey"), by , No. (the "Survey"), of , under Job No. , in connection with the above- referenced Property. The following sets forth a brief summary of the title exceptions affecting the Property, as well as a brief summary of matters shown on the Survey. A. Exceptions appearing on the Commitment. To the extent possible, the documents described below are in the

order they appear in the Commitment. Schedule A:

1. Item 1. Once the name of the purchasing entity has been determined, this item should be revised accordingly. The insured amount should be revised to reflect the purchase price of $ .

2. Item 3. Title is shown to be vested in the name of , a .

3. Item 4.

a. The legal description reflects that the Property is a portion of a platted lot. ACTION: Local counsel will be contacted to determine if the conveyance of a portion of a platted lot is a violation of any subdivision ordinance or law.

b. The legal description should include the easement estates created pursuant to the Declaration of Restrictions, Covenants and Conditions and Grant of Easements. ACTION: We will request that the Title Company include the easement estates.

Schedule B-I (Requirements): This section contains the standard Title Company requirements to the issuance of a title policy.

These requirements include the current financing with , including a UCC Financing Statement which will need to be terminated.

Schedule B-1 also reflects .

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Schedule B-II: 1. General Exception to defects, liens, encumbrances, adverse claims or other matters appearing after the

effective date of the Commitment but prior to the issuance of the title policy. ACTION: We will require that this exception be deleted in its entirety.

2. General Exception to rights or claims of parties in possession not shown by the public record. ACTION: We will require that this exception be deleted in its entirety.

3. General Exception to easements or claims of easements not shown by the public records. ACTION: We will require that this exception be deleted in its entirety.

4. General Exception to encroachments, overlaps, boundary line disputes, or other matters which would be disclosed by an accurate survey or inspection of the premises. ACTION: We will require that this exception be deleted in its entirety.

5. General Exception to any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records. ACTION: We will require that this exception be deleted in its entirety.

6. General Exception to any adverse claim to any portion of the land which has been created by artificial means or has accreted to any such portion so created and riparian rights, if any. ACTION: We will require that this exception be deleted in its entirety.

7. General Exception to taxes or special assessments which are not shown as existing liens by the public records. ACTION: We will require that this exception be deleted in its entirety.

8. Taxes for the year and all subsequent years, not yet due and payable. ACTION: We will request further information as to the date such taxes become due and payable.

9. Restrictions, dedications, conditions, reservations, easements and other matters shown on the Plat of , as recorded in Plat Book , Page .

The copy of the plat provided is not completely illegible. It appears from our review of the plat and the Survey that the plat created a . ACTION: We will ask for a full-size legible copy of the plat, and require that any such items on the plat be specified, rather than be included in a general exception.

10. Right of Way Easement dated , and recorded in Book , Page .

a. Grantee: b. Purpose: c. Locatable/reflected on Survey: ; NOTE: There is a .3' encroachment of one of the

buildings onto the easement. d. Grantee rights: e. ACTION: We will require that the Seller provide any consents or waivers in its possession in

connection with the encroachment. In addition, we will require affirmative insurance on the title policy in connection with the encroachment.

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11. Declaration of Restrictions, Covenants and Conditions and Grant of Easements dated , and recorded in Book , Page .

a. Declarant:

b. Association: c. Terminates: d. Provisions for Amendments: e. Annual/Special Assessments: f. Subordinate to Mortgage: g. Easements: h. Development Restrictions: i. Additional Obligations Imposed on the Property: j. Default/Remedies: k. ACTION: An estoppel has been required in connection with this Declaration.

12. Memorandum of Lease dated , and recorded in Book , Page . Tenant is______________. ACTION: Need to confirm that this lease is still in effect.

13. Tenants in Possession. This exception should be revised to read as follows: "Rights of tenants in possession, as tenants only, pursuant to written but unrecorded lease agreements."

B. Survey Requirements:

1. Please see the following table of ALTA requirements and other survey requirements:

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2016 ALTA/NSPS TABLE A REQUIREMENTS:

TABLE A ITEM NO.

DESCRIPTION SHOWN ON SURVEY

1 Monuments placed (or a reference monument or witness to the corner) at all major corners of the boundary of the property, unless already marked by an existing monument

2 Address(es) 3 Flood zone designation 4 Gross land area (and other land areas if specified by the client) 5, 6 List setback, height and floor space restrictions disclosed by

applicable zoning or buildings codes. If none, so state. The source of such information must be disclosed.

7(a) Exterior dimensions of all buildings at ground level 7(b) Square footage of (i) exterior footprint of all buildings at ground

level, (ii) gross floor area of all buildings, or (3) other areas to be defined by client

7(c) Measured height of all buildings above grade at a defined location; if no defined location is provided, the point of measurement shall be shown

8 Substantial, visible improvements (in addition to buildings) such as signs, parking areas or structures, swimming pools, etc.

9 Parking areas and, if striped, the striping and the type (e.g., handicapped, motorcycle, regular, etc.) and number of parking spaces

10 Division or party walls 11 Location of utilities existing on or serving the property, as determined

by (a) observed evidence, or (b) observed evidence together with plans and markings provided by client, utility companies and other appropriate sources

13 Names of adjoining owners of platted lots

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TABLE A ITEM NO.

