**CHAPTER 5**

**Real Property Acquisition**

1.  INTRODUCTION

    A.  [Purpose of Chapter]{.underline}. This chapter provides policies
        and guidance relating to the acquisition of real property (real
        estate) for HUD funded programs and projects under the Uniform
        Relocation Assistance and Real Property Acquisition Policies Act
        (URA) and other HUD requirements. The policies and guidance
        found in this handbook supplement the statutory and regulatory
        requirements of the URA. Recipients must ensure compliance with
        the URA statute and implementing regulations at 49 CFR Part 24.

    B.  [General URA Acquisition Process (Appendix 23)]{.underline}.

2.  APPLICABILITY OF URA ACQUISITION REQUIREMENTS

    A.  [Voluntary vs. Involuntary Acquisition]{.underline}. 49 CFR
        Subpart B sets forth the real property acquisition requirements
        for Federal and federally-assisted programs and projects under
        the URA. Generally, the URA regulations have different
        requirements for acquisitions of a voluntary nature and for
        acquisitions under threat or use of eminent domain
        (condemnation). For ease of understanding, this chapter refers
        to the different types of acquisitions as: 1) Voluntary
        acquisitions (transactions with no threat or use of eminent
        domain meeting the criteria set forth in 49 CFR 24.101(b)(1)
        through (5)); and 2) Involuntary acquisitions (acquisitions
        subject to threat or use of eminent domain). Under the URA,
        voluntary acquisitions which satisfy the requirements of 49 CFR
        24.101(b)(1)-(5) are not subject to the acquisition requirements
        of 49 CFR Part 24 Subpart B. A common misconception is that a
        "willing seller" or "amicable agreement" means a transaction is
        "voluntary." This is not necessarily true under the URA and the
        applicable requirements of 49 CFR 24.101(b)(1)-(5) must be
        satisfied for a transaction to be considered a "voluntary
        acquisition" for purposes of the URA.

    B.  [Understanding the difference]{.underline}. Recipients must
        understand the critical differences between "voluntary"
        acquisitions and "involuntary" acquisitions prior to acquiring
        real property for a HUD funded project. See the aforementioned
        regulations and Appendix 23 to determine how your proposed
        acquisition should be handled. If you are uncertain or have
        questions how your proposed acquisition should be treated under
        the URA regulations, contact your local HUD Regional Relocation
        Specialist for assistance. A list of HUD contacts is accessible
        on HUD's Real Estate Acquisition and Relocation web site at:
        <http://www.hud.gov/relocation>.

    C.  [Temporary Easements]{.underline}. 49 CFR 24.101(c)(1) provides
        that the subpart B requirements apply to the acquisition of
        permanent and/or temporary easements necessary for the project.
        However, 49 CFR 24.101(c)(2) provides an exception for the
        acquisition of temporary easements which exclusively benefit the
        property owner. 49 CFR 24.101(c)(2) states that, *"The
        provisions of this subpart do not apply to temporary easements
        or permits needed solely to perform work intended exclusively
        for the benefit of the property owner, which work may not be
        done if agreement cannot be reached."* The acquisition of
        temporary easements which do not satisfy the exception provided
        in 49 CFR 24.101(c)(2) above remain subject to the regulatory
        requirements of 49 CFR part 24 subpart B. It is also important
        to note that "voluntary acquisitions" of temporary easements
        which satisfy the applicable requirements of 49 CFR
        24.101(b)(1)-(5) are not subject to the full URA regulatory
        requirements of 49 CFR part 24 subpart B.

    D.  [Greatest Extent Practicable Under State Law (49 CFR
        24.4(a)).]{.underline}[^1] The phrase "greatest extent
        practicable under state law" means: if the State is not
        specifically precluded by its law, compliance with the URA and
        regulatory provisions of sections 24.102, 24.103, 24.104 and
        24.105 is required.

3.  VOLUNTARY ACQUISITIONS (49 CFR 24.101(b)(1)-(5))

    A.  [Persons Acting on Behalf of Agency]{.underline}. In cases where
        persons (e.g., private developer, agent, non-profit
        organization, etc.) pursue the acquisition of real property
        "officially or unofficially" on behalf of an agency for a
        federally-funded project, such persons must satisfy the
        applicable voluntary acquisition requirements of
        24.101(b)(1)-(5). In the event the person is acting on behalf of
        an agency with eminent domain authority, all applicable
        requirements of 24.101(b)(1) must be satisfied. In no case is it
        permissible for an agency to subsequently undertake the
        acquisition under threat or use of its eminent domain authority
        in the event initial negotiations for a voluntary acquisition
        fail. If the agency cannot ensure the applicable requirements of
        24.101(b)(1)-(5) will be satisfied, then such acquisitions must
        not be pursued as a "voluntary acquisition" and must instead be
        pursued as an involuntary acquisition under the full
        requirements of 49 CFR 24 Subpart B.

    B.  [Non-Profit Organizations (NPOs)]{.underline}. The acquisition
        activities of NPOs are subject to Uniform Act coverage if such
        activities are for a Federal or federally-assisted program or
        project. Pertinent considerations in determining whether an
        acquisition is "for" a program or project include (but are not
        limited to) (1) when HUD assistance was requested and (2)
        whether the acquisition is integrally related to the program or
        project.

        1.  A NPO usually does not have recourse to the power of eminent
            domain. Under such circumstances, the obligation imposed by
            the Uniform Act would be limited. The NPO would ordinarily
            comply with 49 CFR 24.101(b)(2) in the acquisition of
            property and 49 CFR 24.2(a)(9)(ii)(H) in providing
            relocation assistance. See also paragraph 5-3A.

