TITLE TALK: SURVIVING THE SURVEY
Survey Deletion Coverage is the cause of great confusion in the real estate world. What in the world does that even mean and why is it monumentally important to title policies? Let’s discuss.
In the Texas Real Estate Commission (“TREC”) Residential Contract (“Contract”), there includes a provision that states an option to amend or delete the general survey exception in the Owner’s Policy of Title Insurance (“OTP”). In Section 6(A)(8), the Contract reads:
The standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements;
□ (i) Will not be amended or deleted from the title policy; or
□ (ii) Will be amended to read, “shortages in area” at the expense of □ Buyer □ Seller
So, why is this paragraph included in the TREC Contract and why is it important? Well, this paragraph dictates whether a buyer will receive Survey Deletion Coverage in their OTP. In order to understand what Survey Deletion Coverage is, one must first understand what Schedule B of the OTP includes.
Schedule B of a Title Commitment lists the exceptions from coverage; in other words, whatever is listed in Schedule B will not be covered by the Title Policy. Schedule B, Item 2 states the following:
“Any discrepancies, conflicts, or shortages in the area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements.”
Does this sound familiar? Compare it with Section 6(A)(8) of the TREC Contract above. This language means that if anything listed in Schedule B, Item 2 is known to the buyer at closing, the buyer will not have coverage for these items in the OTP.
Fortunately for buyers, this provision may be amended. While drafting a TREC Contract, the real estate agent has the option to check off one of the two boxes. Paragraph (i) will not allow Schedule B, Item 2 to be amended or deleted from the Title policy, while Paragraph (ii) will be amended to read only “shortages in the area.”
So, how can coverage be added back into the policy? Once a survey is reviewed and accepted by the title company, the title company may add coverage back into the OTP. This is where the term “survey deletion” comes from – simply because we are deleting exceptions to coverage regarding the survey. Therefore, if the exceptions to coverage are amended, the OTP will only read “shortages in area,” instead of the original broader language of Schedule B, Item 2.
Is this good for the Buyer? YES! By amending this language, the Buyer will gain policy coverage for any discrepancies, conflicts or boundary lines, encroachments or protrusions, or overlapping improvements. HOWEVER, the title company may still make specific exceptions to matters shown on the survey – for example, after reviewing the survey, the title company may make a specific exception to improvements located in an easement.
TITLE TRUTH: Always recommend to your Buyer that he obtain this coverage! Survey Deletion (Area & Boundary) Coverage for a residential property is 5% of the basic rate for a single-issue policy, and 15% on a commercial property? However, certain requirements must be met before the title company will provide Survey Deletion Coverage. If you have any questions on whether you meet these requirements, feel free to give us a call at (713) 227-7500 or email email@example.com.