DESCRIPTION SHOWN ON SURVEY

14 The distance to the nearest intersecting street as designated by the client

15 Rectified orthophotography, etc. where ground measurements are not otherwise necessary to locate features

16 Observable evidence of earth moving work, building construction or building additions within recent months

17 Any changes in street right of way lines either completed or proposed and available from the controlling jurisdiction. Observable evidence of recent street or sidewalk construction or repairs.

18 Wetlands

ADDITIONAL REQUIREMENTS:

REQUIREMENT SHOWN ON SURVEY

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APPENDIX 12

SAMPLE OBJECTIONS

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APPENDIX 13

HYPOTHETICAL TRANSACTION COMMITMENT


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APPENDIX 14

FORM OF PURCHASER'S TITLE/SURVEY OBJECTION LETTER


FORM OF PURCHASER'S TITLE/SURVEY OBJECTION LETTER

, 20___

, Esq.

Re: Sale of the property (the "Property") described in or to be covered by the Sales Contract (the "Sales Contract") by (the "Seller") to (the "Borrower") Title Co. GF Number:

Dear :

On behalf of Borrower, we have reviewed the Commitment for Title Insurance ("Title Commitment") with an effective date of , 20____, issued by Title Insurance Company (the "Title Company") under Commitment GF: , together with the survey prepared by ("Surveyor") dated , 20___ ("Survey").

This letter shall constitute Borrower's Objections to the Title Commitment and the Survey pursuant to

of the Agreement.

TITLE COMMITMENT

Schedule A:

Item 1.(a): The Proposed Insured: Borrower requires Title Company to revise the name of the proposed insured to . (Title Company)

Item 4: Legal Description: Borrower requires Title Company to use the legal description provided by the Surveyor. (Title Company)

Schedule B – Exceptions from Coverage:

Item 2: Shortages in Area: Borrower objects and requires Title Company to modify this exception to only read "shortages in area". (Title Company)

Item 10.b: Rights of Parties in Possession: Borrower objects and requires Title Company to obtain from Seller an Owner's Affidavit with Indemnity so this exception may be deleted and not appear in the Title Policy. (Seller and Title Company)

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Items 10.c. – 10.f Inclusive: Borrower objects as Title Company is in receipt of the Survey and therefore Title Company must delete these exceptions so that same do not appear on the Title Policy. (Title Company)

Items 10.p – 10.mm inclusive: Mining, Drilling and Exploring: Borrower objects to the mineral rights being severed and a third party or parties with rights to mine, drill, prospect, produce oil, produce gas, mine any and all minerals, laying pipe lines, building tanks, storing oil and water resulting from operations. Together with the ability and rights to build power stations, telephone lines and other structures to include houses for employees and to explore the Property for oil, gas and other minerals. Borrower requires surface waivers for the said instruments from Seller together with Title Company issuing the T-19.1 giving title coverage thereto. (Title Company)

Endorsements: Borrower requires the following endorsements to the Title Policy and requests the Title Company to provide Borrower with a revised Title Commitment and "pro forma" of the Title Commitment with each endorsement: (Title Company)

(a) Endorsement for access to the nearest public right of way; and

(b) Deletion of the arbitration provision. Schedule B-Section 1 Matters. Purchaser requires that all items described on Schedule B-Section 1 to the Commitment be satisfied on or before the closing of this transaction, so that such items shall not be exceptions to the Owner's Policy, and so that Purchaser shall be assured of receiving indefeasible fee simple title to the Property. Seller is requested to confirm that such items will be satisfied at or before Closing.

Taxes. Purchaser hereby objects to and disapproves Item 8 of Schedule B – Section 2 of the Commitment due to the inclusion of "other land" in such tax parcel. Purchaser requires, prior to or at closing, evidence satisfactory to determine that "other land" has been severed from the tax parcel for Parcel 1.

Schedule B Objections. Objection is raised to the inclusion of the following items as exceptions:

1. Item 1, Item : Objection is raised to the following items:

(a) Volume , Page . This appears to be applicable to property other than the Property.

(b) Volume , Page . This appears to be applicable to property other than the Property.

2. Item - Lease: Objection is raised to Item 9 to the extent that it is determined that the Seller is in default of its obligations under the lease as of closing.

3. Items : Objection is raised to Item 9 to the extent that it is determined that the Seller is in default of its obligations under any of these agreements as of closing.

Insured Closing Service Letter:

(a) T-51. A Form T-51 Buyer Insured Closing Service Letter signed by the Title Underwriter and Buyer covering the handling by the Title Company of the Settlement Funds (the "Insured Closing Service Letter") and acknowledged by telephone confirmation by the Title Underwriter that it has received in its offices a telefaxed copy of the Insured Closing Service Letter

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signed by the Buyer and that the Insured Closing Service Letter is in effect.

(b) Escrow Account Auditor's Letter. Letter from the Title Company's Independent C.P.A. auditor stating that the Escrow Account and other interest bearing accounts opened in the name of the owner/beneficiary of the escrowed funds with the financial institution as the escrow agent are audited as required by the Texas Department of Insurance (the "Escrow Account Auditor's Letter").

