1

A PICTURE IS WORTH A THOUSAND WORDS:

• Legal Descriptions, • Surveys, • Easements & • Endorsements Chicago Title

CPE SeminarOctober 2017

LEGAL DESCRIPTIONS

UNUSUAL LEGAL DESCRIPTION!

2

“From the white horse in the field

“As long as it takes for a man on a horse to smoke a cigarette”

DRAFTING OF LEGAL DESCRIPTIONS

THE PROBLEMS…

Omitted “Schedule A”Metes and bounds that fail to closePoor monumentationImproper Lot/BlockImproper map“old” legal descriptionsAnd others….

3

LEGAL DESCRIPTIONS: BADASSUMPTIONS

Old legals are adequate

New legals are adequate

That the legal actually describes the property your client is buying

All surveyors know how to draft adequate legals

Any prior M&B actually closes

Realtors know what description to put in the contract

RULES OF CONSTRUCTION

You must know and understand

how the content of the

legal will be construed.

See Webster’s Real Estate Law in North Carolina §10-34 et seq.

RULES OF CONSTRUCTION

The intent of the parties will be construed within the “four corners” of the document.

G.S. § 39-1.1. In construing conveyances court shall give effect to intent of the parties.(a) In construing a conveyance executed after January 1, 1968, in which there are inconsistent clauses, the courts shall determine the effect of the instrument on the basis of the intent of the parties as it appears from all of the provisions of the instrument. . . .

4

WHAT IS AN “ADEQUATE” LEGAL?

[D]eed purporting to convey an interest in land is void unless it contains a description of the land sufficient to identify it or refers to something extrinsic by which the land may be identified with certainty.

Cannot be aided by extrinsic or parol evidence

DRAFTING THE LEGAL DESCRIPTION:SOURCES OF INFORMATION

The Contract Prior instruments

For the dirt in question For the adjoining tracts,

occasionally Surveys, Plats

Surveys are key… tell them to get one!

Tax office Deed Plotting Software

Deed Plotter, Quick Plat, etc. Google Maps, Google Earth, Bing?

SAMPLE DESCRIPTION…

Lacks monumentation…

Has prior deed referenceLow print quality

5

SAMPLE DESCRIPTION…PLOTTED

Closure error

ONE ADVANTAGE OF DEED PLOTTING SOFTWARE…

Deed plotting software can analyze a tract and make recommendations to correct a defective legal…as it did here:

First run on Legal…North 81 degrees

Should be…North 18 degrees

LET’S IMPROVE THE LEGAL…STEP ONE

Clarify commencement and beginning points Define them and Capitalize

them

Be sure that your legal is “tied down”

Separate runs for clarity and ease of verification Dyslexics Untie!

Count ‘em

When tract is shown on a prior map or survey…say so

6

Adding monuments from easily located resources

Without a survey… Use tax maps to locate

adjoiners

STEP TWO …WHEN IN DOUBT…MONUMENT IT!

STEP TWO…WHEN IN DOUBT…MONUMENT IT!

ALWAYS!!!

Good Monuments are… Permanent or nearly

permanent At least hard to move!

Easy to locate (usually) Include

Roads and intersections Rivers, creeks & ditches Adjoining tracts Trees (to some extent) Easements Concrete monuments culverts

Not as Good Monuments are: Movable, removable Not so permanent as in the

case of trees Include

Irons (old or new) PK nails A stone (a BIG stone might

be okay) axles

INSIDE THE 4 CORNERS(THE DEAN SMITH APPROACH)

Why is all of this so important? The deed that saves itself Incorporating as much identifying

information as is available may prevent a “minor” typo from causing a deed to fail

NCGS 47.36.1 Minor and obvious error Versus corrective deeds Time and MONEY

7

THE LEGAL DESCRIPTION IN THE OFFICE(OR THE PLUTONIUM THEORY)

Simple Ideas to avoid mistake, confusion, & error in the office.

Draft, copy or prepare the legal at preliminary opinion. Save the correct legal in your software Print multiple copies for file and do so only once at the beginning. Print a “Master Legal” on colored paper so everyone in the office

can easily locate the correct exhibit Keep the correct legal in the same place in every file Flag the legal or place in a colored folder in the file Affix Exhibits at the registry…one document at a time ALWAYS have two people review descriptions for errors Count the number of runs

MONUMENTS & CALLS: WHY THEY MAKE ALL THE DIFFERENCE!!!

Where?

