survey

Something Spooky Is Lurking in Your Survey: The Rise of Survey Fraud

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October is the season for ghosts, goblins, haunted houses, and things that go bump in the night. But for real estate lawyers and title professionals, there may be something even scarier hiding in a closing file: a fraudulent survey.  And unfortunately, this one is not wearing a costume.

An emerging form of real estate fraud involves property surveys that have been fraudulently altered or, in some instances, completely fabricated. With today’s sophisticated graphic-editing software and artificial intelligence tools, changing a document has become frighteningly easy. Even worse, the finished product can look remarkably authentic. That means the survey sitting in your closing file may not always be what it appears to be.

A Survey With a Few Tricks

Fraud-prevention reports have described schemes in which existing surveys were allegedly manipulated to conceal or misrepresent conditions affecting property. Examples have included an existing survey allegedly altered to remove an improvement, as well as a fabricated survey allegedly omitting structures encroaching into an easement.

Now you see it. Now you don’t.  These are not harmless edits. A survey can play an important role in identifying or evaluating boundaries, improvements, easements, encroachments, and other physical matters that may affect the title to or use of the property.

But remember that the survey and title examination serve different functions. A clean-looking survey does not eliminate matters disclosed by the public record, and a survey should not be treated as a substitute for a proper title examination. When the survey, legal description, recorded documents, and conditions on the ground do not seem to tell the same story, that discrepancy deserves further investigation.

Look for the Survey’s Skeletons

Unfortunately, there may not be one obvious clue that a survey has been manipulated. Still, a few red flags should cause you to take a closer look:

  • Inconsistent fonts, text sizes, spacing, or formatting.
  • Letters or numbers that appear to float, lean, or otherwise differ from surrounding text.
  • Smudges, unusually faint lines, white areas, or other indications that information may have been removed or replaced.
  • A surveyor’s signature or seal that appears misaligned, copied and pasted, or visually disconnected from the document.
  • Differences between the property’s legal description and what is depicted on the survey.
  • A recorded easement or other matter revealed by the title examination that an apparent current survey unexpectedly fails to depict or reference.
  • Electronic file creation or modification dates that do not reasonably correspond with the purported date of the survey or revision.

None of these things, standing alone, necessarily proves fraud. Documents are frequently scanned, copied, downloaded, combined, and converted into different electronic formats. Unusual metadata or formatting should therefore be treated as a reason to ask questions, not proof that a survey has been fraudulently altered.

Don’t Be Haunted by a Fake Survey

Fortunately, one of the best defenses against survey fraud is surprisingly low-tech: independent verification.  Whenever practicable, obtain the survey directly from the licensed surveyor or independently confirm with the surveyor that the version provided for the transaction is authentic.  If a survey comes from the seller, buyer, real estate agent, or another third party, consider independently identifying and contacting the surveyor to verify the document.

And here is an important point: do not rely exclusively on the phone number or email address printed on a questionable survey.  If someone has gone to the trouble of fabricating a survey, creating fraudulent contact information is not much of a leap. Independently locating the surveyor’s legitimate contact information provides an additional safeguard.

The Same Old Fraud Lesson, Wearing a New Costume

Title professionals have already learned an important lesson from years of combating wire fraud and other real estate scams: trust but verify. The same principle applies here.

Technology continues to make document manipulation easier and more convincing. That does not mean every imperfect-looking survey should send the closing attorney running from the building like the last scene of a horror movie. It does mean we should resist accepting a document at face value when something does not look right. Fraudsters may have some new tricks.

Our best treat remains the same: slow down, ask questions, compare the survey with the title evidence, and independently verify before relying on the document. Because when it comes to property surveys, the scariest problems may be the ones somebody has carefully erased.

Advice for purchaser clients: obtain a survey!

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Advice for lawyers: paper your file when clients refuse!

On this cold, wet Monday morning, I was wondering what I could write to help my real estate lawyer friends through a February week in South Carolina. Then I remembered this news article from the U.S. Sun an excellent dirt lawyer friend from the coast sent to me. His quote was: “I wish I could get all buyers to read it when they turn down a survey.” Perhaps you can use this article to convince a client or two.

Any of us who are old enough to have practiced in the 1990s will remember a time when lenders and title insurance companies required current surveys for every closing. A current survey is a great tool for a real estate lawyer to review along with the title work. Comparing the boundary lines with the title work and checking for easements, encroachments and such horrible mishaps as sewer lines running under improvements gave the lawyer and client a great deal of comfort.

Our backdoor neighbors were once Steve and Wendy Spitz. Many real estate lawyers in South Carolina attribute our knowledge and enthusiasm for the practice to Steve’s property classes in law school. We both built in a new subdivision, and a corner of the Spitz home, as revealed by a survey, sat squarely on a City of Columbia water easement. That builder’s mistake was corrected prior to closing by negotiating with the City to move the easement. Thankfully, the water line itself was not a problem.

To hold down closing costs, at some point in the 1990s lenders began to eliminate the requirement for a survey in most residential closings if the lender could obtain title insurance survey coverage. One of the title insurance companies agreed to provide survey coverage to lenders without a new survey. There were some requirements back then, like having a survey of record showing the improvements or having an affidavit from the owner that nothing had changed since the prior survey.

Then, for competitive reasons, all the title insurance companies caved. Current surveys were no longer required. Over the years, the requirements were even softened.

My thought was that the title companies had unceremoniously hung the lawyers out to dry. Previously, the closing attorney simply told the client that a survey was required to close. With the change, the closing attorney had to convince the client of the need for a survey despite the added cost. I believe one of the biggest traps for the unwary closing attorney is failing to advise purchaser clients to obtain surveys and failing to paper files when surveys are rejected.

And don’t even mention the surveyors! They were collectively and understandably furious that they had lost a large portion of their business. I remember being the sacrificial lamb who was sent to speak to a statewide group of surveyors on behalf of the title insurance industry. It wasn’t pretty.

Here’s another story from my neighborhood. A kindly preacher friend bought a house several doors down from us. The free-standing garage had been added prior to my friend’s purchase and well after the original construction. My friend did not obtain a current survey. When he sold the house, a new survey revealed that the garage violated the side setback line by more than ten feet, and the purchaser refused to close. Keep in mind that contracts typically require sellers to give marketable title. A setback violation of this magnitude may be insured over by a title insurance company, but the title may not be marketable. This purchaser was within his rights to reject this title.

By that time, the developer, a Greenville based insurance company, had sold all the lots, and took the position that it could no longer waive violations of the restrictions even though the restrictions clearly allowed for developer waivers. The solution was that my friend went door to door to obtain the signatures of the required majority of the owners. Thankfully, my friend was a very nice guy, and the neighbors were willing to accommodate his request by signing the waiver.

Today, title insurance policies have evolved to the point that survey coverage is often given to owners without current surveys. But the example above demonstrates that title insurance coverage may not cure the underlying problem. Title insurance can never create marketable title. And title insurance claims may take time and cause aggravation that clients will not appreciate.

So let your clients read the linked article and advise them to obtain surveys. And, if they refuse, obtain  informed consent confirmed in writing for your file!