        2.  The requirements for acquisition under Section 24.101(b)(2)
            are: (1) The owner must be advised that the property will
            not be acquired in the event negotiations fail to result in
            an amicable agreement, and (2) the owner must be advised, in
            writing, of what is believed to be the market value of the
            property. The regulations do not require that relocation
            assistance be offered to an owner-occupant. However, any
            resulting displacement of a tenant is subject to the
            regulations in 49 CFR Part 24.

    C.  [Property Owner Notification]{.underline}. Based on requests
        from recipients, sample letters which may serve to provide
        required information to property owners in voluntary
        acquisitions under 24.101(b)(1) & (b)(2) are included as
        Appendices 31 & 32. These sample letters are not required to be
        used, however, they are useful guides to help recipients satisfy
        the regulatory requirements of this section. See also paragraph
        5-4A.

    D.  [Tenant Notification]{.underline}. If a voluntary acquisition of
        tenant-occupied property will result in the displacement of the
        tenant-occupants, they will generally be eligible for relocation
        assistance. Upon issuance of a voluntary acquisition
        informational notice (see Appendix 31 & 32) and entering into
        negotiations for the property, tenant-occupants must be fully
        informed in writing of their potential eligibility for
        relocation assistance.

        1.  The preliminary tenant notification may be accomplished
            through a General Information Notice (GIN) (see Appendices 3
            & 3a). Such tenant-occupants must also be promptly informed
            in writing of their eligibility for relocation assistance,
            if negotiations are successful and result in a written
            agreement binding the acquiring agency to purchase the
            property from which the tenant will be displaced. In order
            to trigger a tenant-occupant's eligibility for relocation
            assistance, the written agreement must subject the acquiring
            agency and owner to legally enforceable commitments to
            proceed with the purchase. In the event negotiations are
            unsuccessful, tenant-occupants must also be promptly
            informed in writing of their ineligibility for relocation
            assistance. See 49 CFR 24.2(a)(15)(iv) Initiations of
            Negotiations and Appendix A.

        2.  Prior to entering into any agreement to purchase property in
            connection with a voluntary acquisition, agencies should
            ensure they are allowed access to tenant-occupants who may
            be displaced as a result of the acquisition. Agency access
            to tenant-occupants should be made part of any offer or
            option contract for voluntary acquisitions. Tenant access is
            necessary to not only ensure required notifications are
            provided, but also so that interviews with tenant-occupants
            may be conducted. Interviews are necessary for early
            identification of potential relocation challenges and to
            accurately estimate relocation costs associated with tenant
            displacement. Information obtained as a result of tenant
            access and interviews provides agencies with useful
            information to determine whether to proceed with a proposed
            acquisition or to pursue alternate properties.

        3.  Where a property owner will not allow an agency to have
            tenant access, the agency should pursue alternate properties
            where such access will be granted.

    E.  [Estimates of Market Value]{.underline}. In cases of voluntary
        acquisitions under 49 CFR 24.101(b)(1)(iv) & (b)(2)(ii) agencies
        must inform the property owner in writing of what it believes to
        be the market value of the property (See 49 CFR 24 Appendix A).
        Although an appraisal is not required by regulation in these
        circumstances, HUD encourages the use of an appraisal in order
        to establish the agency's estimate of market value, especially
        for high value and/or complex property acquisitions. In some
        cases it would be both prudent and appropriate to conduct a
        technical appraisal review of such appraisals in accordance with
        section 24.104 as part of the recipient's market value
        determination process. If an appraisal is not prepared, the
        estimate of market value must be prepared by a person familiar
        with real estate values. The agency's files must include an
        explanation, with reasonable evidence, of the basis for the
        agency's estimate of market value.

    F.  [Negotiations]{.underline}. In the case of voluntary
        acquisitions under the URA, there is nothing in the regulations
        to preclude negotiations resulting in agreements at, above, or
        even below the agency's estimate of market value after the
        property owner has been so informed and all applicable
        requirements have been satisfied. See 49 CFR part 24 - Appendix
        A 24.101(b)(1)(iv) & (2)(ii)) & HUD RAP Vol. 1 No. 2 - dated
        11/2005.

        1.  Recipients should consider alternative properties available
            for purchase prior to entering into any agreement for
            property which exceeds the original estimate of market
            value. Subject to applicable program requirements,
            alternative properties must be pursued when proposed
            agreements which exceed the recipient's original estimate
            cannot be legitimately supported and justified.

        2.  Documentation and support for all agreements (at, below, or
            above the original estimate) must be at an appropriate level
            to satisfy a HUD technical review. All such agreements are
            subject to HUD review and corrective action when deemed
            necessary (see also paragraph 5-4 H).

    G.  [Title Issues]{.underline}. In voluntary acquisitions, agencies
        should not pay costs required to perfect the owner's title to
        the real property to be acquired. Agencies should require owners
        to transfer the property with clear title; without heirship,
        title dispute, or other title problems such as liens.

