THE IMPORTANCE OF THE SURVEY REVIEW CONTINGENCY IN BUYING REAL ESTATE
03-30-2009
Contracts for the sale of real estate must be in writing in Colorado. C.R.S. § 38-10-108. While there is no written form required for a real estate transaction in Colorado, most parties will utilize the standard forms promulgated by the Colorado Real Estate Commission. A licensed real estate broker is only authorized to complete the standard forms by Statute, C.R.S. § 12-61-803(4). The standard forms are available on the State of Colorado’s Website at http://www.dora.state.co.us/real-estate/contracts/contracts.htm. One of the contingencies contained in the standard form real estate contract is for survey review. The parties may determine whether the seller or buyer shall order and pay for a survey and determine what kind of survey is to be performed. The contract may be made conditional on an acceptable survey. There are provisions for the deadline for completion of the survey and the survey objection deadline.
The type of survey to be ordered and reviewed depends greatly upon the nature of the real estate being acquired. Surveys are useful in determining field locations of deed lines or entire property boundaries. Surveys will locate physical monuments so that improvements can be built in relation to property boundaries within setback requirements. A survey can determine whether there are encroachments on the subject property or whether improvements on the subject property may encroach on neighboring properties. Surveys can locate easements for roads or utilities. Surveys can also reflect off record issues, such as the failure of a legal description to close. They can be utilized to determine acreage and current code compliance for improvements such as setback requirements and flood plain location. Many governmental entitles require a survey or at least an improvement location certificate prior to issuing a permit to erect a fence.
Depending upon the type of survey required, the costs can be wide ranging from several hundred dollars to several thousand dollars. Typically, a lender requires at least an improvement location certificate to ensure that the improvements being collateralized are actually located on the legally described property. Title companies may also require survey review as a condition of the title commitment, especially for vacant land.
Surveyors do not always require written contracts for their services. However, due to the number of different surveys available and ranging number of items that can be included in a survey, it is recommended to have a written contract with the surveyor setting forth exactly what is being ordered, its cost and completion date. The contract should also provide that the survey will be executed and sealed by a professional land surveyor, licensed in the State of Colorado.
TYPES OF SURVEYS
The following are types of surveys, which are referred to in the industry:
1. Improvement Location Certificate (actually not a survey);
2. Construction Survey;
3. Boundary Survey;
4. Land Survey Plat;
5. Improvement Survey Plat;
6. ALTA Land Survey; and
7. Subdivision Plat.
Land survey plats, improvement survey plats, and improvement location certificates are statutorily defined. Together with boundary surveys, these will be the typical surveys in a consumer transaction. Subdivision plats are statutorily defined and typically have added requirements from local authorities.
Improvement Location Certificate:
Improvement location certificate (“ILC”) means a representation of the boundaries of a parcel of land and the improvements thereon prepared pursuant to C.R.S. § 38-51-108. An ILC is relatively inexpensive compared to other surveys. Typically, ILCs are utilized by financial institutions to verify that improvements are located on the property that is legally described. By its own terms, ILCs are not to be used as land survey plats.
Construction surveys are typically not relevant or useful in a real estate acquisition. Construction surveys are typically used only in the construction of a particular improvement and not intended to be used as boundary surveys. Construction surveys do not meet the standards of a land survey plat.
In most instances, a boundary survey must meet the requirements of a statutory land survey plat. Only in rare instances would a boundary survey be able to be performed without setting a monument or accepting an unrecorded existing monument that is not accepted within a subdivision platted after July 1, 1975. Even though there are statutory requirements as indicated, many surveyors are willing to perform variations of boundary surveys at a lesser cost to show only one boundary line as opposed to the entire boundary. Most surveyors will prefer to stake all corners of the property so that an accurate plat can be drawn and since the location of the corners will probably be required even if only one boundary line is requested.
Land Survey Plat:
The requirements for a Land Survey Plat are established by C.R.S. § 38-51-106. The Land Survey Plat requires the establishment of all boundaries, monuments, corners and provides dimensions of the property, discloses recorded and apparent rights-of-way and easements and establishes necessary measurements and bearings to properly locate and describe the property. It requires a written property description and the signature and seal of the professional land surveyor. Any conflicting boundary evidence must be noted.
Improvement Survey Plat:
The Improvement Survey Plat is a land survey plat, which also includes the location of all structures, easements, encroachments and other improvements on the property. Its terms are set forth in C.R.S. § 38-51-102(9).
An ALTA survey is perhaps the most thorough and expensive survey. The American Land Title Association defines its standards. The ALTA survey is the most comprehensive, and typically is required to show nearly every aspect of the property, which can be investigated or shown on a survey. The actual requirements can be found in the ALTA/ACSM Land Title Survey Standard. http://www.acsm.net/ALTA2005.pdf
Subdivision Plat:
A subdivision plat must meet all the requirements of a land survey plat. In addition, a subdivision plat must meet other statutory requirements, such as marking boundaries of the block within the lot, tract or parcel, as well as the corners of any lot, tract or parcel sold separately, within one year of the effective date of a sales contract for said lot. There are numerous other requirements for a subdivision plat, which are beyond the scope of this article. C.R.S. § 38-51-105. In addition to State requirements for a subdivision plat, there are typically additional requirements, which vary by local authority.
Due Diligence
Once received, a survey must be reviewed by a person with adequate experience in reading surveys. It is a good idea to have the buyer meet with the surveyor for a verbal explanation once the survey is complete. Buyer’s counsel should review the survey with a light to the intended use of the property. If there are any unsatisfactory conditions or conditions that require further investigation, then notice to the seller should be provided triggering an obligation to attempt to cure the unsatisfactory condition under the contract.
Disclaimer. This letter and any information contained herein are inteded for informational purposes only, and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.
Authored by Ronald D. Jung, esq.
of Jung & Associates, P.C.
www.legalrealty.com
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