Occasionally buyers of industrial properties ask, "Why do I need to pay for a survey of the property and for title insurance?" In today’s economic climate, investment in a proper survey and title insurance coverage is a vital aspect of real estate ownership.
Title insurance began in 1876 in Philadelphia following a lawsuit regarding a lien on a property. The new owner of the real estate lost his investment because his attorney thought (incorrectly) that an outstanding lien was invalid. This led to the formation of the first title insurance company to insure against title defects that could be costly to a property owner.
Today, lenders require title insurance to protect their interest in a mortgaged property. The American Land Title Association (ALTA) produces standardized title policy forms and endorsements which are almost universally used by title insurance companies in the United States. Most often used in Oklahoma is the ALTA Form B policy. The policy itself is underwritten by the title insurer and ALTA sets the uniform standards for coverage. Another term that you might see in regards to title insurance is “abstract”.
An abstract is an assemblage of the legal documents relating to each specific property set in chronological order. Since Oklahoma is one of the last two states in the country to use real estate abstracts, the ALTA form sets the requirements for updating the abstract and examination by a title attorney. The examination looks for mistakes or omissions made in past transactions as well as outstanding judgments, liens, or mortgages that would affect the property. Based on the examination, a commitment for title insurance is issued specifying any curative steps necessary to perfect the title.
The ALTA Form B includes a survey endorsement and sets the minimum standards for the survey. These standards include depiction on the survey of boundaries, structures, easements, encroachments, and streets. The standards also address the certifications and licenses required for the surveyor. Once accepted by the title company, a survey sets the property boundaries covered by the title insurance.