Take the first two letters of your last name. Next add the last letter of your first name. Finally, enter those three letters on the Nasdaq, and purchase $700,000 worth of whichever stock they represent.
If you think that sounds like bad investment advice, then you are correct. You should never make an investment until you understand precisely what you are investing in – and commercial land is certainly no exception.
Never Buy Commercial Land Without a Survey
Here is equally bad investment advice: purchase commercial property that you haven’t received an ALTA survey for. You’ll spend hundreds of thousands of dollars without knowing the land’s boundaries, whether it is subject to any easements, whether it evinces the existence of underground utilities, or the names of the owners of adjoining properties. You truly are flying blind when you buy commercial property without a comprehensive land survey.
Some commercial land buyers assume that a good title insurance policy preempts the need for a survey. Although having title insurance is advisable in the overwhelming majority of commercial land deals, it does not provide complete protection against every potential issue.
Despite what its name suggests, an ALTA Extended Title Policy does not extend to disclose the locations of improvements and utilities. It does not disclose whether the property is currently in violation of municipal zoning ordinances. It does not disclose existing relationships between owners of adjoining land, the relationship of occupied liens to record lines, or other matters which typically aren’t recorded but which materially affect land. Only an ALTA survey reveals such crucial details, and provides the exhaustive picture a commercial property investor needs in order to fully comprehend precisely what they are getting into.
This caveat is a moot point to many commercial land buyers, however. If you are partnering with a financial lender, then it will most likely require an ALTA survey before the transaction can proceed. That’s because the information it presents is crucial to ensuring the property’s value and whether it is zoned correctly. Lenders know that ALTA surveys can prevent massive headaches. Buyers are advised to follow suit.
Never Sell Commercial Land Without a Survey, Either
Caveat emptor: let the buyer beware. It has been a tenet of common law for over four centuries, and essentially means that a seller isn’t responsible if their buyer incurs a loss that they could have avoided by inspecting or researching a chattel beforehand.
Caveat emptor is generally understood to apply to real estate transactions as well – but this does not absolve the seller of their ethical duty to represent their property as truthfully as possible.
By revealing the existence of encroachments, easements, boundary line disputes, and other factors which materially affect the property’s value, the seller helps their buyer understand which risks they are assuming and whether they should expect to resolve critical discrepancies. In other words, presenting an ALTA survey to your buyer upfront gives them a better chance of success. That increases their likelihood of buying from you again. It also inclines the buyer to form a favorable opinion of you, which counts for a lot in an industry where a good reputation is worth its weight in gold.
A seller gives themselves another great advantage by ordering their own ALTA survey. If the buyer’s survey presents information that could be used to lobby for a lower price – and that information contradicts the seller’s survey – then the seller has recourse to the buyer’s (possibly dishonest) bargaining tactics. In no uncertain terms, an ALTA survey can provide vital protection against fraud.
Buyers and Sellers Should Discuss Surveys Early On
Whichever side of the closing table you intend to sit on, it’s important to discuss surveys at the onset of the sale process. It clarifies everyone’s expectations for one another, enables the seller to make the property accessible to the buyer’s surveyor, and prevents a “he said, she said” scenario from needlessly complicating the transaction while it’s already underway.
If you’re going to take part in a commercial property transaction in Minnesota, then we welcome you to contact Compass Consultants today. In addition to ALTA surveys, we provide comprehensive boundary surveys, location surveys, construction surveys, and other surveys that present essential information for buyers, lenders and sellers alike!
Due diligence. It’s just one way a professional sets themself apart from the amateurs. When a professional is involved in the purchase of a commercial property, due diligence compels them to understand the land it is situated on inside and out.
When it comes to land surveying, an ALTA survey represents the highest degree of due diligence. It is an exhaustive land parcel map – not just a demarcation of a parcel’s boundaries, but a detailed inventory of all existing improvements, easements, and other material information about the property.
The details contained by an ALTA survey won’t just prove useful to the buyer. The comprehensive commercial property report is usually required by attorneys, financial institutions and title insurance providers alike. In fact, these professionals are usually the ones that order ALTA surveys in the first place.
ALTA surveys are especially important to lenders. They use that information to validate their borrowers’ investments. After all, they do want to issue good loans. Title insurers, which sell their clients protection against unknown title defects, have every reason to determine whether any part of real property isn’t legally transferable for any reason. An ALTA survey sheds light on that matter by design.
What Does an ALTA Survey Include?
For a survey to meet ALTA specifications, it cannot merely include boundary lines. It must satisfy a set of criteria defined by two national trade associations: the American Land Title Association (ALTA), and the National Society of Professional Surveyors (NSPS).
The Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys dictates standards for measurement, but we don’t need to delve into the meaning of “Relative Positional Precision” for the purpose of this discussion. Let us focus instead on the elements of records research and fieldwork, which require an ALTA survey to include the following information:
• The current record description of the surveyed property; if one does not already exist, then the survey must include the record description of the parent parcel containing the surveyed property
• Complete copies of the surveyed property’s most recent title commitment; if these do not exist, then other title evidence may be provided instead
• Record descriptions of land parcels adjoining the surveyed property, with some exceptions
• Any recorded easements, regardless of whether they benefit or burden the surveyed propert
• Locations of any existing survey monuments
• Rights of way and access, including the names of all roadways abutting the surveyed property, visible evidence of physical access to said abutting streets, and possible encroachments created by driveways, alleys and private roads of adjoining properties
• The locations of all walls, buildings, fences, and other improvements within 5 feet of each boundary line
• The locations of buildings on the surveyed property
• Evidence of easements, servitudes or other uses by non-owner occupants on the surveyed property: sewer lines, telephone lines, fiber optic lines, electric lines, water lines, gas lines, etc.
• Surface indications of underground easements and servitudes, such as vent pipes and utility cuts
• Cemeteries and other burial grounds
• Water features, including those that form boundaries
This is not an exhaustive list of every detail an ALTA survey must include. But as you can see, an ALTA survey deserves its reputation for being so thorough.
An ALTA survey can also contain information that isn’t specified in the Minimum Standard Detail Requirements. Table A: Optional Survey Responsibilities and Specifications gives the surveyor’s client the option to select additional items. These can include:
• Flood zone classification
• Vertical relief (i.e. topographical characteristics of the surveyed property)
• Exterior dimensions of all buildings at ground level
• Measured heights of all buildings above grade
• Substantial features, such as billboards, swimming pools and unofficial garbage dumps
• Evidence of underground utilities
• Evidence of recent earth moving work, building construction or building additions
• Names of adjoining owners according to current tax records
Are you planning on purchasing commercial property? Or do you work in an industry that regularly orders ALTA surveys on the behalf of its clients? Then we welcome you to contact Compass Consultants today. We serve Minnesota, North Dakota and South Dakota, and we provide all types of land surveys including ALTA, boundary, location, subdivision, site-planning and construction.