# Sample DRAFT Exception Analysis > **Note to Claude**: This is an example format showing how to analyze Schedule B exceptions. Adapt to specific facts and always include disclaimers. --- ``` ═══════════════════════════════════════════════════════════════════════════════ ** DRAFT - FOR ATTORNEY REVIEW ** ═══════════════════════════════════════════════════════════════════════════════ DRAFT SCHEDULE B EXCEPTION ANALYSIS Property: 123 Main Street, Austin, Texas 78701 Commitment: [Commitment Number] Effective Date: [Date] ═══════════════════════════════════════════════════════════════════════════════ This analysis is a preliminary draft for informational purposes only. It must be reviewed and approved by a licensed Texas attorney. ═══════════════════════════════════════════════════════════════════════════════ EXCEPTION SUMMARY TABLE ┌────┬──────────────────────────┬─────────────┬────────┬───────────────────────┐ │ # │ Exception │ Type │ Impact │ Recommendation │ ├────┼──────────────────────────┼─────────────┼────────┼───────────────────────┤ │ 1 │ Taxes (2025+) │ Standard │ Low │ No action - standard │ │ 2 │ Rights of parties │ Standard │ Low │ Deletable w/affidavit │ │ 3 │ Survey matters │ Standard │ Low │ Deletable w/survey │ │ 4 │ Mechanic's liens │ Standard │ Low │ Deletable w/T-47 │ │ 5 │ Deed restrictions │ CCRs │ Medium │ Remains - review │ │ 6 │ Utility easement │ Easement │ Low │ Remains - no impact │ │ 7 │ Pipeline easement │ Easement │ Medium │ Remains - verify loc. │ │ 8 │ Mineral reservation │ Minerals │ Medium │ Remains - disclosed │ │ 9 │ Deed of trust │ Lien │ High │ Must release │ │ 10 │ HOA assessment lien │ Lien │ Medium │ Verify current │ └────┴──────────────────────────┴─────────────┴────────┴───────────────────────┘ ═══════════════════════════════════════════════════════════════════════════════ DETAILED EXCEPTION ANALYSIS ═══════════════════════════════════════════════════════════════════════════════ ────────────────────────────────────────────────────────────────────────────── EXCEPTION 1: TAXES AND ASSESSMENTS ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Standby fees, taxes, assessments, and charges by any taxing authority for the year 2025 and subsequent years, and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership." CLASSIFICATION: Standard Pre-Printed Exception ANALYSIS: This is a standard exception appearing in all Texas title commitments. It covers: - Current year taxes not yet assessed - Future years' taxes - Rollback taxes if land use changes Per Standard 15.10, ad valorem property taxes have first-priority lien status under TEX. TAX CODE § 32.01. DOCUMENTS REVIEWED: - Tax Certificate dated [Date] showing 2024 taxes PAID - 2025 taxes not yet due IMPACT ASSESSMENT: LOW - Standard exception; cannot be deleted - 2025 taxes estimated at $8,500 (prorate at closing) - No delinquent taxes - No rollback tax exposure (no ag exemption history) RECOMMENDATION: No action required - Exception remains as standard - Prorate current year taxes at closing - Verify no special assessments pending CURE: N/A (standard exception) ────────────────────────────────────────────────────────────────────────────── EXCEPTION 2: RIGHTS OF PARTIES IN POSSESSION ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Rights of parties in possession not shown by the public records." CLASSIFICATION: Standard Pre-Printed Exception (Deletable) ANALYSIS: This exception protects against unrecorded possessory rights including: - Tenants under unrecorded leases - Adverse possessors - Licensees Per Standard 3.40, an examiner should consider evidence of possession that might create inquiry notice. DOCUMENTS REVIEWED: - Survey shows no evidence of third-party occupation - Seller affidavit confirms owner-occupied, no tenants IMPACT ASSESSMENT: LOW - Property is owner-occupied (by seller's principals) - No evidence of adverse possession - No tenants or licensees RECOMMENDATION: Request deletion with