The Memoranda Included Herein Are for Informational Purposes Only, and Are Not Intended

T</big</big</big>he memoranda included herein are for informational purposes only, and are not intended as legal advice. Although the memoranda have been prepared by attorneys with this firm, they are not intended to constitute legal advice or legal opinions which may be relied upon. You should seek legal advice from your own attorney. No attorney-client relationship is intended with the dissemination of this information. The firm requires a written fee agreement to be executed prior to its acceptance of client representation or performance of legal services.

TABLE OF CONTENTS

I. An Overview

A. Bundle of Rights

B. Considerations of Purchase

C. Due Diligence Investigation

D. Title Commitments and Surveys

II. Definition, Purposes and Terminology

A. Definitions

B. Purpose

C. Terminology

III. Land Surveying in Texas

IV. Selecting and Hiring A Surveyor

V. Review of Survey

A. The Legend

B. The Legal Description

C. The Map

D. The North Arrow

E. General Notes and Symbols

F. Access

G. The Certificate

VI. Conclusion

SURVEYS

I. An Overview

A. Bundle of Rights.

Real estate law practitioners are trained to view real property not only as the physical property, the “dirt, and the bricks and sticks”,but also as the “bundle of rights” which the owner may exercise with regard to the dirt and bricks and sticks. This “bundle” includes(among other rights) the right to use of the surface and the airspace, the right of lateral support from the adjoining owner, the right toexplore, drill and produce mineral substances, and the right to convey a portion or all of the “bundle”. On nearly all parcels of land, theexercise by the owner of the rights in the “bundle” is restricted. A parcel may be encumbered by deed restrictions that prohibit certainuses, such as “no commercial use”. Deed restrictions may prohibit all but certain specified uses, such as “single family residential only”. There may be easements that burden the land and run in favor of adjacent landowners. There may be city ordinances and state andfederal regulations affecting the property which prohibit an owner from exercising rights on the land. An example would be a treeordinance which prohibits the removal, without a permit, of a tree four inches or greater in diameter. Another example would befederal regulations prohibiting development of wetlands or natural habitats of animals on the endangered species list.

Additionally, certain rights may be severed from the “bundle” prior to conveyance to the owner. An example would be priorconveyance of the mineral estate to a third party, or a conveyance of a life estate to another. The severance of some of the “bundle ofrights” not only would prevent the owner from exercising those rights, it may also impact the owner’s exercise of the “bundle” theowner has been conveyed.

B. Considerations of Purchase.

When a prospective purchaser of real property contemplates purchase of a parcel, there are numerous considerations which must beinvestigated to determine whether the parcel should be purchased. Such considerations would include the following:

Will the property be appropriate and adequate for the intended use?

Is the use of the property legally restricted and if so, would these restrictions have a material impact on theplanned use?

Do others have the right to use or occupy a portion or all of the property, and on what terms?

In other words, the prospective purchaser will want to know approximately which “sticks” in the “bundle” will be conveyed to him atclosing, and which “sticks” have already been conveyed to third parties.

C. Due Diligence Investigation.

In many transactions, the prospective purchaser will take for granted that the “bundle” being conveyed in a real estate transaction isadequate for the planned use. In many residential transactions, for example, the prospective purchaser will do very little investigation todetermine legal limitations as to the use of the property. It is likely that the prospective purchaser will not review exceptions to title or asurvey until the actual time of closing (if at all). It is not uncommon for the prospective purchaser of residential real property to rely onthe “experts”, the title company escrow officer, the real estate agent and the lender to look after the purchaser’s interest. This is alsotrue in many residential and commercial lease transactions.

