The U.S. Small Business Administration ("SBA") National 7(a) Authorization Boiler Plate explains that the Lender must obtain a lien on 100% of the interest in its collateral and properly perfect its lien positions. Appendix B of the Boiler Plate then identifies which of the nine types of evidence of title is necessary to do just that.   Generally, the majority of states will require evidence of title to be based upon an American Land Title Association ("ALTA") Loan Policy insuring the lender and its successors and/or assigns where it is available. 

The primary obligation of the title insurer is to indemnify the insured against losses resulting from a covered claim, and the typical remedy for insured lenders when a claim arises is to obtain lien priority. However, certain claims are excepted, or even excluded, from coverage. The Survey Exception (defined below) is an example of an excepted claim.

For lenders, an ALTA Loan Policy insures against loss or damage incurred by reason of any defect in, lien, or encumbrance on title, which includes, but is not limited to, insurance against loss from:

"Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the title that would be disclosed by an accurate and complete land survey of the Land and inspection of the Land." (the "Survey Matters")

Typically, Schedule B of an ALTA Loan Policy will contain an exception to the Survey Matters (the "Survey Exception") unless they are disposed of to the satisfaction of the title insurer. The purpose of the Survey Exception is to exclude from coverage those matters that cannot be ascertained from a search of the public records (e.g. the existence of an encroaching fence or pavement).

 For a survey of real property to be acceptable to a title insurance company to delete the Survey Exception, specific information must be presented in order to create a clear understanding between the insured, title insurance company, lender, and surveyor. Certain states, such as Florida, have established their own minimum survey standards and a procedure by which the Survey Exception may be deleted.  

Florida Statutes Section 627.7842