8

LEGAL DESCRIPTION:

Which way are you going?

LEGAL DESCRIPTION:

NCGS MONUMENTATION

“said rebar having coordinates of N: 670,596.64 feet and E: 919,797.76 feet and lying a grid bearing and distance of South 01-55-23 East 697.88 feet from NCGS Monument “Sardis” (with coordinates of N: 671,294.13 feet and E. 919,774.34 feet) …

CURVESLEGAL DESCRIPTIONS:

C3: “… thence on a curve to the right having a radius of 267.77 feet, an arc length of 111.01 feet, a chord bearing of North 63-23-35 East, and a chord distance of 110.21 feet to the point and place of beginning …”

C1: “… thence on a curve to the right having a radius of 174.34 feet, an arc length of 83.67 feet, a chord bearing of South 61-31-09 West, and a chord distance of 82.87 feet to … “

9

Along the creek/river?

OR

Metes & Bounds?

Water, Water –EVERYWHERE!!

ROAD Right-of-way – SIMPLE, RIGHT?

MAPPING THE LEGAL DESCRIPTION

10

GREAT ARTICLE BY ANN CANTRELL WITH NEXSEN PRUET

SURVEYS

SURVEYS:WHY YOU NEED ONE

11

Review and compare the written metes and bounds legal description against the actual drawing itself.

Survey exception should only have NON-RECORD instrument items b/c recorded instruments should have their owner exception, NOT RECORDED PLATS OR EASEMENTS which should go in a separate specific exception.

Survey exception should not include matters that are clearly excepted elsewhere, such as a 200’ railway right-of-way or a street right-of-way.

If you are able to remove an exception from Schedule B-Section II of the commitment, remember to use the “IO” code ([INTENTIONALLY DELETED]). This will help keep the exception numbers consistent for any incoming comments on the commitment, as well as keep the numbering the same for the survey. If you can use a strikethrough and keep the exception, that is even better, such as:

Easement(s) to Duke Power Company recorded in Book 2432, page 489.[INTENTIONALLY DELETED] 31

If the survey identifies the actual location of the easement on the survey (not just a generic reference), the preference is just to reference the survey:

32

SURVEY COVERAGE“Lender survey coverage without a survey”

- Underwriting Philosophy

- Risk

Survey required to give lender coverage

- amount of loan

- certain endorsements

Survey

Access

Contiguity

Easements

others

NOTE: If you have a survey, you need to take the exception for matters it shows and give affirmative coverages where appropriate!

12

SURVEYOR’S STATEMENTON SURVEY

DRAFT OR PRELIMINARY SURVEY

When you only have a preliminary survey you CAN use that survey designating it as follows and add the CR119:

The following matters disclosed by PRELIMINARY survey entitled "ALTA/ ACSM Land Title Survey Prepared For: BMPI- SB1520 LLC" by Charles E. Bell, P.L.S. of R.B. Pharr & Associates, P.A., dated _______, 2015 (the "Survey"): …

Company must be provided with a copy of the survey of the Land dated August 18, 2015, bearing the signature and seal of Charles E. Bell, P.L.S., which has been prepared in accordance with North Carolina standards for surveys of land or the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys.

What is a TITLE

EXCEPTION?

What is NOT?

13

MIND THE GAP?

(OR, WHERE DID THATCOME FROM?)

CONCRETE & ASPHALT:PROBABLY NOT AN “ENCROACHMENT”

BUILDING ADDITION: IS IT AN ENCROACHMENT OR A POSSIBLE PRESCRIPTIVE RIGHT?

14

SIGN & FENCES ARE AN ENCROACHMENT, BUT WE TYPICALLY GIVE LENDER COVERAGE ANYWAY!

A real problem!!

What is a “setback? Zoning = Regulatory not

title Plat = Title

What is a “violation?”Covered porchScreen porchSteps

15

WHAT IS “MINOR”?

CONTROLLED ACCESS (WHETHER

THEY SAY SO OR NOT!)

Some things you cannot ignore!!

Easements and rights of access!

16

OUR ACCESS?THEIR ACCESS?

What’s on the ground really

matters!!!

“REVISED” TOWNHOUSE PLAT: JUST BECAUSE IT WAS FROM THE DEVELOPER DOESN’T MAKE IT RIGHT!

Lot 40 sale first (plat 29/272) Lot 39 sale later (plat 31/8)

“REVISED” / RECOMBINATION PLAT – WHAT IS THE LEGAL DESCRIPTION? WHAT TITLE SEARCHED?

