What on earth is an Improvement Location Certificate (ILC) and why does my lender or title company want me to get one?

In the intricate world of real estate transactions, clarity and assurance are paramount. Whether you're a seasoned homeowner or a first-time buyer, you've likely encountered the term "Improvement Location Certificate" (ILC) when navigating the labyrinthine processes of buying a property. While it may seem like just another bureaucratic hurdle, an ILC plays a pivotal role in ensuring a smooth and secure real estate transaction. So, why would a lender or title company require one? In this post, we will attempt to briefly unravel the significance of ILCs, exploring the reasons behind their necessity and the peace of mind they bring to all parties involved in real estate dealings in the event you're asked to get one.

Improvement Location Certificate (ILC)

First, what is an ILC? An Improvement Location Certificate depicts any visible improvements that may encroach onto the subject property from the adjacent properties or from the subject property onto the adjacent properties. Distances from the property line will be shown for all major structures. However, an Improvement Location Certificate does not constitute a boundary survey, therefore no property corners will be set and it should not be used or relied upon for any construction or future improvements to the property. More simply stated, and ILC is like an inspection of a parcel by a licensed surveyor to determine possible encroachments or other matters that could be adverse from a land surveying standpoint. It is important to keep in mind an ILC is not technically a survey, and should not be used as such. It does not locate exact boundaries. It does not establish property corners. It is not to be legally relied upon for locations of property lines or future improvements. The ILC provides a document that shows a bird's eye view of a property, summarizing deeded boundary dimensions, and approximate improvement locations, among other things. It is essentially a drawing of a parcel of real property prepared by a licensed surveyor that shows the location of improvements to, and easements across the property; as well as encroachments onto the property by improvements located on adjoining properties. Ultimately, the ILC will be delivered to you via PDF. 

When does a title company require an ILC?

If you're buying residential real estate and you're required to get an ILC, it's likely at the request of either your lender, or the title company. It's also possible that a buyer could request an ILC from a seller, especially when there is concern that the boundary lines of a property have been encroached upon by a neighbor. 

According to an article published in March 2023 by Land Title Guarantee Company (Land Title), there are a few circumstances when an ILC will be called for as a requirement to issue a title insurance policy:

Significant Renovation or New Construction

• If the home is being flipped, Land Title would likely require an ILC to ensure that the new home conforms to the building envelope or setback lines relevant to the property.

OEC (Owners Extended Coverage)

• If an OEC is being purchased, we may require a survey in order to identify certain exceptions, including boundary issues.

• If there is no survey coverage being offered on the property, a title company will not require a survey.

Large Acreage

• The typical rule is that 5 acres or more requires a survey.

• Fence lines can cause boundary issues that can be extensive or expensive to fix.

Unusual Terrain

• If the property is mountainous, hilly, or contains bodies of water, then a survey may be necessary as these features may be used as boundaries and can shift over time.

Complicated Legal Descriptions

• If the legal description is metes & bounds, rather than a simple lot, block, subdivision, we may require a survey to confirm the property boundaries.

Most Commercial Properties

Vacant, Unplanted Lots

• A Land Survey Plat may be required.

Areas with Known Issues

• Prior boundary/survey claims on a subject or neighboring properties.

• In older communities with known, consistent issues (happens sometimes in older towns established through mining claims, etc),

Please note: Do not rely upon Title Company Requirements when making the decision about recommending a survey. There are many instances in which a survey could be critical to avoiding problems for the buyer post-closing, but there will be no title company requirement.

How much does an ILC cost?

An "ILC" in a typical residential neighborhood in the Denver Metro Area, described by lot and block, will cost around $350. Characteristics such as lot size and location, terrain, age of the subdivision, or a metes and bounds legal description could all affect the total cost.

Bottom Line

In the complex tapestry of real estate transactions, the Improvement Location Certificate emerges as a crucial thread, weaving together the interests of lenders, title companies, and property buyers. It serves as a vital tool in guaranteeing the accuracy of property boundaries, safeguarding investments, and mitigating potential risks. By demanding an ILC, lenders and title companies not only protect their financial stakes but also offer invaluable reassurance to homebuyers, fostering transparency and trust in the real estate industry. As you venture into the realm of property acquisition, remember that behind the seemingly mundane document lies a world of security and certainty, ensuring that your dream home is founded on a solid and unshakeable basis.

Let us know how we can help you handle ordering and deciphering a survey, should you be required to obtain one for your property purchase.