documentation CURE STEPS: 1. [ ] Obtain seller's affidavit stating: - No parties in possession other than seller - No unrecorded leases or tenancies - No boundary disputes or adverse claims 2. [ ] Survey shows no evidence of third-party possession 3. [ ] Title company approves deletion STATUS: [ ] Affidavit obtained [ ] Deletion approved ────────────────────────────────────────────────────────────────────────────── EXCEPTION 3: SURVEY MATTERS ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Discrepancies, conflicts in boundary lines, shortage in area, encroachments, or any other facts which a correct survey would disclose, and which are not shown by the public records." CLASSIFICATION: Standard Pre-Printed Exception (Deletable) ANALYSIS: This blanket exception covers all physical/survey-related matters. Per Standard 11.10, a current survey is not required for title examination but is needed to delete this exception. DOCUMENTS REVIEWED: - ALTA/NSPS survey dated [Date] by [Surveyor], RPLS #[Number] - Survey certified to title company and lender - Table A items 1, 2, 3, 6, 8 included SURVEY FINDINGS: - Legal description matches commitment - All improvements within property lines - No encroachments onto adjacent property - No encroachments from adjacent property - No encroachments into easements - No boundary conflicts - Area: 0.25 acres (matches deed) - Flood Zone X (minimal flood hazard) IMPACT ASSESSMENT: LOW - Survey shows no adverse matters - All improvements properly located RECOMMENDATION: Request deletion with T-19 endorsement CURE STEPS: 1. [ ] Survey reviewed and acceptable 2. [ ] T-47 affidavit obtained from seller 3. [ ] T-19 endorsement requested 4. [ ] Exception deleted or modified to specific matters MODIFIED EXCEPTION LANGUAGE (if deletion not granted): "Survey dated [Date] by [Surveyor], RPLS #[Number], which survey discloses no encroachments, conflicts, or discrepancies." STATUS: [ ] Survey accepted [ ] T-47 obtained [ ] Deletion/modification approved ────────────────────────────────────────────────────────────────────────────── EXCEPTION 4: MECHANIC'S AND MATERIALMAN'S LIENS ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records." CLASSIFICATION: Standard Pre-Printed Exception (Deletable) ANALYSIS: Texas Constitution Art. XVI, § 37 creates a self-executing constitutional lien for labor and materials. Per Standards 15.70-15.80: - Lien attaches regardless of recording - Inception date: when work commenced or materials delivered - Perfection: affidavit filed within statutory period - May prime recorded deeds of trust DOCUMENTS REVIEWED: - Survey dated [Date] shows no evidence of recent construction - T-47 affidavit to confirm no improvements within 90 days IMPACT ASSESSMENT: LOW (assuming no recent work) - No visible construction activity per survey - Property appears stable (no additions/modifications) RECOMMENDATION: Delete with T-47 affidavit CURE STEPS: 1. [ ] Seller executes T-47 affidavit certifying: - No improvements, alterations, or repairs within 90 days - No work contracted for but not yet performed - No unpaid bills for prior work 2. [ ] If recent work: Obtain lien waivers from all contractors 3. [ ] Title company approves deletion IF RECENT CONSTRUCTION: - Obtain all contracts and payment records - Obtain final lien waivers from: [ ] General contractor [ ] All subcontractors [ ] All material suppliers - Consider lien escrow for protection period STATUS: [ ] T-47 obtained [ ] Deletion approved ────────────────────────────────────────────────────────────────────────────── EXCEPTION 5: DEED RESTRICTIONS (CCRs) ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Restrictive Covenants recorded in Volume 1234, Page 567, Deed Records, Travis County, Texas, but omitting any covenant or restriction based on race, color, religion, sex, handicap, familial status, or national origin unless and only to the extent that said covenant (a) is exempt under Chapter 42, Section 3607, of the