- What Do the New 2011 ALTA/ACSM Survey Standards Mean to Lenders?
- February 18, 2011 | Author: Frank A. Appicelli
- Law Firm: Bingham McCutchen LLP - Hartford Office
On February 23, 2011, the “2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys” go into effect and replace the 2005 Standards. The 2011 Standards were adopted by the American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS) in the fall of 2010. The 2011 Standards have been described as the first major re-write of the standards since their initial adoption in 1962. Since an ALTA/ACSM survey is a standard closing requirement for a commercial mortgage loan, lenders will want to know what the 2011 Standards mean to them.
Concerns of Lenders
ALTA and NSPS report that the 2011 Standards are the result of two years of work by NSPS and a select group of title attorneys from ALTA. Most commercial mortgage lenders were probably not aware of this project. One understandable reaction of lenders will be concern that the drafters of the 2011 Standards, primarily surveyors, will have weakened the benefits of the ALTA/ACSM survey to lenders in an effort to insulate the surveying industry from liability and to reduce the work required to be undertaken by surveyors in a typical loan closing. While that has partly occurred, the scope of changes embodied by the 2011 Standards are not reminiscent of the changes forced on lenders by the insurance industry in their recent changes to the ACORD forms of insurance certificates. Nonetheless, lenders need to be aware of the changes in the 2011 Standards.
Summary of Changes
The depiction of the mortgaged property and the plottable title matters shown on a survey prepared under the 2011 Standards will differ very little from a survey prepared under the 2005 Standards. In large part, the differences between the 2011 Standards and the 2005 Standards are formatting revisions to the organization of the standards and the streamlining of terminology for consistency purposes. Other differences are technical in nature and are largely refinements in the measurement standards to be used by surveyors that should not materially affect lenders. The following is a listing of differences between the 2011 Standards and the 2005 Standards that may be of concern to lenders:
1. Exclusive Form of Surveyor’s Certification: The 2011 Standards contain a “short-form” of surveyor’s certification that is generally the same as the one contained in the 2005 Standards. However, the 2005 Standards described this certification as one that could be made when the surveyor had met all of the detail requirements of the 2005 Standards. This was generally interpreted by lenders as permitting changes and additions to this form of certification. In fact, nearly all lenders require their own version of a “long-form” certification from surveyors. This is no longer allowed under the 2011 Standards. The 2011 Standards state that “[t]he plat or map of an ALTA/ACSM Land Title Survey shall bear only the following certification, unaltered, except as may be required pursuant to [applicable laws or jurisdictional requirements].” This is the one change in the 2011 Standards that appears to be an intentional effort by the surveying industry to avoid complying with the additional survey certification requirements imposed by lenders and property owners. However, it should be noted that the 2011 Standards now require that the short-form certification contain the date of completion of the field work for the survey, which is something that most lenders required in their long-form certifications.
2. Recognition of Lenders: The 2005 Standards did not include any references to lenders within the scopes and purposes of the surveying standards. The 2005 Standards only implicitly recognized lenders as part of the surveying process by referring to lenders as a potential party who could be named within the short-form surveyor certification. The 2011 Standards now expressly recognize lenders as parties who have come to rely on complete and accurate surveying work. A skeptical lender could ascribe this express recognition of lenders as a way to be clear that the use of only the short-form surveyor’s certification, without alteration, is mandatory for lenders.
3. Mandatory Depiction of Table A Items: The Table A appearing at the end of the 2005 Standards also appears in the 2011 Standards. The Table A items are described as optional survey responsibilities and specifications to be negotiated with the surveyor. In the 2011 Standards certain of these optional items have become mandatory items and have been moved out of Table A and into the main body of 2011 Standards. These new mandatory items are (a) the vicinity map showing the surveyed property in reference to nearby highways and major streets and (b) the indication of access to public ways such as curb cuts and driveways. For lenders who already required these items when they were optional under the 2005 Standards, this will not constitute a noticeable change.
4. Other Changes to Table A: Item 6 of Table A continues to cover zoning matters. Item 6 has been revised to add the zoning classification for the property as an optional item. However, Item 6 has been further amended to provide that the zoning classification and other zoning information are to be provided to the surveyor by the title insurer. Since title insurers do not generally provide this type of information, it will be interesting to see how the title insurers respond to this change. Another change to Table A has been the addition of the following new Items: (a) Item 2 — street address of property, (b) Item 19 — location of wetland areas, (c) Item 20 — location of improvements within offsite easements, and (d) Item 21 — furnishing of certificate of surveyor’s professional liability insurance.
5. Greater Description of Access, Easements and Servitudes: In addition to making access to public ways a mandatory survey item, the 2011 Standards require more information to be depicted regarding access, easements and servitudes. For instance, the survey must show the width of all easements and provide information as to whether their locations are plottable or observed, whether they affect the surveyed property, and whether they are part of a blanket easement. The survey must also show the location of any other forms of access used by persons other than the occupants of the property.
6. Inclusion of Title Commitment Information: The 2011 Standards require the surveyor to note on the survey the title commitment or policy number, its effective date and the name of the title insurer. For lenders who previously required this information on their surveys, this will not be a change. However, this requirement will help to make the use of the short-form surveyor certification more palatable to lenders as this requirement was typically found in lenders’ long-form certifications.
The implementation of the 2011 Standards will not bring about any major changes to lenders, other than prohibiting the use of a long-form surveyor certification. However, if lenders undertook a review of their standard long-form certifications, many will find that the items contained in their certifications are already covered by the requirements contained in the 2011 Standards. Where a particular lender’s standard certification in fact provides additional critical protections (such as flood zone information and additional zoning information), that lender will need to determine how to continue to receive those protections or reasonable alternatives. One option is to obtain those protections from other vendors, like flood zone and zoning consultants, title insurers or engineering firms. Another option is to remove the item, such as flood zone or zoning information, from the certification and require it be shown elsewhere on the survey. A third option is to require the property survey to be prepared under state or local surveying standards if they do not prohibit the use of a long-form certification. In the end, each lender will need to compare their own surveying requirements against the 2011 Standards and determine whether any such alternatives are necessary or practical. We believe that most lenders will end up accepting the 2011 Standards, even if grudgingly, and will rely even more on the survey coverages afforded by the lenders’ title insurance policies (when the standard survey exception is deleted).