(c) Updated, Revised Title Commitment. A currently dated and effective Title Commitment updated as of a time on the Closing Date and revised in accordance with these Buyer's Closing Instructions (the "Updated, Revised Title Commitment").

Title Policy. As of Closing, before the Title Company may disburse any of the Settlement Funds, the Title Company will need to determine that it can, as of closing, issue to Buyer an Owner Policy of Title Insurance (the "Title Policy") in the form prescribed by the Texas State Board of Insurance and the Sales Contract, written by the same underwriter that issued the Title Commitment under the above-referenced GF number. The Owner Policy must be issued in accordance with the Title Commitment, except as follows:

(a) Insured's Name. The Insured under the Title Policy must read exactly as the Buyer's name is set forth in the Deed.

(b) Effective Date. The effective date and time of the Title Policy must be the date and time on which the Deed is filed of record.

(c) Description. The real property described in the Title Policy must be the same property described in the Deed and in the Survey of the Property.

(d) Title. Fee simple title to the real property described in the Deed must be shown by the Title Policy to be vested in the Buyer, and any easements benefitting the real property must be included in the description of the property insured by the Title Policy.

(e) Parties in Possession Exception and Visible and Apparent Easements Exception. There must not appear in the Updated, Revised Title Commitment or the Title Policy any exception for:

(f) Parties in Possession Exception. "Parties in possession" (the "Parties in Possession Exception").

(g) Visible and Apparent Easements Exception. "Visible and apparent easements" (the "Visible and Apparent Easement Exception").

(h) Inspection Exception. There must not appear in the Title Policy any matter which would be revealed by any inspection of the Property conducted by the Title Company or its agent or contractor, if an inspection is or would be made by the Title Company, its agent or contractor (the "Inspection Exception"). If the inspection reveals matters that are to be listed in the Title Policy, then these matters must be disclosed to Buyer and us and to Seller and Seller's Counsel before the Settlement Funds are deposited with the Title Company and must be approved in writing before the request for the wire transfer.

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Schedule C: Requirements: Borrower requires Seller to provide Title Company with any and all documentation to include, but not limited to, the Owner's Affidavit and Indemnity Agreement to delete the standard exceptions listed in the Title Commitment to include, but not limited to, Item 10.b (rights of parties in possession). All remaining requirements listed under this section must be deleted and not appear in the Owner's Title Insurance Policy ("Title Policy") to be issued at closing. (Seller and Title Company)

Endorsements to be provided. Purchaser requires confirmation from the Title Company that the following endorsements shall be issued in connection with the Owner's Policy and requests the Title Company provide the amount of the premium for each endorsement:

(a) Restrictions, Encroachments, Minerals. (b) Minerals and Surface Damage. (c) Access. (d) Subdivision Map Act (ALTA states only). (e) Environmental Protection Lien. (f) Zoning (ALTA states only). (g) Contiguity. (h) Tax Parcel (ALTA states only). (i) Deletion of arbitration.

This letter constitutes timely delivery by Purchaser of its objections pursuant to Section of the Agreement. To expedite review of our comments and revisions to the Commitment, we are sending copies of this letter directly to the Title Company. Please work with the Title Company to make sure our comments are thoroughly addressed. Please also be advised that each of these matters must be resolved to Purchaser's satisfaction prior to the Closing Date.

Borrower reserves the right to make future objections to any item which may appear in any subsequent Title Commitment, Pro Forma or revised Survey. In addition, Purchaser reserves the right to make objections based on additional information provided as a result of the above objections. We look forward to receipt of Seller.

Should you have any questions concerning the foregoing objections and disapproval of Purchaser as set forth above, please do not hesitate to contact me.

Sincerely

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APPENDIX 15

FORM OF LENDER'S TITLE/SURVEY OBJECTION LETTER


FORM OF LENDER'S TITLE/SURVEY OBJECTION LETTER

[LENDER'S COUNSEL LETTERHEAD]

, 200

Re: Proposed $ loan (the "Loan") by , a (the "Lender"), to , a (the "Borrower"), relating to a certain located at in ,

County, (the "Property")

Dear :

As you know, this firm represents Lender in connection with the referenced transaction. We have reviewed the following:

1. Commitment for Title Insurance dated effective _ (File Number ) (the "Commitment"), issued by (the "Title Company"); and

2. ALTA/ACSM Land Title Survey prepared by No.

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of Project Number (the "Survey").

(the "Surveyor"), dated .

The matters described below should be resolved or corrected, as appropriate.

COMMITMENT (Texas):

1. Policy Form. We require a Loan Policy of Title Insurance T-2 Form insuring Lender (the "Policy"). The effective date of the Policy must be the later of the date of recording of the deed of trust or the date of funding of the Loan (i.e., the "gap" must be insured).

2. Proforma Policy. Lender hereby requests that you issue a Proforma Loan Policy (including the endorsements described below), incorporating the matters set forth herein. We request that the exact name of the document be described in each item, along with the width, description and general location of each easement.

