Wednesday, July 22, 2009

Who Decides if an Improvement Location Certificate (ILC) is Needed?

We are seeing an increasing number of title companies requiring an improvement location certificate (ILC) before they will issue a title insurance commitment. An ILC differs from a survey in that the ILC simply identifies the location of the property improvements (buildings), encroachments, and easements, but it is not evidence of the exact boundaries of the property. Although it is not a full survey, it's usually sufficient documentation for properties that are located within subdivisions. It is less expensive than a survey, also.

If a real estate agent enters "N/A" in the survey section of the sales contract, indicating that an ILC is not needed, that has absolutely no bearing on whether an ILC is actually needed. The title company decides whether they need one before they will issue the title commitment. If the contract states that an ILC is not needed, but the buyer will pay for it if it is needed (we see this a lot), then your buyer is on the hook for the ILC fee if the title company needs one. On deals where money is tight for the buyer, this can be a big problem.

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