    H.  [Noncompliance with Voluntary Acquisition
        Requirements]{.underline}. In those cases where an agency has
        entered into a purchase option or contract for an acquisition
        but has not satisfied all applicable requirements of a voluntary
        acquisition under 24.101(b)(1)-(5), the agency must , in
        writing, provide the seller the opportunity to withdraw from the
        existing agreement. After the applicable requirements have been
        satisfied by the agency and the seller has been so informed in
        writing, the seller may elect to void or affirm the original
        agreement in writing. If the seller voids the original
        agreement, the agency can negotiate a new agreement with the
        seller. Additional corrective action may be required based on
        the circumstances as determined by the local HUD Regional
        Relocation Specialist.

4.  INVOLUNTARY ACQUISITION BASIC REQUIREMENTS

    A.  [Notice to Owner (49 CFR 24.102(b))]{.underline}. This
        acquisition notice usually serves as an agency's initial written
        communication to an owner whose property may be acquired for a
        federally-funded project under threat or use of eminent domain.
        This notice is required to be issued in writing and provides
        information on the basic protections for property owners under
        the Uniform Act and regulations. Agencies may satisfy this
        requirement by providing, as appropriate, the HUD information
        brochure, \"When a Public Agency Acquires Your Property\"
        (HUD-1041-CPD) available through HUD Field Office locations or
        from HUD's web site at <http://www.hud.gov/relocation>. Records
        of when this written notice was issued must be maintained for
        HUD monitoring purposes. Sample language for a "notice to owner"
        is included as Appendix 30.

        1.  Agencies must understand the difference between a "notice to
            owner" and a "notice of intent to acquire" (49 CFR
            24.203(d)). Whereas a "notice to owner" sets forth minimum
            rights and protections for property owners under the URA, a
            "notice of intent to acquire" is specifically intended to
            establish eligibility for relocation assistance and payments
            in advance of the usual URA triggering actions.

        2.  If the agency does not know whether or not the property is
            tenant-occupied, the notice to owner should ask for this
            information. Tenant-occupants would be considered displaced
            persons and could impact the agency's decision to go forward
            with the purchase because of the financial implication of
            relocation costs.

        3.  If the property is tenant-occupied, a General Information
            Notice should be issued to each tenant as soon as feasible
            (which may be at the time of the Notice to the Owner or, if
            the agency was unaware that the property was
            tenant-occupied, as soon as the agency becomes aware of the
            tenant(s)).

    B.  [Notification Requirements for Time Share Condominium
        Owners.]{.underline}[^2] Acquisition notification of property
        owners in a time-share condominium may be accomplished by
        advising the homeowners\' association, which in turn may notify
        the condominium owners via a homeowners\' association meeting.
        The appraiser may participate in the meeting to satisfy the
        requirement that the homeowners be given the opportunity to
        accompany the appraiser during the property inspection.

    C.  [Establishment of Just Compensation Cannot be Delegated (49 CFR
        24.102(d))]{.underline}.[^3] The establishment of an amount
        believed to be just compensation for federally-funded projects
        can not be delegated to a private consultant. It would be an
        improper delegation of a public function to a private entity.
        Establishment of the amount believed to be just compensation to
        be offered the property owner must be by an appropriate official
        of the acquiring agency.

    D.  [Property Owner with Conflict of Interest]{.underline}. A
        conflict of interest exists whenever the owner of an interest in
        real property that is to be acquired for a HUD-assisted project
        serves as an officer, employee, or agent of the recipient or its
        designated acquiring agent or exercises any other responsible
        function in connection with that project. See, e.g., 24 CFR
        570.611. A recipient must establish safeguards to prohibit
        employees, officers, and agents from using their position for a
        purpose that is, or gives the appearance of being, motivated by
        a desire for private gain for themselves or others, particularly
        those with whom they have family, business, or other ties. The
        recipient must document its files to enable HUD to review the
        adequacy of actions taken. Recipients should refer to applicable
        HUD program regulations for applicable conflict of interest
        requirements.

        1.  Examples of Safeguards: Among the various measures which a
            recipient could adopt to prevent the possibility of undue
            personal enrichment by real property owners who may be in a
            conflict of interest position are:[^4]

            a.  Disclosure. The recipient may require disclosure of any
                potential conflict of interest to the governing body of
                the locality, to the recipient's legal counsel, and as
                otherwise may be appropriate.

            b.  HUD Price Concurrence. The recipient may request that
                HUD review the appraisals and the determination of just
                compensation and concur in the proposed and final
                acquisition prices.

            c.  Condemnation. The recipient may acquire the property
                through condemnation and let the court determine just
                compensation for the property. This is especially
                appropriate if the owner is unwilling to sell his or her
                property for its appraised fair market value.

    E.  [Waiver Valuations]{.underline}. An appraisal is not required
        for cases involving acquisition by sale or donation of real
        property with a low fair market value (Section 301(2)). This
        provision of the law is further defined and implemented by the
        URA regulations at 49 CFR 24.102(c), which in part sets forth
        that an appraisal is not required when the "...Agency determines
        the appraisal is unnecessary because the valuation problem is
        uncomplicated and the anticipated value of the proposed
        acquisition is estimated at \$10,000 or less, based on a review
        of available data." If these criteria are met, the Agency may
        prepare a waiver valuation, provided the person performing the
        waiver valuation has sufficient understanding of appraisal
        principles and the local real estate market to be qualified to
        prepare it. The term "Waiver Valuation" is defined at 49 CFR
        24.2(a)(33).

        1.  A waiver valuation is not appropriate when:

            a.  The anticipated value of the proposed acquisition is
                expected to exceed \$10,000 (unless granted prior
                approval by HUD and the acquiring agency offered the
                owner the option of an appraisal);

            b.  Possible damages to the remainder property exist;

            c.  Questions on highest and best use exist;

            d.  The valuation problem is complex;

            e.  The use of eminent domain is anticipated;

            f.  Hazardous material/waste may be present; or

            g.  For other reasons, the agency determines an appraisal is
                required.

