Real Property Acquisition Handbook


1 Property Real ACQUISITION Handbook How the U.S. General Services Administration Acquires Real Property for Programs and Projects GSA Public Buildings Service


3 Table of Contents ... 2 Introduction ... 3 CommonT erms Used in Acquiring Real Property 6 ... Property Appraisal and the Determination of Just Compensation ... Negotiations 9 ... Settlement and Condemnation 12 ... Project Contacts 13 GSA Public Buildings Service | 1

4 Federal programs designed to benefit the public may result in the acquisition of private property and sometimes in the displacement of people from their residences, places of business or farms. The acquisition itself does not need to be The Fifth Amendment to the United States Constitution provides that private property may Federally funded for the Uniform Act to apply. If Federal funds are used in any phase of the not be taken for public use without the payment of just compensation. To provide uniform and program or project, the rules and regulations of the Uniform Act apply. equitable treatment of persons whose property is acquired for public use, Congress passed The Uniform Act requires acquiring agencies the Uniform Relocation Assistance and Real to make “every reasonable effort to acquire Property Acquisition Policies Act of 1970, expeditiously real property by negotiation.” 42 and amended it in 1987. The law is commonly U.S.C. § 4651. The objective is to encourage referred to as the Uniform Act. Implementing agreements with property owners to minimize regulations for the Uniform Act are issued litigation and promote public confidence in by the Department of Transportation and can Federal and federally assisted land acquisition be found in part 24 of title 49 of the Code of programs. Federal Regulations. All Federal, state and This brochure explains the rights of an owner local government agencies, as well as others of real property to be acquired for a federally receiving Federal financial assistance for funded program or project. An accompanying public programs and projects that require the brochure, entitled “Relocation Handbook,” acquisition of real property, must comply with explains the rights and benefits of a displaced the policies and provisions set forth in the person under the Federal Relocation Assistance Uniform Act. Program. 2

5 Common Terms Used in Acquiring Real Property ACQUISITION CONDEMNATION Acquisition is the process of gaining ownership Condemnation is the legal process of acquiring or control of real property (real estate) or an private property for public use or purpose through the government’s power of eminent interest in real property. domain. Condemnation usually is not used until AGENCY all attempts to reach a mutually satisfactory An agency can be a governmental organization agreement through negotiations have failed. An (Federal, state or local), a nongovernmental agency then goes to court to acquire the needed organization (such as a utility company), property. or a private person, using Federal financial EASEMENT assistance for a program or project that An easement is an interest in real property that acquires real property or displaces a affords a person the right to make limited use person. (All references to “Agency” in this brochure refer to the U.S. General Services of another person’s real property. An easement Administration (GSA).) may be exclusive or non-exclusive and may be perpetual or expressly limited in duration. APPRAISAL Examples of easements are (1) a right-of-way, An appraisal is a written statement prepared (2) a right of entry for a stated purpose, (3) a independently and impartially by a qualified right to the support of land and buildings, (4) a appraiser setting forth an opinion of defined right of light and air, (5) a right to place or keep value of an adequately described property as of utilities on another person’s property, (6) a a specific date, supported by the presentation right to the perpetual maintenance of drainage and analysis of relevant market information. structures, (7) a right to allow reconstruction of a driveway during construction, and (8) a right to do some act that would otherwise constitute a nuisance. “ The Fifth Amendment of the Constitution states that private property shall not be taken for public use without the payment of just compensation.” GSA Public Buildings Service | 3

6 Common Terms Used in Acquiring Real Property EMINENT DOMAIN LIEN Eminent domain is the right of the government A lien is a legal claim of one person upon to take private property for public use. In the the property of another person to secure United States, just compensation must be paid the payment of a debt or the satisfaction of for private property acquired in connection with an obligation. Examples include mortgages, federally funded programs or projects. mechanics’ liens and tax liens. As a general rule, liens must be paid in full when the property FAIR MARKET VALUE is sold. Fair market value is the price on the date of valuation that a property would change hands MARKET VALUE between a willing buyer and a willing seller, Market value is the sales price that a willing and neither being under any compulsion to buy or to informed buyer would pay in cash to a willing sell and both having reasonable knowledge of and informed seller for a particular property. relevant facts. NEGOTIATION INTEREST Negotiation is the act of discussing an issue An interest is a right, title or legal share in between two or more parties with competing something. People who share in the ownership interests with an aim of coming to an agreement. of real property have an interest in the property. It is the process by which GSA and the seller of property seek to reach an amicable agreement INVERSE CONDEMNATION over the terms and conditions of the sale of Inverse condemnation is a term used to property. An offer may be made for the purchase describe a situation in which the government of property in person or by mail, and the offer is takes private property but fails to pay the discussed with the owner. compensation required by the Fifth Amendment to the U.S. Constitution. To be compensated, the PERSON owner must then sue the government. A person is an individual, family, partnership, corporation, or association. JUST COMPENSATION Just compensation is the price an agency must PERSONAL PROPERTY pay to acquire real property. An agency official In general, personal property is property that must make the estimate of just compensation can be moved. It is not permanently attached to, to be offered for the property, which amount nor a part of, the real property. Personal property may not be less than the amount established is not to be included and valued in appraising in the approved appraisal report as the fair real property. market value for the property. If the owner and GSA cannot agree on the amount of just compensation, the amount will be determined in court. 4