3. Arbitration. Please delete all arbitration provisions pursuant to Procedural Rule P-36.

4. Loan Policy of Title Insurance (Form T-2). With respect to Item 1(c) of Schedule A of the Commitment, please note the following:

(a) The Policy Amount [should be in the amount of $ ][will be forwarded to you under separate cover].

(b) The name of the Proposed Insured on the Commitment should be shown as follows: " , a , and its successors and assigns, as their interests may appear, and each successor in ownership of the indebtedness secured by the insured mortgage, except a successor who is an obligor under the provisions of Section 12(c) of the Conditions and Stipulations."

(c) Item 1(c) – Proposed Borrower. The proposed Borrower under Item (1)(c) should be "[NAME OF BORROWER], a [TYPE OF ENTITY]." Please verify the exact legal name with the Borrower's legal counsel.

5. Legal Description. The legal description in the Commitment must be identical to the legal description in the Survey. The Title Company should coordinate the required revisions with the Surveyor.

6. Item 2 – Legal Interest. The interest in the land covered by the Commitment should be "Fee Simple" [for Tract ], and "Easement" [for Tract ].

7. Copies Needed. Please forward complete and legible copies of the following documents:

(a) Item of Schedule B of the Commitment (Volume , Page ); and

(b) .

Please note that we reserve comments until receipt of same.

In the event that completely legible copies are not available, then the Title Company should either (i) delete such exceptions, or (ii) provide endorsement(s) to insure around such exceptions.

8. Restrictive Covenants. With respect to Item 1 of Schedule B of the Commitment, Lender will require

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Borrower to obtain an estoppel from the declarant confirming that there has been no violation of same.

9. Schedule B-II, Item - CCRs. With respect to the covenants recorded at Volume , Page , Lender will require that Borrower obtain an estoppel from the declarant confirming that there has been no violation of same (form of estoppel is enclosed).

This exception should be amended by replacing the phrase "Matters contained in" with "Covenants, conditions, restrictions, maintenance obligations and easements set forth in". In addition, please request that the Title Company indicate that Section of the Declaration states that liens created thereby in favor of are expressly subordinate to the lien of the insured mortgage, and that Section provides that no breach under the Declaration shall defeat or render invalid the lien of any mortgage or trust deed made in good faith and of value as to any part of the Property. Also, please request that the Title Company confirm to Lender that the Comprehensive Endorsement will insure against loss in the case of a violation of any of the covenants and restrictions set forth in the Declaration. Otherwise, a separate endorsement will be required.

10. Survey Deletion. The Title Company should confirm, upon the closing of the Loan, that Item 2 of Schedule B of the Commitment should be amended to read "Shortages in area."

11. Inapplicable Matters. The Title Company should confirm, upon the closing of the Loan, that Items of Schedule B of the Commitment will not be included in the Policy as such items are not applicable to the Property.

12. Taxes. With respect to Item 5 of Schedule B of the Commitment, Lender requires a tax certificate in order to verify that no rollback taxes or special use valuation is in effect, to confirm that no other property is included in the tax parcel for the Property and the tax parcel number of the Property.

In addition, such item should be revised to read as follows:

Stand-by fees, taxes and assessments by any taxing authority for the year 20 , and subsequent years; but not those taxes or assessments for prior years because of an exemption granted to a previous owner of the property under Section 11.13, Texas Tax Code, or because of improvements not assessed for previous tax year. The Company insures that stand-by fees, taxes and assessments by any taxing authority for the year 20 are not yet due and payable.

13. Subordinate Liens and Leases Exception. Item 8 of Schedule B of the Commitment should be amended to read in the Policy as follows: it either must (i) state that there are no subordinate liens or leases, or (ii) list all subordinate liens and leases of record and must insure that such liens and leases are subordinate to the insured Deed of Trust. (Please see Procedural Rule P-11b[8]).

14. Survey Reference. Items 10( ), 10( ) and 10( ) of Schedule B of the Commitment should contain the following phrase: ", as shown on survey of the land prepared by , Texas R.P.L.S. No. of dated , last revised , ."

15. Tenant's Rights. Item 10(_ ) of Schedule B of the Commitment should be annotated "None of the leases under which such tenants are occupying space contain any options to purchase or rights of first refusal covering all or any portion of the fee interest in said land or the buildings thereon."

16. Item 10(*) – Parties in Possession/Rights of Tenants. Pursuant to Procedural Rule P-3, the Lender does not accept this general exception and does not waive inspection of the Property.

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17. Inapplicable Matters. Items 10( ) and 10( ) of Schedule B of the Commitment should either be deleted.

18. Mineral Rights. The Title Company should limit the fee estate in Schedule A to read "Fee Simple save and except any and all rights, titles and interests previously reserved, conveyed or created with respect to oil, gas, or other minerals in and under the land" thereby deleting the specific exception of Item of Schedule B of the Commitment; and the Title Company should issue the T-19 Endorsement. In addition, please confirm that the City of includes an "anti-drilling" ordinance. Please advise.

19. Overhead Electric Lines. All exceptions to overhead electric should be deleted because the lines are merely evidence of availability of utilities and service to the Property and in no way evidences additional easements affecting the Property.