        2.  Written procedures for use of a waiver valuation should be
            established by an Agency prior to its use. When a waiver
            valuation is determined to be appropriate, adequate
            documentation of the valuation data used must be maintained
            in the acquisition file for HUD monitoring purposes.

    F.  [Exclusion of Cost-to-Cure From Waiver Valuation
        Limits.]{.underline}[^5] Generally, the cost-to-cure cannot be
        excluded from the \$10,000 waiver valuation limit. However,
        under certain circumstances, specified items may be excluded
        from the waiver valuation limits. Some common costs-to-cure
        related to repetitive contracting for the restoration of items,
        such as well and septic systems, may be considered for exclusion
        from waiver valuation limits. The acquiring agency\'s procedures
        should include a definitive policy for handling such items to
        ensure that there is no duplication of payment in the valuation
        process.

    G.  [Waiver Valuations -- Exceeding \$10,000 Limit]{.underline}. If
        the anticipated amount of a waiver valuation is expected to
        exceed \$10,000 but is less than \$25,000, the agency may
        request HUD prior approval to exceed the \$10,000 regulatory
        limit. However, in cases where an increased threshold is
        granted, the agency must still offer the property owner the
        option of having the agency appraise the property (see 49 CFR
        24.102(c)(2)(ii)(C)).

        1.  All requests for approval of a threshold above \$10,000 (not
            to exceed \$25,000) for a HUD-funded project should be
            submitted to the appropriate HUD Regional Relocation
            Specialist who has responsibility for the State in which the
            project is located. A list of the HUD Regional Relocation
            Specialists located in the Office of Community Planning and
            Development (CPD) can be found on HUD's relocation website
            at: [www.HUD.gov/relocation]{.underline} under "Contacts."

        2.  The agency request must include its written waiver valuation
            operating procedures and documentation to support the waiver
            request including: identification of the project or projects
            for which a higher threshold is requested, the threshold
            amount requested, identification of the person or persons
            who will be authorized by the agency to perform the waiver
            valuation in lieu of an appraisal, a description of the
            qualifications of each named person to perform such a
            valuation based on sufficient understanding of the local
            real estate market, and proof that the agency offered the
            property owner the option of having the agency appraise the
            property.

        3.  The Regional Relocation Specialist will review the request
            and consult with appropriate staff from the HUD program
            area(s) funding the project (CPD, Public and Indian Housing,
            and/or Housing). The Regional Relocation Specialist will
            prepare a memorandum addressed to the Field Office CPD
            Director in whose jurisdiction the project is located,
            recommending approval or disapproval of the request with
            appropriate justification. Copies will be provided to the
            appropriate HUD program areas.

        4.  The Field Office CPD Director in whose jurisdiction the
            project is located will approve or disapprove of the
            request.

        5.  If an increase in the waiver valuation threshold is granted
            by HUD, it is strongly recommended that the agency secure
            the property owner's agreement to accept a waiver valuation
            (in lieu of an appraisal) in writing, prior to preparation
            of the waiver valuation. In any event, the property owner's
            signature acknowledging the agency's offer of an appraisal
            and the property owner's acceptance of a waiver valuation
            must be included in the agency's acquisition file whenever
            the waiver valuation amount exceeds \$10,000.

    H.  [Administrative Settlements]{.underline}. Two acquisition
        related objectives of the URA are "...to encourage and expedite
        acquisition by agreement..." and "...to minimize litigation and
        relieve congestion in courts....". The administrative settlement
        provisions of 49 CFR 24.102(i) are intended to help acquiring
        agencies achieve these objectives when warranted. Administrative
        settlements may be considered when reasonable efforts to
        negotiate an agreement at the amount offered have failed and a
        settlement would be deemed reasonable, prudent, and in the
        public interest. Although not a requirement, agencies should
        consider preparing another appraisal and appraisal review to
        help determine if a proposed administrative settlement is
        warranted. Preparation of an additional appraisal and appraisal
        review can be a cost effective tool used in the administrative
        settlement process, especially in cases where a substantial
        increase over the amount of the original offer is under
        consideration.

        1.  Under the URA administrative settlement provisions, when
            federal funds pay for or participate in acquisition costs,
            agencies [must]{.underline} document and maintain written
            justification for the higher amount. The justification must
            state what available information, including trial risks,
            supports exceeding the original estimate of market value.
            The level of documentation should fit the situation. A minor
            increase in the purchase price will typically require less
            support than larger increases. Documentation and support for
            administrative settlements must also be at an appropriate
            level to demonstrate compliance with applicable program
            requirements in the case of such reviews or audits as may be
            necessary and appropriate. All such agreements are subject
            to HUD review, and failure to provide such documentation may
            lead to corrective action when determined necessary.

        2.  Acquiring agencies must also comply with applicable HUD
            program regulations and/or policies in negotiating
            agreements for a property which exceeds the agency's market
            value determination. If there is a conflict, HUD program
            regulations and/or policies prevail.