7 PROGRAM OR PROJECT A program or project is any activity or series “ An agency official must of activities undertaken by an agency where Federal financial assistance is used in any make the estimate of phase of the activity. just compensation UNECONOMIC REMNANT A parcel of real property in which the owner is to be offered for the left with an interest after the partial acquisition of the owner’s property, and which the agency property, which amount has determined has little or no value or utility to the owner. may not be less than the WAIVER VALUATION amount established in The valuation process used and product produced when the agency determines that an the approved appraisal appraisal is not required. A waiver valuation may be used for relatively low-value, non-complex report as the fair market acquisitions. A waiver valuation is prepared instead of an appraisal. value for the property.” GSA Public Buildings Service | 5

8 Property Appraisal and the Determination of Just Compensation her representative, may point out any unusual PROPERTY APPRAISAL or hidden features of the property that the The U.S. General Services Administration appraiser might overlook. At this time, the (GSA) determines the specific property to property owner should advise the appraiser if be acquired for a public program or project any of these conditions exist: after the project has been planned and Other persons who have an ownership or • the government requirements have been other interest in the property, whether established. or not of record; If a property, or a portion of it, needs to be • Tenants on the property; acquired, the primary owner will be notified as Items of real or personal property located • soon as possible of: on the property that belong to another (1) GSA’s interest in acquiring the property; person; or GSA’s obligation to obtain any (2) Presence of hazardous materials, • necessary appraisals; and underground storage or utilities. (3) Any other useful information. This is the owner’s opportunity to tell the When GSA begins the acquisition process, the appraiser about anything relevant to the first personal contact with the property owner property’s valuation, including other properties should be no later than during the appraisal of in the area that have sold recently. the property. The appraiser will inspect the property and An appraiser will contact the property owner note its physical characteristics. He or she will to make an appointment to inspect his or her review sales of properties similar to the subject property. The appraiser is responsible for property to compare the facts of those sales determining the initial fair market value of the with the facts about the property. The appraiser property. GSA will have a review appraiser will analyze all elements that affect value. analyze the appraisal report and recommend The appraiser must consider any normal whether or not the agency should accept the depreciation and physical deterioration that report.T he accepted appraisal report will have taken place. By law, the appraiser must become the basis for the agency’s offer of just disregard the influence of the future public compensation for the property.T he property project on the value of the property. This owner, or a representative designated by the requirement may be partially responsible for any property owner, will be invited to accompany difference in the fair market value and market the appraiser when the appraiser inspects value of the subject property. the property.T he property owner, or his or The appraisal report will describe the property, and GSA will determine a value based on the condition of the property as of the day the 6

9 property, GSA must offer to acquire at least appraiser last inspected it compared with other an equal interest in all buildings, structures or similar properties that have sold. other improvements located on the real property Once the appraisal of fair market value is to be acquired if they must be removed or if they complete, a review appraiser from GSA will will be adversely affected by the use to which review the report to confirm that all applicable the real property will be put.T his includes any appraisal standards and requirements have improvement of a tenant-owner who has the been met. The GSA review appraiser will then right or obligation to remove the improvement at determine the amount of just compensation to the expiration or earlier termination of the lease be offered for the real property.T his amount term, as discussed in greater detail immediately will never be less than the fair market value below. established by the approved appraisal. If GSA is acquiring only a portion of the JUST COMPENSATION property, there may be damages or ancillary benefits to the remaining property. Any TENANT-OWNED IMPROVEMENTS allowable damages or benefits will be reflected Sometimes, a tenant leases real property and in the offer of just compensation. GSA will builds or adds improvements for his or her prepare a written offer of just compensation for own use. Frequently, the tenant has the right or the property owner when negotiations begin. obligation to remove the improvements at the expiration or earlier termination of the lease BUILDINGS, STRUCTURES AND term. If, under state law, the improvements OTHER IMPROVEMENTS would be considered to be real property, GSA Sometimes, buildings, structures or other must treat the improvements as real property improvements are located on the property to and make an offer to the tenant-owner to acquire be acquired. If they are determined to be real these improvements as though they were real “ An appraiser will contact the property owner to make an appointment to inspect his or her property. The appraiser is responsible for determining the initial fair market value of the property. ” GSA Public Buildings Service | 7