United States Code or (b) relates to handicap but does not discriminate against handicapped persons." CLASSIFICATION: Deed Restrictions / CCRs ANALYSIS: These are the recorded restrictions for Oak Hills Subdivision, filed when the subdivision was platted. DOCUMENT REVIEWED: Declaration of Covenants, Conditions and Restrictions recorded Volume 1234, Page 567 KEY RESTRICTIONS: ┌────────────────────────────────────┬─────────────────────────────────────┐ │ Restriction │ Current Compliance │ ├────────────────────────────────────┼─────────────────────────────────────┤ │ Single-family residential only │ ✓ Compliant - single family home │ │ Minimum 2,000 sq ft living area │ ✓ Compliant - 2,450 sq ft per surv │ │ 25' front setback │ ✓ Compliant - 30' per survey │ │ 10' side setbacks │ ✓ Compliant - 12' per survey │ │ 20' rear setback │ ✓ Compliant - 25' per survey │ │ Max 2-story height │ ✓ Compliant - single story │ │ No commercial vehicles visible │ Unable to verify │ │ Architectural review for changes │ N/A - no changes proposed │ │ No temporary structures │ ✓ Compliant - none visible │ └────────────────────────────────────┴─────────────────────────────────────┘ ENFORCEMENT: - Enforced by Oak Hills HOA - Individual lot owners have standing to enforce - No violations noted in HOA resale certificate EXPIRATION: None stated; restrictions run with land IMPACT ASSESSMENT: MEDIUM - Restrictions limit property use to residential - Current improvements comply - Buyer should review if planning modifications RECOMMENDATION: Remains as exception - Cannot be deleted (valid restrictions) - Current use complies - Provide copy of restrictions to buyer ACTION FOR BUYER: [ ] Restrictions provided to buyer for review [ ] Buyer acknowledges receipt and review [ ] Buyer confirms intended use complies ────────────────────────────────────────────────────────────────────────────── EXCEPTION 6: UTILITY EASEMENT (PLATTED) ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "A 10-foot utility easement along the north (rear) property line as shown and dedicated on the plat of Oak Hills Subdivision recorded in Volume XX, Page YY, Plat Records, Travis County, Texas." CLASSIFICATION: Utility Easement (Platted/Dedicated) ANALYSIS: This easement was created when the subdivision was platted and dedicated for public utility use. DOCUMENT REVIEWED: Subdivision plat, Volume XX, Page YY, Plat Records EASEMENT DETAILS: - Width: 10 feet - Location: Along entire rear (north) property line - Purpose: Public utilities (electric, gas, water, telecom) - Beneficiary: Public/utility companies SURVEY VERIFICATION: - Easement plotted correctly on survey - Underground utilities present in easement - Electric meter and junction box located in easement - NO IMPROVEMENTS encroach into easement IMPACT ASSESSMENT: LOW - Typical utility easement in expected location - No structures affected - Limits building in rear 10 feet only - Standard for subdivision lots RECOMMENDATION: Remains as exception (cannot delete) - Easement is valid and properly shown - No encroachments to address - Minimal impact on property use BUYER NOTICE: - No permanent structures in easement area - Utility company has right to access - Temporary excavation possible for repairs ────────────────────────────────────────────────────────────────────────────── EXCEPTION 7: PIPELINE EASEMENT ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Pipeline easement to ABC Pipeline Company granted in instrument recorded in Volume 5678, Page 123, Deed Records, Travis County, Texas." CLASSIFICATION: Pipeline Easement ANALYSIS: This appears to be a transmission pipeline easement granted prior to subdivision development. DOCUMENT REVIEWED: Pipeline Easement Agreement, Vol. 5678, Pg. 123 EASEMENT DETAILS: - Width: 50 feet (25' each side of centerline) - Location: Crosses southwest corner of property - Purpose: Gas transmission pipeline - Grantee: ABC Pipeline Company (now DEF Energy per assignment) - Rights: