Real Estate Industry
Commercial RE Purchasers: Yes, You Always Need an ALTA Survey!
Published: Feb 11, 2025
When purchasing commercial real estate, due diligence is critical to ensure a sound investment. One of the most vital components of this process is obtaining an American Land Title Association (ALTA) survey. An ALTA survey provides a comprehensive view of the property, highlighting potential issues that could impact ownership, development, or use. Here’s why every commercial real estate purchaser should prioritize obtaining an ALTA survey rather than just a basic boundary survey.
1. Comprehensive Property Boundaries and Easements
A basic boundary survey identifies the property lines and helps confirm that the legal description matches the physical boundaries. However, it does not provide detailed information about easements, encroachments, or improvements. An ALTA survey, on the other hand, accurately defines property boundaries while also identifying any easements such as utility lines, access rights, or shared driveways. Understanding these easements is essential as they can limit the use or development potential of the property.
Example: Imagine purchasing a commercial property intending to expand the building, only to later discover a utility easement running through the expansion area. Without an ALTA survey, this crucial detail might be missed, resulting in costly redesigns or legal battles to relocate the easement.
2. Identification of Encroachments and Boundary Discrepancies
While a boundary survey focuses solely on property lines, an ALTA survey identifies encroachments from neighboring properties or structures that cross boundary lines. This clarity helps prevent future disputes over property lines and ensures compliance with zoning regulations.
Example: A business owner purchased a commercial lot only to find out later that a neighbor’s fence encroached onto their property by several feet. Resolving this required legal action and significant expense—an issue that could have been identified and addressed before purchase with an ALTA survey.
3. Assurance of Title Insurance Coverage
Most title insurance companies require an ALTA survey to issue comprehensive title insurance policies. The survey provides detailed information about the property’s boundaries, improvements, and easements, enabling the title company to identify and exclude specific risks from the policy. Without an ALTA survey, buyers’ policy will contain an exception from coverage for what would have been shown on a current ALTA survey.
Example: Without an ALTA survey, a purchaser discovered post-closing that a portion of their parking lot extended onto an adjacent property. The title insurance did not cover the dispute, leading to expensive litigation and eventual loss of part of the parking area.
4. Verification of Zoning and Compliance with Local Regulations
An ALTA survey helps verify that the property complies with local zoning laws and regulations, which a basic boundary survey does not cover. It identifies any violations, such as buildings or structures that do not meet setback or buffer requirements.
Example: A real estate purchaser planned to add an addition to an existing structure—the ALTA survey revealed that the contemplated addition was not possible without a zoning variance and a stream buffer variance.
5. Improvements and Physical Attributes
While a basic boundary survey might only show the property lines, an ALTA survey provides a detailed depiction of all improvements on the property, including buildings, parking lots, fences, and other structures. Especially for a larger property, this is extremely valuable. Identifying all existing structures will allow the buyer to consider whether the structure will be incorporated into the buyer’s use/project or if not, demolition costs, whether there are historic structures than will entail costly regulatory compliance or approvals,
An ALTA survey also shows any existing access improvements, such as driveways and roads, which hopefully are in the location(s) permitted by existing municipal approvals (for curb cuts onto public roadway) and/or access easements (for access over adjacent private property or private roadway).
Example: A business owner bought a property assuming it had legal access through a neighboring driveway. After closing, they discovered there was no recorded easement, and they were forced to negotiate a costly access agreement or create a new entrance at significant expense.
Physical attributes of the property revealed on an ATLA could include “red” or “yellow” flags that require additional investigation such as intermittent streams or other bodies of water, burial sites, shelter structures of occupants/squatters, signs of prior environmental contamination such as monitoring wells, storage tanks, or waste disposal/dumping areas, or evidence of geotechnical issues such as sink holes.
6. Protection Against Future Legal Issues
By identifying potential issues before closing, an ALTA survey protects buyers from future legal disputes and unexpected costs. It ensures that buyers have a clear understanding of the property’s physical and legal characteristics, reducing the risk of surprises after the purchase.
Example: A commercial property buyer skipped an ALTA survey and later found that part of their building violated a setback requirement. The city imposed fines and required expensive modifications to bring the property into compliance.
7. Cost Considerations and Value Justification
While an ALTA survey may cost 50% to 200% more than a basic boundary survey, this expense must be viewed in the context of the buyer’s total investment and potential losses. Commercial real estate transactions typically involve significant sums of money, and the cost of an ALTA survey is relatively small compared to the financial risks of undiscovered issues.
Consider the potential losses if matters that should have been revealed by an ALTA survey—such as those outline above—are discovered only after closing or, worse, after additional investments in development and improvements. The cost of rectifying these issues can far exceed the initial survey expense.
Moreover, buyers can manage ALTA survey costs through the strategic selection of Table A items, which are optional survey specifications. By only selecting Table A items that are relevant to the buyer’s specific project or use, buyers can tailor the survey to meet their needs without incurring unnecessary costs. For example, a buyer not planning to build new structures may choose to omit certain detailed topographic data, thereby reducing the survey fee. For a fillable version of Table A, see https://nsps.us.com/page/2021ALTA.
Conclusion
Obtaining an ALTA survey is a crucial step in the commercial real estate purchase process. Unlike a basic boundary survey, an ALTA survey provides a comprehensive overview of the property, identifying potential issues that could impact ownership, use, or development. Even though the cost may be higher, this investment is minor compared to the financial and legal protections it offers. By investing in an ALTA survey, purchasers can make informed decisions, secure comprehensive title insurance coverage, and protect themselves from future legal and financial risks. In the complex world of commercial real estate, an ALTA survey is an indispensable tool for ensuring a successful and secure investment.