On the other hand, many prospective purchasers are desirous of having an investigation undertaken to determine the physical conditionand the legal status of the rights inherent in the conveyance transaction. This investigation is commonly referred to as the “due diligenceinvestigation”. Due diligence investigations are particularly common in commercial real estate purchase and financing transactions. If forexample, a person is considering purchase of a 300 acre tract for a mixed use development, to include 275 acres of single familyresidential and 25 acres of retail use, there are numerous inquiries to be investigated to ensure that the property could be developedfor such use. The inquiries would include the following:

1.Deed restrictions and ordinances regarding use of the property

2.Easements encumbering the tract

3.Outstanding mineral reservations and leases

4.Outstanding reversionary property interests

5.Environmental impact and the existence of hazardous substances

6.Wetlands and protected species issues

7.Flood zone determination

8.Utility availability and hydrological studies

9.Subsidence issues

10.Road access and traffic patterns

11.Drainage patterns investigation

12.Governmental exactations in plat approval process

The due diligence necessary to ascertain that a mixed use project could be developed on the tract includes an investigation as to thephysical characteristics of the tract and an investigation as to the legal characteristics of the “bundle of rights” to be conveyed to theprospective purchaser. A review of a title commitment and the exceptions to title will be very instrumental in determining whether thetract may be developed according to the prospective purchaser’s plan. An investigation based solely on a review of recordeddocuments with nothing more, however, would be inadequate. A practitioner would be hard pressed to do an adequate review of thetitle documents without the review of an adequate land title survey of the property to locate easements, set-back lines, boundary lineencroachments, areas of coverage of deed restrictions, and designated drillsites, to mention a few items. In most earnest moneycontracts and option contracts for the sale and purchase of improved and unimproved commercial real property, provision is made fora period of review of title and survey, allowing the prospective purchaser to object to items shown on the title commitment and/or thesurvey. Typically, the seller is given a period to cure or respond to the objections, and if the seller fails to cure the objections, theprospective purchaser may elect to terminate the contract. The contract usually contains a detailed provision specifying who isresponsible for providing (and paying for) the survey, designation of the surveyor whose services are to be utilized, the minimumrequirements of the contents of the survey, and the date the survey must be delivered to the prospective purchaser. In addition to the purchaser’s interest in preparation and review of a survey, it is typical for institutional lenders to require a survey as acondition of providing financing for a purchase transaction.

D. Title Commitments and Surveys.

On most real estate purchase and finance transactions, the purchaser and/or the lender will require title insurance. Although it isbeyond the scope of this presentation to discuss due diligence relating to title commitment review and title insurance, an understandingof some of the basics is required in order to understand issues relating to surveying. Initially, a title company issues a title commitment,which is a legal promise to provide title insurance on a particular tract. This commitment indicates to the prospective insured underwhat conditions the title company will issue insurance. Schedule “A” of the commitment sets out the dollar amount of proposedinsurance, the name(s) of the proposed insured(s), and a sufficient legal description of the tract, the title of which is to be insured. Schedule ‘B” of the commitment contains the exceptions from coverage; Schedule “C” contains certain requirements or conditionswhich must be satisfied before the title policies (owner and mortgagee) will be issued. The items shown on Schedules B and C aretypically referred to collectively as the “title exceptions”. On Schedule B of a current form title commitment, preprinted item 2 is commonly known as the “survey exception”. It reads: “anydiscrepancies, conflicts, or shortages in area or boundary lines, or any encroachments, or any overlapping of improvements”. With thisexception in the final policy, the title company would not include coverage of the physical conditions on the property. However,Procedural Rule P-2 of the Basic Manual of Rules, Rates and Forms for Writing Title Insurance in the State of Texas (the “BasicManual”), allows an owner or a lender to obtain a deletion of this verbiage except for “shortages in area” (the title company isprohibited from insuring the actual size of the tract). By requesting and obtaining the P-2 deletion, the owner and lender are obtaininginsurance coverage as to the non-existence of an encroachment or protrusion, and as to boundary line disputes.

Under Rate Rule

R-16 of the Basic Manual this endorsement deletion is free to the lender on the mortgagee policy; to obtain the same endorsement onthe owner policy will cost the insured 15% of the original premium cost of the owner policy.

