Area and Boundary Amendment
The TREC 1-4 Family Residential Contract (Resale) Form includes an option to amend or delete the general survey exception in the Owner’s Title Policy. Clients often ask about this Area and Boundary Amendment, commonly referred to as the Survey Deletion or Survey Coverage. They want to know what it is, what it does, how to get it, what it costs, and what the title company needs to make it happen. Here are a few tips to help address these questions:
What is the Area and Boundary Amendment (aka Survey Deletion or Survey Coverage)?
Survey Coverage insures the boundaries of your property and any loss to the owner due to boundary conflicts or any loss due to encroaching improvements that are NOT shown on the survey.
What is the benefit of having Survey Coverage?
Schedule B of the title commitment sets forth exceptions to coverage. All exceptions that are listed are items that will not be covered by the title policy. One of the exceptions listed on Schedule B is Schedule B, Item #2 which excludes coverage for: “Any discrepancies, conflicts or shortages in area or boundary lines, and any encroachments, protrusions, or overlapping of improvements.”
What does this mean for the buyer? The exception excludes coverage for any of the following items that exist at closing:
– Surveyor errors in locating improvements or the boundary lines of a property;
– Homeowner’s Association claiming an improvement is built over a building line and demanding the removal of the improvement;
– A utility company requiring removal of improvements located within an easement;
– Fence lines not following the actual boundary lines of the property;
– An adjoining landowner claiming a buyer’s improvements encroach onto their property;
– A buyer claiming an adjoining landowner’s improvements encroach onto their property
Doesn’t the survey take care of boundary issues? Relying on surveys to address boundary issues does not always work. Often, buyers want to use the seller’s existing survey for a new transaction. However, this practice puts both the buyer and the agent at risk in the event the survey proves to be inaccurate. Because the survey was issued to a prior owner, the new property owner cannot turn to the surveyor for recourse. In this instance, the agents involved offer their only choice for remedy. Unfortunately, even a new survey may have errors, may be challenged by a third-party, or may be subject to action.
An easy strategy to minimize risk is to make buyers aware that they can purchase Survey Coverage: an amendment to the survey exception in their title policy, which will protect them from loss in the event of a survey error. By paying a minimal amount of additional premium, buyers can protect themselves and their agents. This optional Area and Boundary Amendment coverage deletes “Any discrepancies, conflicts or boundary lines, and any encroachments, protrusions, or overlapping of improvements” from the general exception, leaving only “shortages in area” in the Exceptions.
How do You Get Survey Coverage?
Simply check the box in Paragraph 6A (8) of the contract stating the exception “will be amended”, and then select which party will pay for this additional expense.
What does Survey Coverage Cost?
The cost for an amendment, often referred to as survey deletion coverage, depends on the type of policy being issued. On a residential policy the cost of Area and Boundary Coverage is 5% of the basic premium rate (15% for non-residential).
What does the Title Company Need to Amend the Exception?
We must be presented with a survey prior to closing. If we are using an existing survey we also must receive a Residential Real Property Survey Affidavit (“T-47”) that describes any improvements or changes, if any, that have been made to the property. The existing survey and T-47 are subject to review and approval by our examiners and underwriters. Assuming the survey is approved, we must also collect the premium for Survey Deletion at closing.