20. Item – Plat Created Items. All plat created easements listed in Schedule B should be amended to read as for the following general form:

"A [size] foot [type] easement crated by that certain , Block ,

Subdivision map or plat recorded in Volume , Page of the Deed and Plat Records of County, Texas, as shown on that certain Survey dated , [date of revised Survey], prepared by [Surveyor],

R.P.L.S. No. [Surveyor's registration number]."

21. Encroachments. We note the following encroachments on the Survey:

a. [Item] [Encroachment by on or into that easement recorded in .]

b. [Item] [Encroachment by _ on or into that building setback line established by that recorded in .]

Please provide the undersigned with any consents or waiver letters that the Borrower may have with respect to such encroachments. [In addition, to the extent that the Title Company takes exception to such encroachments, Lender will require [ALTA: The ALTA Form 9 "comprehensive endorsement" or local equivalent] [Texas: the T-19 "comprehensive" endorsement or in the alternative require] affirmative coverage with respect thereto as allowed pursuant to Procedural Rules P-5, P-11 and P-39(a) with respect to such encroachments.]

20. Express Insurance Language (Texas). (P-39)

[Pursuant to Procedural Rule P-50(B), Express Insurance pursuant to P-39 is only available for those title matters that do not fall within the scope of the coverage of the "Comprehensive" Endorsement (T-19). Thus, there will be discussions with the Title Company regarding whether P-39 or T-19 applies to a particular matter. Keep in mind Express Insurance pursuant to P-39 is provided at no expense and the T-19 Endorsement has an additional premium. [See the Appendix related to Express Insurance Alternatives]].

a. Item 10(*) – Express Insurance. Please delete this item or in the alternative, provide Express Insurance pursuant to Procedural Rules P-5, P-11 and P39 by stating that [Choose appropriate language]:

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"Company insures the Insured against loss, if any, sustained by the Insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders the removal of this improvement because it encroaches over or into . Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to require the removal of this improvement because it encroaches as herein stated.";

"Company insures the Insured against loss, if any, sustained by the Insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that divests the Insured of its interest as Insured because of this right, claim, or interest. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to divest the Insured of its interests as Insured because of this right, claim or interest.";

"Company insures the Insured against loss, if any, sustained by the Insured under the terms of this Policy by reason of enforcement of said rights as to the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to enforce said rights as to the land.";

"Exception No. is hereby deleted. Company provides insurance as to said lien in accordance with the terms of this Policy."

21. Requirements. All Schedule C matters will need to be provided to the Title Company in order that such matters will not be shown on the Policy issued in connection with this transaction.

22. SCHEDULE "D" (Texas). The premium calculated and this schedule of parties should be completed in its entirety pursuant to Procedures Rules P-21 and P-22.

23. Endorsements. In connection with the issuance of the Policy, please advise as to the availability of the following endorsements:

(a) First Loss Endorsement (if multiple policies) (Form T-14);

(b) Restrictions, Encroachments, Minerals Endorsement (Form T-19);

(c) Access Endorsement (Form T-23);

(d) Contiguity Endorsement (Form T-25);

(e) Assignment of Rents/Leases Endorsement (Form T-27);

(f) Tax Deletion Endorsement (Form T-30);

(g) Variable Rate Mortgage Endorsement (Form T-33);

(h) Environmental Protection Lien Endorsement (Residential only) (Form T 36); and

(i) Deletion of arbitration.

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24. Survey Revisions. Any and all changes to the Survey should be incorporated into the Commitment.

25. Further Comments. The Title Company should refer to the section below for comments which may pertain to the Commitment.

26. Effective Date. Upon reissuance of the Commitment with the objection contained in this Letter, please update the Effective Date of the Commitment to a date within three (3) days of the issuance date.

COMMITMENT (other than Texas):

27. Policy Form. The Commitment contemplates the issuance of ALTA Loan Policy Form . Lender requires the ALTA Loan Policy Form 2006. Please advise.

28. Proforma Policy. Lender hereby requests that you issue a Proforma Loan Policy (including the endorsements described below), incorporating the matters set forth herein. Note that the Title Company should immediately issue an ALTA Commitment on this transaction. We request that the exact name of the document be described in each item, along with the width, description and general location of each easement.

The effective date of the Loan Policy insuring Lender (the "Policy") must be the later of the date of recording of the deed of trust or the date of funding of the Loan (i.e., the "gap" must be insured).

29. Name of Insured. The name of the proposed insured on the Commitment should be shown as follows: "UBS Real Estate Securities Inc., a Delaware corporation, and its successors, assigns and affiliates, as their interests may appear."

30. Name of Proposed Borrower. The name of the proposed borrower on the Commitment should be shown as " , a ."

31. Record Owner. The record title owner under Item 2 of Schedule A of the Commitment should be identical to the proposed borrower under Item 1 of Schedule A of the Commitment as requested above.

32. Legal Description. The legal description should identify the fee tract as "Tract 1" and the easement estate as "Tract 2." The legal description in the Commitment must be identical to the legal description in the Survey. In addition, the Title Company should coordinate the required revisions with the Surveyor. With respect to the

insured easement estate, Lender requests that the Commitment include a metes and bounds description of such easement estate.