        3.  If HUD grant funds are used to acquire properties, acquiring
            agencies must also be guided by the applicable OMB Circulars
            when considering the original estimate of market value and
            any agreement which exceeds that amount. A fundamental
            requirement in the OMB Circulars is that costs charged to a
            federal grant must be reasonable. OMB Circular A-87 "Cost
            Principles for State, Local and Indian Tribal Governments, "
            in particular, provides that costs must "\[b\]e necessary
            and reasonable for proper and efficient performance and
            administration of Federal awards." Each OMB Circular
            provides additional guidance on determining whether a cost
            is reasonable.

            a.  For states, local, and Indian tribal governments, OMB
                Circular A-87 provides as follows:

                1.  A cost is reasonable if, in its nature and amount,
                    it does not exceed that which would be incurred by a
                    prudent person under the circumstances prevailing at
                    the time the decision was made to incur the cost.
                    The question of reasonableness is particularly
                    important when governmental units or components are
                    predominately federally-funded. In determining
                    reasonableness of a given cost, consideration shall
                    be given to:

                    a.  Whether the cost is of a type generally
                        recognized as ordinary and necessary for the
                        operation of the governmental unit or the
                        performance of the Federal award,

                    b.  The restraints or requirements imposed by such
                        factors as: sound business practices; arms
                        length bargaining; Federal, State and other laws
                        and regulations; and, terms and conditions of
                        the Federal award,

                    c.  Market prices for comparable goods or services,

                    d.  Whether the individuals concerned acted with
                        prudence in the circumstances considering their
                        responsibilities to the governmental unit, its
                        employees, the public at large, and the Federal
                        Government,

                    e.  Significant deviations from the established
                        practices of the governmental unit which may
                        unjustifiably increase the Federal award\'s
                        cost.

        4.  Use of Administrative Settlements in Acquisitions.[^6]
            Negotiation implies an honest effort to resolve differences
            with property owners. Negotiators should recognize the
            inexact nature of the process by which just compensation is
            determined. Administrative settlements may expedite
            agreements with owners. The administrative settlement
            process should be maintained separate from the
            appraisal/appraisal review function. If the support for a
            settlement is to be based on appraisal-related issues, then
            a revised fair market value/just-compensation determination
            should be made. Administrative settlements are simply that;
            i.e., settlements made for administrative reasons considered
            to be in the public interest and properly documented. The
            law requires acquiring agencies to attempt to expedite
            acquisitions by agreements with owners so as to avoid
            litigation and relieve congestion in the courts. There are
            also significant cost savings in the use of administrative
            settlements as shown by cost data from the Department of
            Justice.

        5.  Justification for Administrative and Legal Settlements.[^7]
            Any administrative settlement is a management decision with
            advantages and disadvantages. Trial costs can be substantial
            and must be weighed against the impact that a settlement may
            have on subsequent negotiations with other owners. Agencies
            are given considerable discretion in how to deal with such
            circumstances. The requirements of 49 CFR 24.102(i) are
            intended to ensure that an acquiring agency explains the
            reasoning behind its decision, which then serves as
            documentation for participation in the cost above the
            initial offer. Such documentation is also required for legal
            settlements.

        6.  Prohibition of Inclusion of Relocation Payments as Support
            for Administrative Settlements.[^8] Section 203 of the
            Uniform Act defines a replacement housing payment as \"the
            amount, if any, when added to the acquisition cost of the
            dwelling acquired by the Federal agency equals the
            reasonable cost of a comparable dwelling....\" 49 CFR
            24.401(b) contains similar language. The acquisition cost of
            a dwelling includes the amount of just compensation
            determined through the appraisal process, and those
            additional amounts paid by the acquiring agency as an
            administrative settlement, legal settlement, or condemnation
            award. Relocation payments are not an acquisition cost and
            cannot be used to support an administrative settlement in
            whole or in part. Administrative settlements must be
            justified on acquisition issues only.

        7.  Administrative Settlements on Parcels Where Waiver
            Valuations are Used (49 CFR 24.102(i)). Section
            24.102(c)(2)(ii) provides for the acquisition of parcels
            without an appraisal when the estimated just compensation
            for the parcel is \$10,000 or less. Section 24.102(i)
            provides for administrative settlements when negotiations at
            the initial offer have failed. An administrative settlement
            can be made for an amount greater than \$10,000, with proper
            justification and documentation. When the estimated just
            compensation for the parcel is \$10,000 or less, the
            regulations do not require that an appraisal be prepared for
            a reasonable administrative settlement figure in excess of
            \$10,000. If the acquiring agency and the owner cannot reach
            agreement on an amount that the agency deems reasonable, an
            appraisal and a review would then seem advisable. The URA
            regulations do not place a monetary limit on administrative
            settlements that would automatically trigger the requirement
            for an appraisal. The agency may elect to impose such a
            limit (see also subparagraph 3). Title III of the Uniform
            Act and 49 CFR Part 24 clearly allow some administrative
            discretion when the amount in question is relatively minor.
            An administrative settlement may be the most prudent course
            of action available.

    I.  [Condemnation]{.underline}.

        1.  Waiver of Rights relative to Withdrawal of Court
            Deposit.[^9] In some jurisdictions, if a property owner
            withdraws any portion of a court deposit in a condemnation
            action, the withdrawal of deposit causes the property owner
            to automatically waive the right to challenge the taking. An
            automatic waiver of the right to challenge the taking is
            inconsistent with the requirements of the Uniform Act. The
            withdrawal of funds should not prejudice the property
            owner\'s right to request a judicial review of the necessity
            of the acquisition. Deposited funds may be the only
            resources available to the property owner, since the
            property has been encumbered by a condemnation filing.