17

NOTES ARE IMPORTANT!

EASEMENTS -- APPURTENANT

Customer needs to understand this is a separate title prior to the document that joined the fee and the easement together, so it’s subject to whatever came before the recording of that easement document.

Consider if appropriate:

1. Legal Description

2. Schedule B Exception

3. Endorsement(s)

When survey doesn’t show easement, we need to be clear that not giving survey coverage or, if we are, to what extent

CAUTION: RESIDENTIAL & COMMERCIAL ISSUE!!!!

ACCESS? ENCROACHMENTS?EASEMENTS?WHO OWNS THE LOTS?

LEGAL DESCRIPTION?EASEMENT AGREEMENT?

18

PLAT “REVISED” AFTER ADJOINING

LOT SOLD

Plat #1

Plat #2

MAPS ATTACHED TO DEEDS OR OTHER INSTRUMENTS: NEW RECORDING STATEMENT 7/1/2017 (HB 454, S.L. 2017-27)

TACKING: CONDOMINIUM RISK CASESErrors in development documents

Failure to revise Declarations and plats carefully

Significant noncompliance of Declarations or plats

Wrong unit

Wrong association

Prior policy has errors

Failure of prior attorney to appreciate title issues, such as association deeds of trust on common areas or payment of association dues

Inadequate review of prior policy and its exceptions

Endorsement requirements not met

Problems not addressed prior to closing

19

ENDORSEMENTS & AFFIRMATIVE COVERAGE

BONUS SECTION!!

ASKING FOR AFFIRMATIVE COVERAGE:

You’re the one who knows the property, what’s in the file, how long it’s been there

Why is it a good idea or not You are familiar with the file information Setback on survey – zoning or plat (record matter)? Are you

giving zoning coverage? How long has it been there? How can we give coverage to this attorney and his/her client

and how can we avoid 20 questions.

DRAFTING AFFIRMATIVE COVERAGE AND REVISING ENDORSEMENTS

Alliance Mortgage Company v. Rothwell, 10 Cal. 4th 1226, 44 Cal. Rptr. 2d 352 (1995)

57

Distinguished between guarantee of a state of facts

rather than indemnity insurance.

20

Affirmative coverage reads:The Company insures against loss or damage incurred by the Insured by reason of the forced removal of the encroachment by final order of a court of competent jurisdiction.The Company insures against loss or damage incurred by the Insured solely in the event that the existence of the encroachment affects the validity, priority, or enforceability of the Insured Mortgage.The Company insures against loss or damage incurred by Insured solely as a result of the encroachment.The Company insures against loss or damage incurred by Insured solely as a result of *.The Company insures against loss or damage incurred by Insured as a result of entry of a final decree by a court of competent jurisdiction ruling that the conveyance insured is void or voidable or subject to a forfeiture or reversion of title solely as a result of *.The Company insures against loss or damage incurred by Insured as a result of invalidity, unenforceability, or loss of priority of the Insured Mortgage solely as a result of *.The Company insures against loss or damage incurred by Insured as a result of an entry of a final decree by a court of competent jurisdiction ruling that the Insured Mortgage lacks priority, is unenforceable, or is invalid solely as a result of *.

Affirmative coverage reads:The Company insures against loss or damage incurred by Insured resulting from the exercise, maintenance, or attempted enforcement of said easement(s).

As to the foregoing general easement(s), the Company insures against loss or damage incurred by Insured arising from the forced removal of any improvements to be constructed on the insured Land as a result of the enforcement of the easement(s). Notwithstanding the above, no protection is given for utility improvements shown on the survey referenced above/below.The Company insures against loss or damage incurred by Insured solely as a result of interference by the foregoing easement(s) with the intended use of the Land or improvements located thereof.The Company insures against loss or damage incurred by the Insured solely as a result of encroachment of any improvement onto said easement(s) or in the event of and to the extent that said easement(s) adversely affects the Title to or use of said Land.

AFFIRMATIVE COVERAGES: COMPANY INSURES…ALLIANCE MORTGAGE CO. V. ROTHWELL

as a result of entry of a final decree by a court of competent jurisdiction ruling that the conveyance insured is void or voidable or subject to a forfeiture or reversion of title solely as a result of *.

as a result of an entry of a final decree by a court of competent jurisdiction ruling that the Insured Mortgage lacks priority, is unenforceable, or is invalid solely as a result of *.

as a result of invalidity, unenforceability, or loss of priority of the Insured Mortgage solely as a result of *.