10 Property Appraisal and the Determination of Just Compensation to be personal property, then the tenant may these improvements as though they were real property. To be paid for these improvements, the be reimbursed for moving them under the tenant-owner must assign, transfer and release relocation assistance provision. to GSA all of the tenant-owner’s right, title GSA will personally contact a tenant who has and interest in the improvements. In addition, made any such improvements to explain the the owner of the real property on which the procedures to be followed. Any payments must improvements are located must relinquish all be made in accordance with applicable Federal interest he or she has in the improvements. and state laws and regulations.T he Uniform Act requires that all rental property to be acquired In the case of a tenant improvement, the must be appraised, but it also authorizes waiving measure of just compensation is the amount that requirement for low-value acquisitions. the improvement contributes to the fair market value of the whole property, or its value for The regulations authorize an agency to waive removal from the property (salvage value), the appraisal requirement under certain whichever amount is greater. A tenant-owner circumstances. If an owner elects to donate may reject payment for the tenant improvements his or her real property and releases GSA and obtain payment for his or her property from the obligation to obtain an appraisal, or if interests in accordance with other applicable GSA believes acquisition of the real property law. GSA is not authorized to pay for tenant- is uncomplicated and a review of available data owned improvements if such payment would supports a fair market value likely to be $10,000 result in the duplication of any compensation or less, GSA may prepare a waiver valuation, otherwise authorized by law. If state law rather than an appraisal, to estimate the considers the tenant-owned improvements property’s fair market value. EXCEPTIONS TO THE APPRAISAL REQUIREMENTS If GSA believes acquisition of the real property is uncomplicated and a review of available data supports a fair market value likely to be greater than $10,000, but less than $25,000, GSA may prepare a waiver valuation, rather than an appraisal, to estimate the real property’s fair market value, if the agency offers the property owner the option of having the agency appraise the property. If the owner elects to have GSA appraise the property, an appraisal must be obtained. 8

11 Negotiations THE WRITTEN OFFER After GSA approves the offer of just compensation, the agency will begin negotiations with the property owner, or his or her designated representative, by delivering the written offer of just compensation for the purchase of the real property. Whenever possible, the offer will be delivered in person by a GSA representative; otherwise, the offer will be mailed and followed up by a personal visit or phone call. All owners of the property with known addresses will be contacted, unless they collectively have designated one person to represent their interests. An agency representative will discuss the agency’s offer to purchase the property, including the basis for the offer of just compensation and the agency’s The offer may list items of real property that the acquisition policies and procedures. owner may elect to retain and remove from the Along with the initial written purchase offer, property and the retention values associated GSA must give the owner a written summary with the individual items. If the owner decides statement of the basis for the offer of just to retain any or all of these items, the offer will compensation, which must include, at a be reduced by the value of the items retained. minimum, the following information: The owner will be responsible for removing the items from the property in a timely manner. The amount offered as just • GSA may elect to withhold a portion of the compensation; remaining offer until the retained items are • The description and location of the removed from the property. Any separately property and the interest to be acquired; held ownership interest in the property, such as and tenant-owned improvements, will be identified The identification of the buildings and • by GSA. GSA may negotiate individually with other improvements that are considered each person who holds a separate ownership to be part of the real property and interest in the property, or it may negotiate with included as part of the offer of just the primary owner and prepare a check payable compensation. jointly to all owners. GSA Public Buildings Service | 9