        2.  Withholding of Payment in Lieu of Security.[^10] The
            procedure of withholding a portion of the salvage value of
            owner-retained improvements in lieu of a security deposit or
            bond to guarantee clean-up of the acquired site is
            permissible. Every property owner is to be offered the full
            amount of just compensation, but may elect to retain
            improvements. When improvements are retained in this manner,
            it is considered good business practice to hold sufficient
            funds to ensure proper clean-up of the premises. Additional
            benefits are also provided through reduced administrative
            costs.

        3.  Compensation Funds Deposited with Court at Time of Filing
            for Condemnation. Filing condemnation actions without
            concurrent deposit of just compensation funds has a clear
            potential for coercion of affected property owners. The
            conclusion of condemnation proceedings and physical
            possession normally take place sometime later. In the
            intervening period, the landowner must pay the property
            taxes, is precluded from selling or refinancing the
            property, or benefiting from any appreciation in value of
            the property. This practice, particularly where long delays
            are experienced between the initial filing of condemnation
            action and the deposit of just compensation funds, is
            contrary to the intent of the Uniform Act.

        4.  Escrow of Acquisition Payment.[^11] An agency may retain a
            reasonable portion of the purchase price to ensure that the
            acquired property, including fixtures, is surrendered to the
            agency. Such funds must be made available to the property
            owner simultaneously, with the agency\'s taking physical
            possession of the property.

        5.  Owner has Right to Withdraw Full Amount Deposited with Court
            Prior to Surrendering Possession.[^12] When condemnation is
            used, owners must be allowed to withdraw the full amount of
            the court deposit before being required to surrender
            possession of the property. This is based on the phrase
            \"for the benefit of the owner,\" which is found in 49 CFR
            24.102(j) and means the owner has the right to withdraw the
            full amount of the court deposit for the owner\'s use, in
            the same sense that the owner has the use of the full amount
            of the agreed purchase price in instances where condemnation
            is not involved.

        6.  Condemnation of Uneconomic Remnants.[^13] If the acquisition
            of a portion of a parcel leaves the owner with an uneconomic
            remnant, the acquiring agency shall offer to acquire the
            uneconomic remnant along with the portion of the property
            needed for the project. While it would be acceptable to
            condemn an uneconomic remnant to resolve title issues where
            the property owner consented to the acquisition,
            condemnation of uneconomic remnants over valuation issues
            should not be used on federal-aid projects. The condemnation
            of uneconomic remnants without the owner\'s consent is
            inconsistent with both the letter and the intent of the
            Uniform Act. The law states that the \"head of the Federal
            agency concerned shall offer to acquire that remnant.\" The
            law intentionally limits the acquiring agency to
            \"offering\" to acquire an uneconomic remnant. To permit the
            condemnation of uneconomic remnants would effectively allow
            the taking of private property not required for a defined
            public purpose. Many, if not most, States would consider the
            condemnation of real property, in excess of that actually
            required for a public facility, to be improper as it would
            not meet the necessity (for taking) test.

    J.  [Appraisal]{.underline}. (see Appendix 19 for a URA Guide for
        Preparing an Appraisal Scope of Work and Appendix 20 for a
        sample Agreement for Appraisal Services.)

        1.  The agency must provide the owner with an opportunity to
            accompany the appraiser during his/her inspection of the
            property to be acquired. All reasonable requests to meet
            with the appraiser must be honored. Agencies should include
            this requirement as part of any appraisal scope of work and
            all appropriate documentation, including the property
            owner's release of this obligation (if applicable) must be
            maintained in the acquisition files for HUD monitoring
            purposes. NOTE: Owners of tenant-owned improvements proposed
            for acquisition must also be offered the opportunity to
            accompany the appraiser during their property inspection.

        2.  When conducting a waiver valuation, the agency is not
            obligated to invite the property owner to accompany the
            waiver valuation preparer during the property inspection.
            Waiver valuations do not meet the definition of an appraisal
            under the URA and are not subject to URA appraisal
            requirements.

        3.  Release of Appraisal(s) to Property Owner. State laws govern
            the release of appraisal documents. There is no specific
            requirement under the URA for agencies to provide a property
            owner with a copy of an appraisal document. The URA
            regulations require that the agency give the property owner
            a written statement of the basis for the offer of just
            compensation often called a summary statement.

        4.  Appraisal Data.[^14] Appraisals should rely on factual
            information or assumptions supported in the market. Cost or
            income methods not derived from the market data are
            unacceptable.

        5.  Appraisal of Hazardous Waste Contaminated Property.[^15]
            Increasingly, agencies are faced with the necessity of
            acquiring properties that contain or have been exposed to
            hazardous waste. Any necessary cleanup of waste disposal
            costs is normally reflected in a property\'s market value.
            If the property has been cleared of hazardous waste material
            by the property owner in accordance with applicable
            government requirements prior to the acquisition of the
            property by the public agency, the property is to be
            appraised and valued as if exposed for sale on the open
            market without regard to costs incurred clearing the waste
            material. FHWA lead agency policy on the appraisal of
            contaminated properties reflects Uniform Standards of
            Professional Appraisal Practice (USPAP) Advisory Opinion
            AO-9. (See:
            http://commerce.appraisalfoundation.org/html/2006%20USPAP/ao9.htm.)

        6.  Comparable Sales and Tax Assessor Records.[^16] A comparable
            sale verified by tax assessor records could be used as a
            last resort provided that (1) all reasonable efforts to
            verify the sale with a party to the transaction such as a
            grantor, grantee, or broker were first exhausted, and (2) it
            would be used in conjunction with other properly verified
            sales, and only if its inclusion leads to a better
            documented estimate of value.

