Title commitments and ALTA surveys: a practitioner read.

Schedule B-II is the part of the title commitment the lender actually reads. Schedule A establishes the insured estate and the amount of coverage. Schedule B-I lists requirements – things that must happen before the policy issues (payoff of existing mortgages, delivery of the deed). Schedule B-II lists exceptions – matters that are excluded from coverage, either because they’re general limitations on the policy or because they’re specific to this property. Every exception in B-II is a potential lender objection. The analyst who reviews the commitment on week one has time to cure problems; the one who reads it the week of closing is managing a delay.

The standard exceptions that appear on virtually every commitment – parties in possession, unrecorded easements, mechanics’ lien rights, taxes not yet due and payable – are not red flags. They’re addressed by the owner’s affidavit (which the seller executes at closing), title endorsements, and the customary closing mechanics. Lenders who see these for the first time and escalate to counsel add two days to the timeline unnecessarily. The exceptions that actually require substantive cure work fall into four categories: recorded liens (mortgages, judgment liens, federal tax liens), encroachments or boundary issues revealed by survey, mineral rights reservations that affect surface use, and easements that affect the intended use of the property.

On survey standards: the ALTA/NSPS Land Title Survey is the standard for CRE transactions with institutional debt. Standard surveys – what a local surveyor produces for a residential or small-commercial transaction – won’t satisfy an institutional lender’s survey requirements and won’t support an ALTA policy. The lender’s title requirements will specify which Table A optional items are required; at minimum, items six (zoning setbacks), seven (parking count and type), 11 (utility location), and 20 (plat review) are typical for multifamily and industrial. An encroachment discovered in an ALTA survey – a neighboring structure extending over the boundary line, or the subject building’s parking canopy crossing an easement – requires either title insurance endorsement or a cure. Endorsements for encroachments are available but not automatic; the title company assesses risk, and a significant structural encroachment may require a boundary-line agreement with the neighboring owner before coverage is extended.