Schedule B Exceptions: learn & quiz

The minute version

Two kinds of exceptions

Standard (general) exceptions are boilerplate for off-record risks: rights of parties in possession, survey matters, unrecorded easements, mechanics' liens not of record, and taxes not yet due.
Special exceptions are deal-specific recorded items: a particular easement, CC&R declaration, mortgage, lease, mineral reservation or pending lawsuit.

Possession and mechanics' liens: an owner's affidavit (no tenants beyond the rent roll, no unpaid work), sometimes lien waivers or an indemnity.
Survey matters: a current survey, usually an ALTA/NSPS Land Title Survey, reviewed by the insurer. The exception is removed or replaced with specific findings.
Unrecorded easements: usually handled with the affidavit and survey together.
Each state's rules and forms differ. Removal is an underwriting call, not automatic.

Without a survey, the policy takes a general exception for anything an accurate survey would show, which wipes out survey coverage under Covered Risk 2.c.
With an acceptable survey, the insurer typically removes the general exception and lists specific survey findings instead (an encroaching fence, a drive over a setback line).
Endorsements like ALTA 25 (same as survey) and ALTA 28.1 (encroachments) build on that survey.

Pull and read every document referenced. Ask what it actually does to your use, your financing and your improvements.
Ask for exceptions to be removed (released or expired), limited ("insofar as it affects…") or insured over with affirmative coverage or an endorsement.
In 2021 ALTA policies, discriminatory covenants in excepted documents are treated as redacted; only the rest of the document is excepted.

Schedule B, Part I – Requirements: what must happen before the policy issues (payoffs, releases, entity documents, the deed to be recorded).
Schedule B, Part II – Exceptions: what the policy will not cover. A requirement not met can become an exception.