        7.  Appraiser's Certification Statement.[^17] The appraisal
            certification contains the limiting conditions, i.e. the
            conclusions and the appraiser\'s signed statement certifying
            that to the best of his/her knowledge and belief his/her
            conclusions are correct. In the preparation of detailed
            appraisals where the acquiring agency uses contract (fee)
            appraisers to perform the appraisals, such appraisers will
            be state licensed or certified in accordance with Title XI
            of the Financial Institutions Reform, Recovery, and
            Enforcement Act of 1989 (FIRREA).

        8.  Contribution of Specialists in Appraisal Reports. While the
            Uniform Act and 49 CFR Part 24 are silent on the issue,
            general appraisal practice, including practice under the
            Uniform Act, embraces and even requires specialists' input
            to the appraisal in situations where the appraiser is not
            competent to consider or value a certain aspect of the
            appraisal problem. The appraiser must be competent and
            qualified to perform the appraisal. See Appendix A,
            24.103(d)(1). In this regard, the USPAP Competency Rule
            provides, in part, that an appraiser must "take all steps
            necessary or appropriate to complete the assignment
            competently;" and that this may be accomplished in several
            ways, including ". . . association with an appraiser
            reasonably believed to have the necessary knowledge or
            experience, or retention of others who possess the required
            knowledge or experience."

        9.  Use of Certified Appraisers. Federal law and regulations do
            not require that a review appraiser be either licensed or
            certified to do work on federally-funded projects. If a
            contract (fee) appraiser is hired to perform an appraisal,
            then that person must be a State-licensed or certified real
            estate appraiser. State licensing or certification, and
            professional designations, however, can help provide an
            indication of an appraiser's abilities. Therefore,
            certifications, licenses, and designations must be
            considered by an Agency in determining the qualifications of
            an appraiser (or review appraiser).

        10. Quality and Validity of Appraisal Products.[^18] Agencies
            are encouraged to avail themselves of the services of major
            professional appraisal organizations\' professional
            practices and ethics panels when confronted about the
            quality and/or validity of the appraisal products they
            receive. Such organizations would appreciate submission to
            them for official review of suspect appraisals made by their
            members and for appropriate disciplinary action, if
            warranted.

        11. Qualifications of Appraisers and Review Appraisers. To help
            identify the best qualified appraisers for particular
            assignments, the Agency should make appropriate inquiries to
            users of appraisal services, particularly other public
            agencies and/or condemnation trial attorneys for the Agency
            and other public agencies. State highway agencies can be an
            excellent resource to help identify qualified appraisers and
            review appraisers since most State highway agencies maintain
            a qualified list of appraisers and reviewers for their
            projects.

    K.  [Appraisal Review]{.underline}.[^19]

        1.  Documentation Standards for appraisal/appraisal review
            should be commensurate with the complexity of the appraisal
            problem. Review appraisers are expected to prepare an
            appropriate written explanation supporting the reviewer\'s
            estimate of fair market value (see 49 CFR 24, Appendix A)

            a.  When reconciling divergent appraisal reports or
                establishing an independent estimate of value, the
                review appraiser must provide a written explanation
                sufficient to convey the basis for the approved amount.

            b.  Where possible, it is highly recommended for agency
                staff review appraisers to participate in the planning
                and scheduling of acquisition activities, evaluation of
                fee appraisal proposals, and the evaluation of
                performance of staff and contract appraisers.

        2.  Use of Contract (Fee) Review Appraisers. While Section
            24.104 requires the agency to have an appraisal review
            process and a qualified review appraiser, it does not
            specifically address the status of the review appraiser,
            e.g., staff, contract, or fee review appraiser. Because the
            review appraiser\'s activity is closely connected with the
            offer to be made to the property owner on behalf of the
            acquiring agency (essentially amounting to a commitment of
            public funds), it is recommended and encouraged that the
            review appraiser should be a member of the staff of the
            acquiring agency with all the requisite authority and
            responsibilities of such public employment. Each funding
            agency decides whether to use fee review appraisers. If
            contract or fee review appraisers are permitted, an official
            of the acquiring agency must approve the estimate of just
            compensation before any offer to acquire is made.

        3.  Appraisal Review Requirements. The review appraiser must
            examine all agency appraisal requirements and address any
            items that fail to meet the requirements of the agency.

        4.  Low Value Appraisal Reviews. All appraisals must be
            reviewed, including those being handled by a single
            appraiser/negotiator.

        5.  Review Appraiser Qualifications. The Federal requirements
            for review appraiser qualifications are found in 49 CFR
            24.104 and 103(d)(1), where the acquiring agency is required
            to have an appraisal review process and, \"A qualified
            review appraiser shall examine the presentation and analysis
            of market information in all appraisals...\". The agency
            determines what constitutes being a qualified review
            appraiser considering 24.103(d)(1) and 24.104 requirements.