It appears from our review of the plat that there are some easements adjacent to the Property. In the event that any of such easements benefit the Property, such easements should be insured tracts on the Commitment. In particular, it appears that some of the easements created by may be for the benefit of the Property. The legal description for such easement tract should read as follows:

33. State Platting Statute. We note that the Property is [not a separately platted lot.] [a portion of a platted lot.] Please explain how the configuration of the Property does not violate any local or state laws and/or ordinances.

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34. Parcels. Items through , inclusive, of Schedule B of the Commitment should be amended to indicate which parcels are affected thereby.

35. Requirements. All Part I, Schedule B matters will need to be provided to the Title Company in order that such matters will not be shown on the Policy issued in connection with this transaction.

36. Standard Exceptions. Items of Schedule B of the Commitment should be deleted.

37. Inapplicable Matters. Items of Schedule B of the Commitment should be deleted.

38. Taxes. Item of Schedule B of the Commitment should be deleted. In the event that the Title Company cannot delete such item, Lender requests that the exception for special assessments be annotated, "Not yet due and payable."

In addition, with respect to Item of Schedule B of the Commitment, Borrower will need to provide Lender with tax certificates evidencing that all taxes affecting the Property have been paid. The exceptions for general and special taxes and assessments must be limited to the year 200 and subsequent years and annotated, "Not yet due and payable."

39. Survey Reference. Items of Schedule B of the Commitment should contain the following phrase: "as shown on survey of the land prepared by ( No. ) (Project No. ), dated , , and last revised , ." In addition, such exceptions should set forth the general location upon the land and the width of such matters.

In addition, Items of Schedule B of the Commitment should contain the following phrase: "as noted on survey of the land prepared by ( No. ) (Project No.

), dated , , and last revised , ."

40. Tenant's Rights. Item of Schedule B of the Commitment should be amended to read "Rights of tenants in possession under unrecorded leases solely as tenants and solely with respect to space occupied by each such tenant (together with non-exclusive rights in common with other tenants in areas used by all tenants)."

41. Plat Reference. Items of Schedule B of the Commitment should contain the following phrase: "and as shown on the Final Plat of " recorded as Document No. .

42. Access Easements. With respect to Item of Schedule B of the Commitment, the Title Company should confirm that this item will be amended to indicate that there are "no sums currently due or payable."

43. Deed Restrictions. The following revisions should be made to such Item of Schedule B of the Commitment:

(a) The Title Company should confirm that this item will be amended to begin with the phrase "Terms, conditions and restrictions set forth in...."

(b) The Title Company should confirm that this item will be amended to indicate that there are "no sums currently due or payable."

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In addition, with respect to such item, Lender will require Borrower to obtain an estoppel from the declarant confirming that there has been no violation of same.

44. Memorandum of Lease and Lease Assignment. Items of Schedule B of the Commitment should be combined into one (1) exception.

45. Plat. Items of Schedule B of the Commitment should be combined into one (1) exception and revised to list, describe and locate the "matters" disclosed on such Final Plat. For example, "watermain" should be "10' watermain located throughout property."

46. Overhead Electric Lines. All exceptions to overhead electric should be deleted because the lines are merely evidence of availability of utilities and service to the Property and in no way evidences additional easements affecting the Property.

47. Endorsements. In connection with the issuance of the Policy, please advise as to the availability of an "extended coverage" Policy, and endorsed with the following endorsements in addition to those endorsements previously provided:

(a) A street assessment endorsement (ALTA Form 1);

(b) An endorsement covering direct access to public road, whether by means of an abutting road (CLTA Form 103.7) (please note the phrase "and dedicated public" should be added in the endorsement form prior to the word "street") or, if applicable, by means of a valid easement (CLTA Form 103.4);

(c) A comprehensive endorsement covering restrictions, encroachments, minerals and other matters (ALTA Form 9 and CLTA Form 100);

(d) An endorsement insuring against claims that the loan is usurious;

(e) The following endorsements relating to the Survey furnished to Lender in the proposed loan:

(1) A survey/legal description endorsement stating that the land referred to in the Policy is the same land as shown in the Survey (CLTA Form 116.1);

(2) An endorsement covering the foundations of the structures on the land referred to in the Policy (CLTA Form 102.5) (please note the deletion of the phrase "under construction" in such form);

(3) If the Survey shows any actual or possible encroachment by improvements onto easements, then an endorsement covering the same (CLTA Forms 103.3 and 103.6);

(4) An endorsement as to the location of the land and designation of improvements (CLTA Form 116);

(5) A contiguity endorsement relating to all of the parcels (CLTA Form 116.4);

(f) With respect to Item of Part II, Schedule B of the Commitment, an endorsement insuring against any damage due to blanket easements, if applicable (CLTA Form 103.1);

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(g) A zoning endorsement, including a reference to parking (ALTA Form 3.1 and CLTA Form 123.2);

(h) An endorsement insuring that there is no violation of any existing subdivision map act/statute/ordinance affecting the Property (CLTA Form 116.7);