Generally, a preliminary title commitment will also contain a blanket exception on Schedule B for unrecorded easements, rights ofways and other matters which would have been discovered by a current survey or by physical inspection of the property. Once anadequate survey is provided, the title company will delete this exception from the title commitment.

Schedule C will contain an exception that states: “satisfactory evidence must be provided that there is legal access to and from theland”. This condition will be met if a survey satisfactory to the title company verifies that legal access to a dedicated public street exists(either directly or through private legal agreements). Although title insurance does not insure “adequate” access for the purchaser’sproposed use, if a satisfactory survey is provided, the title insurance will insure legal access from the tract to a dedicated public street. Finally, it would be a very difficult task for a practitioner to review the title exception documents without the benefit of a survey. Theexact location of an easement, a right of way or a drillsite is a fundamental consideration in determining whether the title exception inquestion will have a material adverse impact on the rights of the owner in the proposed use of the land. Without a survey to locatethese matters, the attorney or legal assistant could not properly advise the client with regard to the specific title exceptions.

II.Definition, Purposes and Terminology

A.Definitions.

Black’s Law, Sixth Edition, defines Survey as “the process by which a parcel of land is measured and its boundaries and contentsascertained”. Another definition would be “a graphic representation of certain physical and legal characteristics of a specified tract ofreal property”. There are three major components of a survey: (i) the map or drawing showing the boundaries, the corner monumentsand the improvements and other physical matters, (ii) the legal description of the tract represented by the map, and (iii) the certificationby the surveyor as to what is represented in the map.

B.Purpose.

The purposes for which surveys are undertaken include the following:

1.To generate a legal description sufficient for purposes of conveyance

2.To determine the exact square footage or acreage contained in a tract

3.To identify and locate the boundary lines of a tract of land

4.To determine actual distances along a boundary line

5.To determine the existence and precise location of easements, utility lines and rights of way

6.To determine the precise location of buildings and other improvements

7.To determine the extent of protrusions and encroachments

8.To determine the existence and extent of access to and from the property

9.To determine the centerline of an easement, right of way or utility line

10.To determine whether all or a portion of a tract is in a federally defined flood plain or floodway

11.To determine the topographic features of a parcel of land

12.To serve as the basis for a subdivision of land for platting purposes

13.To assist in resolution of legal disputes relating to conflicting boundary lines, and easement and building setback line

encroachments.

C. Terminology.

1. “Professional surveying” is the term used in Texas for land surveying. The Professional Land Surveying Act of 1979 (V.A.T.S.Article 5282c) provides that professional surveying means the practice of land, boundary, or property surveying or other similarprofessional practices. The term includes any service or work the adequate performance of which involves the application of specialknowledge of the principles of geodesy, mathematics, related applied and physical sciences, and relevant laws to the measurement andlocation of sites, points, lines, angles, elevations, natural features, and existing man-made works in the air, on the surface of the earth,within underground workings, and on the beds of bodies of water for the purpose of determining areas and volumes for:

(a) the location of real property boundaries;

(b) the platting and layout of lands and subdivisions of land; and

© the preparation and perpetuation of maps, record plats, field note records, easements, and real property descriptionsthat represent those surveys.

2. “Registered Professional Land Surveyor” means an individual registered as a registered professional land surveyor by the TexasBoard of Professional Land Surveying.

3. Bearing Source: The derivation of the survey’s point of beginning and the initial direction of north, in relation to which the survey’smeasurements are performed. The initial direction can be magnetic north, the direction that a compass needle would point, true north,the direction to the geographic north pole, assumed north, an assigned assumed bearing to a specific line of the survey or Grid North,a north orientation as one moves east or west. The Texas Coordinate System uses a grid north. The most common bearing sourcedirections used by surveyors are true north and grid north.