Install, maintain, repair, replace pipeline - Surface Rights: Grantor retains surface use subject to easement SURVEY VERIFICATION: - Easement corridor shown on survey - Pipeline markers visible at entry/exit points - Easement affects approximately 0.03 acres - House and other improvements OUTSIDE easement corridor - Portion of driveway crosses easement (permitted use) RESTRICTIONS IN EASEMENT: - No permanent structures - No trees over 15' height - No excavation without notice to pipeline company - Pipeline company may clear vegetation IMPACT ASSESSMENT: MEDIUM - Affects portion of property (southwest corner) - No existing improvements impacted - Limits future development in easement area - Active pipeline—safety setbacks apply RECOMMENDATION: Remains as exception CURE: N/A (valid easement cannot be removed) BUYER NOTICE: [ ] Pipeline location shown to buyer [ ] Pipeline company contact provided: DEF Energy, 1-800-XXX-XXXX [ ] Call-before-you-dig requirements explained [ ] Building restrictions in easement noted ────────────────────────────────────────────────────────────────────────────── EXCEPTION 8: MINERAL RESERVATION ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "All oil, gas, and other minerals in, on, and under the Property together with the right of ingress and egress for the purpose of exploring, developing, and producing same, as reserved in deed from Oak Hills Development Co. to First National Bank, Trustee, recorded in Volume 987, Page 654, Deed Records, Travis County, Texas." CLASSIFICATION: Mineral Reservation ANALYSIS: Per tx-minerals.md reference, Texas follows the "ownership in place" theory. The mineral estate has been severed from the surface estate. DOCUMENT REVIEWED: Deed containing mineral reservation, Vol. 987, Pg. 654 RESERVATION DETAILS: - Minerals Reserved: 100% of oil, gas, and other minerals - Reserving Party: Oak Hills Development Co. (developer) - Surface Rights Reserved: Yes - ingress/egress for mineral operations - Depth Limitation: None stated (all depths) - Pooling Rights: Reserved - Executive Rights: Reserved (right to lease) CURRENT STATUS: - Railroad Commission records: No active wells on property - No current mineral lease of record for this tract - Adjacent tracts: [Check for nearby production] DOMINANT MINERAL ESTATE: Per Standard 20.10, the mineral owner has implied right to use surface as reasonably necessary for mineral extraction. This may include: - Access roads - Well sites - Pipeline routes - Storage facilities IMPACT ASSESSMENT: MEDIUM - Surface owner does not own minerals - Mineral owner has surface access rights - No current production or leasing activity - Standard for this area/subdivision RECOMMENDATION: Remains as exception BUYER CONSIDERATIONS: [ ] Mineral severance explained to buyer [ ] No current lease—but could be leased in future [ ] Surface use rights of mineral owner explained [ ] May want to negotiate surface use agreement with mineral owner OPTIONAL PROTECTION: - Buyer may seek surface damage agreement - Contact mineral owner to discuss surface use limitations - Title insurance does not cover mineral matters ────────────────────────────────────────────────────────────────────────────── EXCEPTION 9: DEED OF TRUST (EXISTING LIEN) ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Deed of Trust from ABC Holdings, LLC to Trustee for the benefit of XYZ Bank securing a note in the original principal amount of $500,000.00, recorded under Document No. 2022-123456, Official Public Records, Travis County, Texas." CLASSIFICATION: Existing Lien / Deed of Trust ANALYSIS: This is an existing mortgage that must be released at closing. DOCUMENT REVIEWED: Deed of Trust, Doc. No. 2022-123456 LIEN DETAILS: ┌─────────────────────────────┬───────────────────────────────────────────┐ │ Grantor (Borrower) │ ABC Holdings, LLC │ │ Beneficiary (Lender) │ XYZ Bank │ │ Trustee │ [Name], or successor │ │ Original Principal │ $500,000.00 │ │ Recording