Bulletin: MT000015

Date:
March 17, 2004
To:
All Montana Agents
RE:
Mortgage Survey Exemption from Subdivision Review
Dear Associates:

A Certificate of Survey [hereafter referred to a "COS"] as described in Montana Statutes §76-3-103 is a survey made for the purpose of establishing boundaries for the division of a larger tract or tracts of land.  It is accomplished typically without a dedication that is normally found in a subdivision plat.  Although dedicated roads may be found in such a COS, typically roads and other easements are privately created by either a declaration of easements or reserved or granted in conveyances by the developer of the COS.

Generally, the Montana Subdivision and Platting Act requires that all transfers of land comprising less than 160 acres undergo subdivision plat review prior to transfer.  See §§ 76-3-104, -301, -302 M.C.A.  However, M.C.A. §76-3-201(b) (as amended by 2003 Session Law HB 298 on May 5, 2003)  provides any division of land that is created to provide security for construction mortgages, liens or trust indentures is exempt from subdivision review. 

This exemption allows lenders to foreclose on the security given for their loan and have title conveyed to a purchaser upon the sale of the land.  When a party other than the lender takes title, the purchaser will then be required to comply with this Act.

Traditionally, we require evidence of a recorded COS as part of the search and examination of title when we are dealing with divided property where there is no new subdivision plat to ensure a valid description of the insured property.  A county recorder may refuse to record a document that does not properly refer to such a COS evidencing the division of the land.  See MCA §76-4-122.  Title examiners must therefore obtain a COS prior to insuring a description that divides the land.

In connection with the issuance of the 'STG Subdivision Map Endorsement 1', examiners should look for a recorded COS if there is no plat or require subdivision review and approval before insuring a mortgage on divided land.  Although various policies issued by the Company have exclusions from coverage for matters related to governmental regulation, including subdivision regulations and matters relating to the division of land, this endorsement overrides to a certain extent the effect of the exclusion.  An examiner needs to review the COS to determine whether approval has been granted by the proper authority to evidence the division of the land.  This endorsement should not be given where a lender is making a division of the land under the exemption in the statute for lenders holding a security interest in a portion of the land.

This law establishes a procedure allowing lenders to be exempt from the filing requirements of a COS or of a subdivision plat, but a subsequent purchaser of this previously exempt parcel would be required to comply by filing such a plat.  Such a subsequent sale would need a requirement to show compliance for such subsequent sale.  In that way the legal description of the land would need to refer to the new COS or subdivision description.

COMPANY POLICY:  Prior to the issuance of a STG Subdivision Map Endorsement 1, a COS or a subdivision plat should be recorded evidencing the establishment of the division of the formerly larger parcel into smaller tracts.  Where a mortgage is on a smaller portion of the divided parcel, this endorsement should not be given without specific approval of the Company.  When the land does not front a road, a COS or subdivision plat will not change the need to create access.

Examiners need to review legal descriptions and make suitable requirements for a COS when land is being divided and it is not the intention of the parties to subdivide the land, including the review and approval prior to recording.  The description in the policy should thereafter use this approved description as shown in the COS.   Examiners should flag starter files so that they know when to create a new COS on a sale out.

IF YOU HAVE ANY QUESTIONS REGARDING THE ISSUES RAISED. BY THIS BULLETIN, PLEASE CONTACT YOUR LOCAL UNDERWRITING PERSONNEL.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
15.40 Plats Of Subdivisions
Exceptions Manual:
None
Forms:
STG Subdivision Map Act Endorsement 1