(i) An endorsement insuring that the Property consists of a single tax lot and only the Property is included;

(j) Doing business endorsement;

(k) Deletion of Arbitration;

(l) Utilities facilities endorsement;

(m) An endorsement insuring the variable rate nature of the proposed loan and mortgage (ALTA Form 6 and CLTA Form 111.5);

(n) Water rights endorsement, if available;

(o) An environmental protection lien endorsement (ALTA Form 8.1);

(p) Gap coverage endorsement;

(q) If a leasehold estate, the following endorsements:

(1) Validity of Lease in Schedule B Endorsement (CLTA Form 119);

(2) Validity and Priority of Lease Endorsement (CLTA 119.2); and

(3) Leasehold Loan Endorsement (ALTA 13.1);

(r) "First Loss" endorsement;

(s) If the Property is covered by a patent, a patent endorsement for damages to improvements (existing or hereafter constructed) (CT-230/Special Endorsement No. 5, if available); and

(t) Tie-In endorsement tying together the policies issued with respect to the first and second lien mortgages and deeds of trust encumbering this Property, the other parcels and all ( ) properties ([name of properties]).

48. Insured Closing Letter. Please provide us with two (2) copies of an Insured Closing Letter. The letter should be addressed to Lender c/o at the address shown above. Please forward the letter to the undersigned, and we will have it executed on behalf of the Lender and returned to you.

49. Survey Revisions. Any and all changes to the Survey should be incorporated into the Commitment.

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50. Further Comments. The Title Company should refer to the section below for comments which may pertain to the Commitment.

SURVEY:

1. General. The Survey must be signed, sealed and dated.

2. Requirements. The Survey must depict the following:

(a) A point of beginning and all mathematical dimensions as they relate to the represented boundary. The boundary must be drawn on a clearly identified scale. A north arrow indicator must be shown, the minimum size for the map or plat must be 24" X 36", and the survey must state that it was performed on the ground.

(b) All discrepancies with any record bearings as they relate to the measured bearings.

(c) The legal description of the Property, which must be identical to that shown on the Commitment. It must be possible to trace the legal description of the land on the survey by following the bearings and dimensions around the boundaries of the land. If the Commitment refers to a recorded plat, then such plat with appropriate recording references must be indicated on the Survey. All exceptions on the Commitment must be plotted (or identified on the face of the Survey as not plottable).

(d) Vicinity map showing the property surveyed in reference to nearby highway(s) or major street intersection(s).

(e) Flood zone designation (with proper annotation based on Federal Flood Insurance Rate Maps or the state or local equivalent, by scaled map location and graphic plotting only).

(f) Gross land area.

(g) List setback, height, and floor space area restrictions disclosed by applicable zoning or building codes . If none, so state.

(h) Exterior dimensions of all buildings at ground level

(i) Square footage of exterior footprint of all buildings at ground level.

(j) Square footage of gross floor area of all buildings.

(k) Measured height of all buildings above grade at a defined location. If no defined location is provided, the point of measurement shall be shown.

(l) Substantial, visible improvements (in addition to buildings) such as billboards, signs, parking structures, swimming pools, etc.

(m) Parking areas and, if striped, the striping and the type (e.g., Handicapped, motorcycle, regular, etc.) and number of parking spaces.

(n) Indication of access to a public way on land such as curb cuts and driveways and to and from

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waters adjoining the surveyed tract, such as boat slips, launches, piers and docks.

(o) Location of utilities existing on or serving the Property as determined by observed evidence (including railroad tracks and sidings; manholes, catch basins, valve vaults or other surface indications of subterranean uses; wires and cables (including their function, if readily identifiable) crossing the Property, all poles on or within ten feet of the Property, and the dimensions of all crossmembers or overhangs affecting the Property; and utility company installations on the Property.

(p) Names of adjoining owners of platted lands.

(q) Observable evidence of earth moving work, building construction or building additions within recent months or a notation that there is no observable evidence of earth moving work, building construction or building additions.

(r) Any changes in street right of way lines either completed or proposed, and available from the controlling jurisdiction or a notation that there have been no changes in street right of way lines

(s) Observable evidence of recent street or sidewalk construction or repairs or a notation that there is no evidence of recent street or sidewalk construction or repairs.

(t) Observable evidence of site use as a solid waste dump, sump or sanitary landfill or a notation that there is no observable evidence of site use as a solid waste dump, sump or sanitary landfill.

(u) The record description of the Property forms a mathematically closed figure.

(v) The Survey correctly shows the location of all buildings, structures and other improvements situated on the Property.

(w) All set back, side yard and rear yard lines shown on the recorded plat or set forth in the applicable zoning ordinance are shown on the survey.

(x) There are no encroachments onto adjoining premises, streets, alleys or easement areas by any buildings, structures or other improvements, and no encroachments onto the Property by buildings, structures or other improvements situated on adjoining property.

(y) All utilities serving the Property enter through adjoining public streets and/or easements of record; that, except as shown, there are no visible easements or rights of way across the Property that the property described is the same property described in the Commitment and that all easements, covenants and restrictions referenced in the Commitment, or easements which the undersigned has been advised or has knowledge, have been listed and plotted hereon or otherwise noted as to their effect on the Property.