4. Boundaries: a series of straight or curved lines which represent a perimeter of a tract of land.

5. Call: the statement of a course and distance describing a particular boundary line.

6. Curve: the path of a line in a consistent arc of a circle. Curves are described by reference to the following geometric terms:

Arc: a segment of a circumference of a circle, the length of the arc is commonly denoted on a survey as “L”Central Angle or Delta Angle: the angle formed by the intersection of the two radii lines extending to the center of thecircle from the points of curve, commonly denoted on a survey by the delta signChord: A straight line intersecting a curve at two points, commonly expressed as a call and distancePoint of Curve: the point at which a curve starts or stopsPoint of Compound Curve: the point at which a curve going one way stops and a new curve in the same direction, butwith a different radius, beginsPoint of a Reverse Curve: the point at which a curve going in one direction stops and a new curve going in the oppositedirection beginsPoint of Tangency: the point where a curve stops and a straight line beginsRadius: half of the diameter of a circle.

7. Date of Survey: the date on which the field work of the survey was completed.

8. Field notes: the notes made by the field team describing the findings from taking measurements on the ground. Field notes includecourses and distances, and monuments found or placed by the surveyor.

9. Strips and Gores: unintentional overlaps or gaps between boundary lines (strip being rectangular and gore being triangular).

10. Texas Society of Professional Surveyors (TSPS): the trade association for professional surveyors in Texas. Formerly called Texas

Surveyors Association.

11. Tolerance: the allowable imperfection in any measurement in a survey.

12. Units of measurement:

Foot: 12 inches; basic English unit

Meter: 39.37 inches; basic international unit

Vara: 33 ½ inches; basic Spanish unit; to convert varas to feet, multiply by 100 and divide by 36. To convert feet tovaras, multiply by .36

Labor: 1,000,000 square varas or 177.136 acres

One League: 25,000,000 square varas or 4,428.4 acres

Rod or Pole: 16.5 feet or 5.94 varas

Chain: 66 feet or 4 rods

Link: 7.92 inches

Mile: 5,280 feet; 1760 yards; 80 chains; 320 rods; or 1,900.8 varas

Acre: 43,560 square feet

Section: an area of land one mile square and containing 640 acres

III. Land Surveying in Texas

All land surveyors must be licensed in Texas by the Texas Board of Land Surveying. The Profession Land Surveying Act of 1979(V.A.T.S. Article 5282c) provides that land surveying in the State of Texas is synonymous with “professional surveying”. Publicsurveying is defined as the practice of land, boundary, or property surveying or other similar professional practices. The Actestablishes the Board and qualifications to become a registered public surveyor. The Act, however, initially did not provide forsurveying standards. Initially, it was felt that, as a profession, the surveying industry should establish its own minimum standards, ratherthan have them imposed by law.In fact, in 1977, the Texas Surveyors Association (now known as the Texas Society of Professional Surveyors) did promulgateminimum survey standards for professional surveyors. The standards are in the Manual of Practice for Land Surveying in the State ofTexas, Comprised of Standards for Land Surveys, Specifications for Categories of Surveying and ALTA/ACSM SurveyingStandards (herein referred to as the “Manual of Practice”). The current version of the Manual of Practice is the 1991 Revised EighthEdition approved November 23, 1991.

The Manual of Practice is composed of two parts, (i) an introduction with general statement regarding standards and definitions andapplications of terminology and (ii) specifications for Categories of Surveying. The categories are numbered 1 through 9. A generalsummary of the categories is as follows:

Category 1A: Land Title Survey. A comprehensive investigation and evaluation of significant factors affecting and influencing thelocation of the boundaries, ownership lines, rights of way and easements within or immediately surrounding a particular parcel of realestate. The focus is directly on the purpose of insuring title.

Category 1B: Standard Land Survey. Boundary survey which is not for insuring purposes. Does not attempt to locate improvementsand internal features.

Category 2: Route Survey. Used to establish location of lineral projects such as roads, canals, utility transmission lines, frequentlydescribed in terms of a center line.