12 Negotiations GSA will give the owner a reasonable amount will offer to purchase it.T he owner will then have of time to consider the written offer and to the option of accepting the purchase ask questions or seek clarification of anything offer for the uneconomic remnant or keeping the that is not understood. If the owner of the property. property believes that all relevant materials AGREEMENT BETWEEN THE were not considered during the appraisal, he PROPERTY OWNER AND GSA or she may present such information at this If the property owner reaches an agreement with time. The owner also may request modifications GSA on the terms and conditions of the offer, to the proposed terms and conditions of the the owner will be asked to sign a purchase and purchase and sale. GSA will consider any sale agreement, an easement or some form of reasonable requests. deed that GSA has prepared, as applicable. The owner’s signature will affirm that the owner and the agency are in agreement concerning “ GSA may not take the terms and conditions of the acquisition of the property. any action to force If the owner does not reach an agreement with an owner to accept GSA, the agency may suggest mediation as a means of coming to an agreement. If, after its offer. ” making every reasonable effort to acquire the property by negotiation, GSA reasonably believes that an agreement cannot be reached, it PARTIAL ACQUISITION will initiate condemnation proceedings. In some cases, GSA will not need to acquire GSA may not take any action to force an owner all of the owner’s property. GSA usually will to accept its offer. Prohibited actions include: purchase only what it needs. If GSA intends to acquire only a portion of the property, the • Advancing the time of condemnation; agency must state the amount to be paid for Deferring negotiations; • the part to be acquired. In addition, an amount Deferring condemnation; • will be stated separately for damages, if any, to the portion of the property to be retained by • Delaying the deposit of funds with the property owner. If GSA determines that the the court for the owner’s use once remainder property will have little or no value condemnation is initiated; or or use to the owner, GSA will consider this • Taking any other coercive action designed remainder to be an uneconomic remnant and to force an agreement on the price to be paid for the property. 10

13 PAYMENT POSSESSION The next step in the acquisition process is GSA may not take possession of the real payment for the property. As soon as all of property until: the necessary paperwork is completed for The owner has been paid the agreed-upon • transferring title to the property, GSA will pay purchase price, or off any liens against the property and pay the • In the case of condemnation, GSA has remaining equity to the property owner. The deposited with the court, for the benefit owner’s incidental expenses also will be paid or of the owner, an amount not less than reimbursed. Incidental expenses are reasonable the agency’s approved appraisal of expenses that the owner necessarily incurred as the fair market value of the property, a result of transferring title to GSA, such as: or the amount of the court award of Recording fees, transfer taxes, • compensation in the condemnation documentary stamps, evidence of title, proceeding for the property. boundary surveys, legal descriptions of If GSA takes possession while persons still the real property, and similar expenses occupy the property, all persons lawfully necessary to convey title to the property occupying the property must receive a written to GSA. GSA is not required to pay costs notice to move at least 90 days in advance of the to perfect the owner’s title, or to assure required date to move. that the title to the real property is entirely A lawful occupant of a residence cannot be without defect. required to move until at least 90 days after a Penalty costs and other charges for • comparable replacement dwelling has been prepayment of any preexisting recorded made available for occupancy. Only in unusual mortgage entered into in good faith circumstances, such as when continued encumbering the real property. occupancy would constitute a substantial danger The pro rata share of any prepaid real • to the health or safety of the occupants, may property taxes that can be allocated to occupants of the property be required to vacate the period after GSA obtains title to the on less than 90 days advance written notice. property or effective possession of it, A Relocation Counselor will be appointed whichever is earlier. and made available to all occupants to explain If possible, GSA will pay these costs directly their rights, respond to any questions and to the property owner to eliminate claim process all claims for reimbursement under the reimbursement. Uniform Act. GSA Public Buildings Service | 11

14 Settlement and Condemnation LITIGATION EXPENSES SETTLEMENT Normally, GSA does not reimburse a property GSA will make every reasonable effort to reach owner for expenses he or she incurs as a an agreement with the property owner during negotiations. The owner may provide additional result of condemnation proceedings. However, GSA will reimburse a property owner for any information and make reasonable counteroffers reasonable expenses, including reasonable and proposals for GSA to consider. When it is in the public interest, GSA may use this attorney, appraisal and engineering fees, which the owner actually incurred because of a information as a basis for an administrative settlement, as appropriate. condemnation proceeding, if: • The court determines that GSA CONDEMNATION cannot acquire the real property by If an agreement cannot be reached, GSA condemnation; may acquire the property by exercising its • GSA abandons the condemnation power of eminent domain by instituting formal proceeding other than under an agreed- condemnation proceedings with the appropriate upon settlement; or Federal court. • The property owner files an inverse condemnation action and the court renders a judgment in favor of the owner “ If an agreement or the agency settles the case. cannot be reached, GSA may acquire the property by exercising its power of eminent domain by instituting formal condemnation proceedings with the appropriate Federal court. ” 12

15 Project Contacts This information is provided to assist you in understanding the requirements that GSA must meet, as well as the property owner’s rights and obligations. If you have any questions, please contact the project representative: Site Acquisition Contact Name: Phone Number: Email: Mailing Address: GSA Public Buildings Service | 13

16 Notes 14

17 GSA Public Buildings Service | 15

18 Notes 16


20 United States General Services Administration Office of Leasing Center for Site Acquisition and Relocation April 2012 GSA Public Buildings Service

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