(z) The Survey shows the location and direction of all visible storm drainage systems for the collection and disposal of all roof and surface drainage.

(aa) Any discharge into streams, rivers or other conveyance system is shown on the Survey.

3. Commitment References. The Survey should include a list of each exception that is shown on the Commitment and identify each exception as either "affecting/does not affect the Property" and "as shown on the

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Survey."

4. Depiction of Easements. The Surveyor should label each easement with the Volume/Page numbers, Instrument numbers, and/or "Per Plat", as applicable.

5. Certification. The certification on the Survey should be revised to conform to Lender's standard form as provided to Borrower (a copy of which is attached hereto as Annex 1).

6. Parking. The Survey should be revised to include a notation indicating the total number of parking spaces located on the Property (regular and handicapped spaces). In addition, there is a discrepancy between the Parking Stall Count depicted on the Survey and the actual number of parking spaces shown thereon. Please confirm the number of parking spaces identified on the Survey.

7. Setback Requirements. The required setback areas should be depicted on the Survey; or, in the alternative, please confirm that no setback lines affect the Property.

8. Commitment Revisions. Any and all changes to the Commitment should be incorporated into the Survey.

9. Further Comments. The Surveyor should refer to the section above for comments which may pertain to the Survey.

We reserve comment on all zoning matters pending receipt of additional information.

Since our comments on the Commitment and Survey have not been reviewed by Lender, our comments are subject to revision following review of same by Lender.

Finally, please note that Lender has requested we not devote additional time to the review of title and survey matters until we have been advised that either (i) all of the foregoing revisions have been performed, or (ii) such revisions have not or cannot be performed, together with an adequate explanation for same.

Should you have any questions or comments with respect to the foregoing, please contact me at

.

Sincerely,

Enclosure

cc: [CLIENT/LENDER] (w/encl.; via facsimile) [SHAREHOLDER] (w/encl.; of the Firm) [BORROWER'S COUNSEL] (w/encl.; via facsimile) [TITLE COMPANY] [SURVEYOR] [BORROWER] (w/encl.; via facsimile) [MORTGAGE BROKER] (w/encl.; via facsimile)

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ANNEX 1

The following certification must be included on the plat by the surveyor:

The survey shall be prepared by a surveyor licensed by the State in which the Property is located, shall be dated no more than thirty (30) days prior to the closing of the Loan and shall contain the following certification:

This survey is made for the benefit of: [INSERT EXACT LEGAL NAME OF BORROWING ENTITY], [ Title Insurance Company] and their respective successors and assigns.

I, , a Registered Land Surveyor in the State of , do hereby certify to the aforesaid parties, their successors and assigns, as of the date set forth above, that I have made a careful survey of a tract of land (the "Premises") described as follows:

[INSERT LEGAL DESCRIPTION]

1. The survey reflected by this plat was actually made upon the ground, this is to certify that this map or plat and the survey on which it is based were made in accordance with the "Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys," jointly established and adopted by ALTA and NSPS in 2011, and includes Items of Table A thereof. Pursuant to the Accuracy Standards as adopted by ALTA, ACSM and NSPS and in effect on the date of this certification, undersigned further certifies that in my professional opinion, as a land surveyor registered in the State of , the Relative Positional Accuracy of this survey does not exceed that which is specified therein.

2. The survey and the information, courses and distances shown thereon are correct.

3. The title lines and lines of actual possession are the same.

4. The record description of the subject property forms a mathematically closed figure. [IF NOT, SO STATE.]

5. The survey correctly shows the location of all buildings, structures and other improvements situated on the Premises.

6. The number of striped parking spaces located on the Premises is , and, to the extent possible, are graphically shown hereon.

7. All set back, side yard and rear yard lines shown on the recorded plat or set forth in the applicable zoning ordinance are shown on the survey.

8. There are no encroachments onto adjoining premises, streets, alleys or easement areas by any buildings, structures or other improvements, and no encroachments onto the Premises by buildings, structures or other improvements situated on adjoining premises.

9. All utilities serving the Premises enter through adjoining public streets and/or easements of record;

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that, except as shown, there are no visible easements or rights of way across the Premises; that the property described hereon is the same as the property described in [ Title Insurance Company] Commitment No. with an effective date of , 201_ and that all easements, covenants and restrictions referenced in said title insurance commitment, or easements which the undersigned has been advised or has knowledge, have been listed and plotted hereon or otherwise noted as to their effect on the subject property.

10. The survey shows the location and direction of all visible storm drainage systems for the collection and disposal of all roof and surface drainage.

11. Any discharge into streams, rivers or other conveyance system is shown on the survey.

12. Said described property is located within an area having a Zone Designation by the Secretary of Housing and Urban Development, on Flood Insurance Rate Map No. , with a date of identification of , 201_, for Community Number , in County, State of , which is the current Flood Insurance Rate Map for the community in which the Premises is situated.

13. The Premises has direct physical access to , a public street or highway.

Name: Reg. Land Surveyor No.

Date: , 20__

[Seal]

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APPENDIX 16

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