Date │ [Date] │ │ Recording Info │ Document No. 2022-123456, OPRTC │ │ Estimated Current Balance │ $425,000.00 (verify with payoff) │ └─────────────────────────────┴───────────────────────────────────────────┘ IMPACT ASSESSMENT: HIGH - Active lien that must be released before buyer takes title free and clear - Senior to buyer's interest - Foreclosure risk if not paid RECOMMENDATION: MUST BE RELEASED AT CLOSING CURE STEPS: 1. [ ] Contact XYZ Bank for payoff letter Loan Servicing: [Phone number] Loan Number: [Number] 2. [ ] Verify payoff amount and good-through date Estimated: $425,000 + per diem interest 3. [ ] Wire payoff from closing proceeds Wire to: [Bank wire instructions] 4. [ ] Obtain and record Release of Lien Release to be recorded post-closing 5. [ ] Verify release recorded STATUS: [ ] Payoff requested: [Date] [ ] Payoff received: [Date] [ ] Good through: [Date] [ ] Amount: $_____________ [ ] Per diem: $_______/day [ ] Wire instructions confirmed ────────────────────────────────────────────────────────────────────────────── EXCEPTION 10: HOA ASSESSMENT LIEN ────────────────────────────────────────────────────────────────────────────── COMMITMENT LANGUAGE: "Assessments and liens in favor of Oak Hills Homeowners Association as set forth in the Declaration recorded in Volume 1234, Page 567, Deed Records, Travis County, Texas." CLASSIFICATION: HOA/POA Assessment Lien ANALYSIS: Texas Property Code Chapter 209 governs POA assessment liens. Per § 209.0091, up to six months of assessments have "super-priority" status over most other liens (except property taxes and prior recorded liens for work performed). DOCUMENT REVIEWED: - Declaration creating assessment obligation - HOA Resale Certificate dated [Date] HOA DETAILS: ┌─────────────────────────────┬───────────────────────────────────────────┐ │ Association │ Oak Hills Homeowners Association │ │ Management Company │ [Name] │ │ Contact │ [Phone/Email] │ │ Annual Assessment │ $1,200 ($100/month) │ │ Assessment Status │ Current (per resale certificate) │ │ Special Assessments │ None pending │ │ Violations │ None │ │ Transfer Fee │ $250 │ │ Capital Contribution │ $500 (buyer's responsibility) │ └─────────────────────────────┴───────────────────────────────────────────┘ IMPACT ASSESSMENT: MEDIUM (if delinquent) / LOW (if current) - Currently: Assessments are current per resale certificate - Ongoing: Regular assessments will continue - Transfer: Fee and capital contribution due at closing RECOMMENDATION: Verify current status; collect transfer amounts at closing CURE STEPS: 1. [ ] Obtain updated resale certificate (within 30 days of closing) 2. [ ] Verify assessment account current 3. [ ] Calculate prorations 4. [ ] Collect transfer fee and capital contribution 5. [ ] Notify HOA of ownership change STATUS: [ ] Resale certificate: Received [Date] [ ] Account current: Yes / No [ ] Transfer fee: $250 [ ] Capital contribution: $500 [ ] Proration through closing: $______ ═══════════════════════════════════════════════════════════════════════════════ EXCEPTION SUMMARY ═══════════════════════════════════════════════════════════════════════════════ WILL BE DELETED (with documentation): - Exception 2: Rights of parties in possession - Exception 3: Survey matters (or modified) - Exception 4: Mechanic's liens MUST BE RELEASED: - Exception 9: Deed of Trust to XYZ Bank WILL REMAIN ON FINAL POLICY: - Exception 1: Taxes (standard) - Exception 5: Deed restrictions - Exception 6: Utility easement - Exception 7: Pipeline easement - Exception 8: Mineral reservation - Exception 10: HOA assessment lien (ongoing) ═══════════════════════════════════════════════════════════════════════════════ ** DRAFT - FOR ATTORNEY REVIEW ** This exception analysis is a preliminary draft prepared for informational purposes only. A licensed Texas attorney must review and approve this analysis before any reliance. ═══════════════════════════════════════════════════════════════════════════════ ```