1. Comprehensive Property Boundaries and Easements
A basic boundary survey identifies the property lines and helps confirm that the legal description matches the physical boundaries. However, it does not provide detailed information about easements, encroachments, or improvements. An ALTA survey, on the other hand, accurately defines property boundaries while also identifying any easements such as utility lines, access rights, or shared driveways. Understanding these easements is essential as they can limit the use or development potential of the property.
Example: Imagine purchasing a commercial property intending to expand the building, only to later discover a utility easement running through the expansion area. Without an ALTA survey, this crucial detail might be missed, resulting in costly redesigns or legal battles to relocate the easement.
2. Identification of Encroachments and Boundary Discrepancies
While a boundary survey focuses solely on property lines, an ALTA survey identifies encroachments from neighboring properties or structures that cross boundary lines. This clarity helps prevent future disputes over property lines and ensures compliance with zoning regulations.
Example: A business owner purchased a commercial lot only to find out later that a neighbor’s fence encroached onto their property by several feet. Resolving this required legal action and significant expense—an issue that could have been identified and addressed before purchase with an ALTA survey.
3. Assurance of Title Insurance Coverage
Most title insurance companies require an ALTA survey to issue comprehensive title insurance policies. The survey provides detailed information about the property’s boundaries, improvements, and easements, enabling the title company to identify and exclude specific risks from the policy. Without an ALTA survey, buyers’ policy will contain an exception from coverage for what would have been shown on a current ALTA survey.
Example: Without an ALTA survey, a purchaser discovered post-closing that a portion of their parking lot extended onto an adjacent property. The title insurance did not cover the dispute, leading to expensive litigation and eventual loss of part of the parking area.
4. Verification of Zoning and Compliance with Local Regulations
An ALTA survey helps verify that the property complies with local zoning laws and regulations, which a basic boundary survey does not cover. It identifies any violations, such as buildings or structures that do not meet setback or buffer requirements.
Example: A real estate purchaser planned to add an addition to an existing structure—the ALTA survey revealed that the contemplated addition was not possible without a zoning variance and a stream buffer variance.
5. Improvements and Physical Attributes
While a basic boundary survey might only show the property lines, an ALTA survey provides a detailed depiction of all improvements on the property, including buildings, parking lots, fences, and other structures. Especially for a larger property, this is extremely valuable. Identifying all existing structures will allow the buyer to consider whether the structure will be incorporated into the buyer’s use/project or if not, demolition costs, whether there are historic structures than will entail costly regulatory compliance or approvals,
An ALTA survey also shows any existing access improvements, such as driveways and roads, which hopefully are in the location(s) permitted by existing municipal approvals (for curb cuts onto public roadway) and/or access easements (for access over adjacent private property or private roadway).
Example: A business owner bought a property assuming it had legal access through a neighboring driveway. After closing, they discovered there was no recorded easement, and they were forced to negotiate a costly access agreement or create a new entrance at significant expense.
Physical attributes of the property revealed on an ATLA could include “red” or “yellow” flags that require additional investigation such as intermittent streams or other bodies of water, burial sites, shelter structures of occupants/squatters, signs of prior environmental contamination such as monitoring wells, storage tanks, or waste disposal/dumping areas, or evidence of geotechnical issues such as sink holes.
6. Protection Against Future Legal Issues
By identifying potential issues before closing, an ALTA survey protects buyers from future legal disputes and unexpected costs. It ensures that buyers have a clear understanding of the property’s physical and legal characteristics, reducing the risk of surprises after the purchase.
Example: A commercial property buyer skipped an ALTA survey and later found that part of their building violated a setback requirement. The city imposed fines and required expensive modifications to bring the property into compliance.
7. Cost Considerations and Value Justification
While an ALTA survey may cost 50% to 200% more than a basic boundary survey, this expense must be viewed in the context of the buyer’s total investment and potential losses. Commercial real estate transactions typically involve significant sums of money, and the cost of an ALTA survey is relatively small compared to the financial risks of undiscovered issues.
Consider the potential losses if matters that should have been revealed by an ALTA survey—such as those outline above—are discovered only after closing or, worse, after additional investments in development and improvements. The cost of rectifying these issues can far exceed the initial survey expense.
Moreover, buyers can manage ALTA survey costs through the strategic selection of Table A items, which are optional survey specifications. By only selecting Table A items that are relevant to the buyer’s specific project or use, buyers can tailor the survey to meet their needs without incurring unnecessary costs. For example, a buyer not planning to build new structures may choose to omit certain detailed topographic data, thereby reducing the survey fee. For a fillable version of Table A, see https://nsps.us.com/page/2021ALTA.
Conclusion
Obtaining an ALTA survey is a crucial step in the commercial real estate purchase process. Unlike a basic boundary survey, an ALTA survey provides a comprehensive overview of the property, identifying potential issues that could impact ownership, use, or development. Even though the cost may be higher, this investment is minor compared to the financial and legal protections it offers. By investing in an ALTA survey, purchasers can make informed decisions, secure comprehensive title insurance coverage, and protect themselves from future legal and financial risks. In the complex world of commercial real estate, an ALTA survey is an indispensable tool for ensuring a successful and secure investment.