May 18-May 31, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 23
Law & Accounting
T
his is the 11th of a series
of a dozen or so articles
that come from some
years of experience using the
Colorado Real Estate Commis-
sion-approved contracts for pur-
chase and sale of real estate for
commercial real estate transac-
tions. Previous articles dealt with
the buyer, seller, property, water
rights, ordering the title commit-
ment, owner’s extended cover-
age, title objections, off-record
matters and special districts. This
article addresses ordering the
improvement location certificate
or survey.
As to survey matters, the con-
tract sets out the following pro-
cedure for ordering the “new
improvement location certifi-
cate” or “new survey:”
1) The buyer and seller state
whether the exceptions for sur-
vey matters are or are not to be
deleted from the title commit-
ment, and if they are not to be
deleted, the rest of the survey
provisions are commonly delet-
ed or treated as not applicable
(§8.1.3).
2) The seller is required to fur-
nish to the buyer existing surveys
in the seller’s possession (§8.3).
3) The parties state whether a
new improvement location cer-
tificate (“new ILC”) or a new
survey (“new survey”) is to be
delivered to the buyer (§9.1) and,
if so, by what date; the date they
select is called the “new ILC, or
new survey deadline” (§9.1).
4) The parties state whether
the buyer or seller is to order or
provide for the new ILC or new
survey if one is to be delivered to
the buyer (§9.1.1).
5) If a new survey is selected,
the parties state what kind of
survey and who is to pay for it
(§9.1.2).
As is warned in §8.1.3, the
title insurance company may
require a new survey or a new
ILC in order to provide owner’s
extended coverage, discussed in
a previous article. In what fol-
lows, I point out some “tips” and
“traps” relating to ordering the
new ILC or new survey.
Ordering the survey.
In §9.1,
the contract gives the parties
the option of requiring a new
improvement location certifi-
cate and new survey.
Trap:
An
ILC is commonly used in residen-
tial transactions, but it is of limited
value and it is unwise to rely on it
except for its limited purpose.
C.R.S.
§38-51-108(2)
requires every
ILC to include
a statement
that “it is not
to be relied
upon for the
e s t a b l i s h -
ment of fence,
building or
other future
improvement
lines.” An ILC
only assures
its
recipi-
ent that “the improvements …
other than utility connections, are
entirelywithin theboundary lines
of the parcel, except as shown,
that there are no encroachments
… and that there is no apparent
evidence or sign of any easement
… except as noted.” C.R.S. §38-
51-108(2). Thus, an ILC should
be used with caution other than
in a transaction for a residence
located on a platted lot, and it
is unwise to use it even for that
purpose if the buyer intends to
construct any improvements on
the property.
Tip:
A better choice for most com-
mercial transactions is an improve-
ment survey plat, which is truly
based on a survey.
It will show the
property by reference to monu-
ments that are either found or set
in the ground. It also will show
the following: “the location of all
structures, visible utilities, fences,
hedges, or walls situated on the
described parcel and within 5
feet of all boundaries of such par-
cel, any conflicting boundary evi-
dence or visible encroachments,
and all easements, underground
utilities, and tunnels for which
properly recorded evidence is
available from the county clerk
and recorder, a title insurance
company, or other sources as
specified on the improvement
survey plat.” In other words, a
lot of important stuff. C.R.S. §38-
51-102(9).
If the property is vacant land,
another type of land survey plat,
commonly called a “boundary
survey,” is used instead of an
improvement survey plat. See
C.R.S. §38-51-102(12) and § 38-51-
106.
One point about nomenclature:
a “survey” is what the surveyor
performs in the field; a “survey
plat” is the drawing a surveyor
makes. Most people refer to the
drawing as the “survey,” and so
will I.
Tip:
A survey is the only
connection between the documents
contained in the recorder’s office and
listed in the title commitment and
what actually exists on the ground.
Thus, a survey is an invaluable
due diligence tool. It is very risky
to buy real property without one.
I once had a client who bought
a lot of real property in his busi-
ness. When it came to buying his
house, he didn’t think a survey
was necessary. It was a small
transaction and a platted lot. He
thought, “Why bother?” When
he went to sell the house, how-
ever, the buyer ordered a survey.
Much to his shock and dismay,
it revealed that the property line
went through the middle of the
house, not around it. He got the
house sold, but a year later, after
the plat was amended. A lesson
learned the hard way.
Every survey will be made by
a licensed surveyor or profes-
sional engineer and will contain
a certificate and be stamped with
his or her seal. The certificate
states what the survey shows.
The requirements for the survey-
or’s certificate on a land survey
plat are stated in C.R.S. §38-51-
106. Some surveyor’s certificates,
however, are pretty thin, usually
to limit the surveyor’s liability.
Tip:
When ordering the survey, tell
the surveyor to whom the certificate
should be given and what it should
contain.
If a lender is involved in
the transaction, the lender usu-
ally will say what the contents
of the certificate must be. Section
9.1.4 of the contract provides that
the survey is to be certified to the
parties to whom it is to be deliv-
ered under §9.1.3, which includes
the “buyer, seller, the issuer of the
title commitment (or the provider
of the opinion of title an abstract
of title)” and anyone else speci-
fied in §9.1.3.
Note that §9.1 of the contract
does not specifywhat type of sur-
vey the “new survey” should be.
It just leaves a blank. Appropriate
entries for that blank would be
“land survey plat,” if there are no
improvements, and an “improve-
ment survey plat.”
Tip:
For most
significant commercial transactions,
however, an “ALTA/NSPS land title
survey,” sometimes simply referred
to as an “ALTA survey,” has become
the industry standard and should
be specified.
This type of survey
used to be called the “ALTA/
ASCM land title survey,” but the
Beat U. Steiner
Partner, Holland &
Hart LLP, Boulder
370 17th Street, Suite 4800 | Denver, Colorado 80202
303.825.0800
James L. Kurtz-Phelan - Real Estate Practice Chair
Real
Estate
Attorneys
with
Rea l
Experience