**** the easement will not interfere with the intended use of the land or the

improvements located thereon for an easement. the easement will not adversely affect the land and that the

improvements are not located within the easement. the exercise, maintenance or attempted enforcement of the easement

will not cause loss or damage. against enforced removal of improvements constructed or to be

constructed on the property as a result of the enforcement of the easement.

21

TYPICAL SURVEY-RELATED ALTA ENDORSEMENTS

3.1 Zoning

9 series CCR’s

17 & 17.1 Access

17.2 Utilities

19, 19.1 & 19.2 Contiguity

22 Location

25 Same as Survey

26 Subdivision

28 Easement

28.1 Encroachments

34 Identified Risk

COMMERCIAL ENDORSEMENT MANUAL

8-28-2017(FOR CUSTOMERS AND

UNDERWRITERS)

ON-LINE AT:WWW.NORTHCAROLINA.CTT.COM

BULLS PAGE

ALTA FORMS IN NC

22

ALTA ENDORSEMENT FORM 3 & 3.1 ZONING – PERMITTED USES

HOW TO GET THE INFORMATIONFOR THE ZONING ENDORSEMENT

New ALTA/ACSM surveys say title companies provide ???

Cities won’t give compliance lettersEngineering firm? Surveyor?Attorney?CAUTION: Risky to opine on who is entitled

to notice without full title exam

Coverage Lender OwnerCovenants, Conditions & Restrictions (not private rights)

9-069.3-069.7-06 (Land Under Development)9.10-06 (current violations)

9.1-06 (Unimproved)9.2-06 (Improved)9.8-06 (Land Under Development)

Private rights (assessments, options, rights of first refusal & rights of prior approval of purchasers or occupants)

9.6-069.6.1-06

9.9-06

Encroachments over boundaries or onto easements

9-069.7-06 (Land Under Development)9.10-06 (current violations)ALTA 28 series

ALTA 28 series

Mineral & subsurface rights 9-069.7-06 (Land Under Development)9.10-06 (current violations)ALTA 35 series

ALTA 35 series

THE NEW FORMS IN THE ALTA 9 SERIES

23

EACH ENDORSEMENT (AS APPLICABLE): Excepts to Exclusions, Exceptions and Conditions of the policy itself

Defines “Covenant” as “a covenant, condition, limitation or restriction in a document or instrument in effect at Date of Policy.”

Defines “Improvement” specifically, depending on the coverage

Excludes “private rights” other than the 9.6-06 (loan policy) and 9.9-06 (owner’s policy)

Excludes, among other things, leases, obligations for maintenance, repair or remediation, environmental protection covenants not recorded in the Public Records normally searched in a title examination, where applicable, physical issues (contamination, explosion, fire fracturing, vibration, earthquake or subsidence), and negligence in extracting mineral or other subsurface rights (on loan policy endorsements providing mineral rights coverage).

No longer provides owner’s coverage for encroachments (now available to owners through separate specific underwriting of the ALTA® Endorsement Form 28 series) and

No longer provides owner’s coverage for minerals and other subsurface rights (now available to owners only through separate specific underwriting of the ALTA® Endorsement Form 35 series).

ALTA Endorsement Form 17 (Direct) Access and EntryOwner & LenderRequires:

SurveyDirect Access

COMPARE: ALTA Endorsement Form 17.1(Via Easement)

ALTA Endorsement Forms 17-06 & 17.1-06 Access

ALTA ENDORSEMENT FORM 17.2-06 –

UTILITIES ACCESS

24

ALTA ENDORSEMENT FORMS 19-06, 19.1-06 & 19.2-06 -- CONTIGUITY

ALTA Endorsement Form 19 (Contiguity-Multiple Parcels) Identifies parcels and boundaries

ALTA Endorsement Form 19.2-06 (Contiguity – Specified Parcels) Identifies parcels only

• Contiguity between multiple insured separate parcels• Owner & Lender• Requires:

• Multiple parcels• Survey

COMPARE: ALTA Endorsement Form 19.1 (Contiguity-Single Parcel) Contiguity between insured parcel and some other parcel

ALTA ENDORSEMENT FORM 25-06 SURVEY ENDORSEMENTA.K.A. “SAME AS SURVEY”

1. Legal description matches survey OR

2. Certification from the attorney or from the surveyor that the property shown on the survey and described in the composite legal description is the same property as that described in the multiple legal descriptions covered by the prior policy.

ALTA STANDARD POLICY EXCLUSION FROM COVERAGE:

LOSS OR DAMAGES SUSTAINEDBY REASON OF ANY LAW, ORDINANCE OR GOVERNMENTAL REGULATION WHICH RESTRICTS, REGULATES OR PROHIBITS THE OCCUPANCY OR USE AND ENJOYMENT OF THE LAND AS WELL AS THE CHARACTER OR LOCATION OF IMPROVEMENTS SITUATED ON THE INSURED PROPERTY.

ZONING AND SUBDIVISION ARE NOT COVERED !!!!!!!

Governmental Regulation

25

ALTA ENDORSEMENT FORM26-06: SUBDIVISION ENDORSEMENT

Greater than 10 acres & no street right-of-way dedication is involved

Division by will Separate parcel for many years through multiple

conveyancesN.C.G.S. 153A-335, Counties

N.C.G.S. 160A-376, Cities and Towns

Require: Attorney's or surveyor's opinion that the Property is in compliance with applicable ordinances, unless exemptions, such as:

ALTA ENDORSEMENT FORM 28 SERIES –EASEMENTS AND ENCROACHMENTS

ALTA Endorsement Form 28-06 (Easement - Damage or Enforced Removal)

ALTA Endorsement Form 28.1-06 (Encroachments -Boundaries and Easements)

ALTA Endorsement Form 28.2-06 (Encroachments -Boundaries and Easements-Described Improvements)

ALTA Endorsement Form 28.3-06 (Encroachments-Boundaries and Easements-Land Under Development)

ALTA ENDORSEMENT FORM 28-06: EASEMENT - DAMAGE OR ENFORCED REMOVAL

Insured lender or owner for damage to or enforced removal or alteration of an existing building on the Land which encroaches into or over an easement identified by

exception number in Schedule B – Exceptions of the policy solely

as a result of the exercise of the right of use or maintenance of the specified easement according to its terms.

4. This endorsement does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees, or

expenses) resulting from the encroachments listed as Exceptions ______________ of Schedule B.

26

ALTA ENDORSEMENT FORM 28-06: EASEMENT - DAMAGE OR ENFORCED REMOVAL

UNDERWRITING TIP: When issuing an ALTA 28-06 Endorsement, can add a note at the end of the exception:

Easement(s) to Carolina Power & Light Company recorded in Book 508, page 64. (See ALTA 28-06 ENDORSEMENT)

Survey note shows:

Commitment example:

Improvement Encroachment Coverages28 Existing Building Onto easement Damage or enforced

removal/relocation by easement holder

28.1 Existing Building on the Land

Onto adjoiner or easement

Enforced removal/relocation byeasement holder or adjoinerLoss or Damage (if no exc. In Sch. B)

28.2 DescribedImprovement

Onto adjoiner or easement

Enforced removal/relocation byeasement holder or adjoinerLoss or Damage (if no exc. In Sch. B)

28.3 Existing or Future building, structure or paved area per specific Plans

Onto adjoiner or easement

Enforced removal/relocation byeasement holder or adjoinerLoss or Damage (if no exc. In Sch. B)

28.1 Existing Building on Adjoining land

Onto Land Loss or Damage (if no exc. In Sch. B)

28.2 Described Improvement on adjoining land

Onto Land Loss or Damage (if no exc. In Sch. B)

ALTA 28 EASEMENTS AND ENCROACHMENTS

Common sense analysisCan you locate the easementDoes the easement hit an

improvementDoes the easement only serve this

lotDoes it cross this lot to serve other

lots

27

SURVEYOR NOTED ENCROACHMENTSCUSTOMER WANTS ALTA 28.1

Coverages –

Loss from an encroachment by an Improvement onto a neighboring property or onto an easement area within the insured Land, other than as disclosed in Schedule B exceptions.

Loss from an encroachment by a neighboring Improvement onto the insured Land, other than as disclosed in Schedule B exceptions.

Enforced removal of an insured Improvement based upon the encroachment into the easement area or onto neighboring property.

ALTA Endorsement Form 28.3 Coverages

ALTA 34 - IDENTIFIED RISK COVERAGE

“All purpose” basic format for affirmative coverage, conforming to Alliance case Identify the violation, encroachment or particular risk issue Identify the applicable recorded document & Schedule B

Exception Identify the specific type of affirmative coverage – enforced

removal or enforcement for a particular type of use, etc.

1

1