    L.  [Acquisition of Tenant-Owned Improvements]{.underline}.[^20] It
        is clearly the intent of the URA that tenant-owners of
        buildings, structures, or other improvements be given status
        equal to owners of real property and are thus entitled to an
        offer of just compensation. A written offer should be made
        directly to the tenant-owner for his or her property if the
        landowner\'s disclaimer of all interest in the tenant-owned
        improvements is obtained. Where separate offer letters are
        tendered to the fee owner and tenant-owner, each would specify
        only the offer of just compensation for the respective ownership
        interests. If a disclaimer pursuant to Section 302(b)(2) of the
        Act cannot be obtained, separate offers to the parties for their
        respective interests need not be made if the agency attempted
        but failed to obtain a disclaimer from the landowner regarding
        the tenant\'s ownership interest. Payments may be made to
        tenant-owners only after the landowner has provided a disclaimer
        of all interest in the improvements of the tenant and, in
        consideration for any such payment, the tenant assigns,
        transfers, and releases to the acquiring agency all rights,
        title, and interest in the improvements.

        1.  Landowner Notice to Vacate to Owner(s) of Tenant-Owned
            Improvements. When the owner(s) of land know that it is to
            be acquired under Title III of the Uniform Act, notice
            should not be issued requiring the owner(s) of tenant-owned
            improvements to vacate the premises prior to the acquisition
            of the property by the acquiring agency. Such action is
            considered to be an attempt to circumvent the rights and
            entitlement of the tenant-owners under Title III of the
            Uniform Act.

        2.  Tenant-Owned Improvements with no Right of Removal. To be
            covered by Section 302(b) of the Uniform Act, a tenant must
            have an ownership interest in property to be acquired. The
            interest of a tenant who constructs an improvement on leased
            land, but does not have the right to remove it, will not be
            covered by this section of the Uniform Act. A tenant must
            have an ownership interest and ownership interests must be
            determined in accordance with state law. In the absence of
            proof of ownership and a disclaimer by the landowner, a
            tenant-owner\'s recourse is with the property owner,
            assuming there is no subsequent agreement on ownership and a
            disclaimer by the property owner after negotiations have
            started.

        3.  Refusal to Make Offer for Tenant-Owned Improvements is
            Coercive. Refusal by the acquiring agency to make an offer
            to acquire buildings, structures, or other improvements of a
            tenant-owner when the fee to the land is being acquired
            constitutes a coercive action under Section 301(7) of the
            Uniform Act. Presuming that the buildings, structures, or
            improvements meet the tests prescribed in Section 302(a) of
            the Uniform Act, i.e., that they must be removed from the
            real property, or that they will be adversely affected by
            the use to which the real property will be put and the owner
            is willing to disclaim all interest in the improvements of
            the tenant, failure to offer to acquire them would be: (1) a
            violation of the law; (2) a coercive act on the part of the
            acquiring agency; and (3) a potential cause for the filing
            of an inverse condemnation action. The provisions of Section
            302(a) of the Uniform Act apply to all buildings,
            structures, and improvements, regardless of their ownership.

        4.  Written Offer of Just Compensation to Landowner and Owner of
            Tenant-Owned Improvements. Tenant-owners are entitled to a
            written offer and summary statement. However, the content of
            the offer will vary depending upon the landowner signing a
            disclaimer, or recognizing the existence of a leasehold
            interest. If a disclaimer has been signed because there is
            agreement as to ownership interests, the tenant-owner\'s
            offer would cover only his/her interest with the same
            principle applying to the landowner. The offer of just
            compensation and summary statement should reference the
            requirements of Section 302(b)(2) of the Uniform Act, i.e.,
            the landowner\'s disclaimer and the tenant-owner\'s
            assignment of ownership rights. In the case of a leasehold
            interest where the tenant does not own any buildings,
            structures, or improvements, State law would govern whether
            the tenant would be entitled to a written offer and summary
            statement.

        5.  Valuation Premise for Tenant-Owned Improvements. When
            estimating the value of tenant-owned improvements, value in
            place and contributory value are essentially the same. The
            following procedure is used to estimate the value of
            tenant-owned improvements:

            a.  Determine highest and best use of the property and then
                allocate value of tenant-owned improvements from the
                value of the whole.

            b.  Consider full value or interim use value of tenant-owned
                improvements as follows:

                1.  Full contributory value in place of building,
                    structure, or other improvements for their remaining
                    economic life when such building, structure, or
                    other improvements are consistent with the highest
                    and best use of the land, or

                2.  Interim use value of the buildings, structure, or
                    other improvements which is not the highest and best
                    use of the land for a specific time period longer
                    than the lease term (include present worth of
                    salvage value), or

                3.  Value in place of the building, structure or other
                    improvement, plus the present worth of the salvage
                    value at the end of the lease term.

            c.  Specialty reports should be obtained for the valuation
                of items not readily measured in the marketplace.

            d.  In instances where a situation may not fit accepted
                appraisal guidelines/techniques, an administrative
                settlement may be used with a written justification and
                explanation.

            e.  In some cases where the contributory value and the
                salvage value of a tenant-owned improvement is of
                minimal value or equal to zero, the agency may at its
                discretion elect to determine and offer the depreciated
                value in place of the improvement as installed, however,
                the agency is under no obligation to do so under the
                regulations at 49 CFR 24.105(c).

        6.  Tenant-Owner Retention Value of Improvements. When the
            contributory value of a tenant-owned improvement exceeds its
            salvage value, a tenant-owner may elect owner retention and
            be paid the difference in the two values.

        7.  Allocation of Value to Tenant-Owned Property. The appraiser
            or review appraiser must allocate separately owned property
            rights in his/her evaluation. Agency procedures should make
            both appraisers and review appraisers responsible for
            determining the existence of, and estimating the value of,
            any tenant-owned buildings, structures, and other
            improvements. The reviewer has the ultimate responsibility
            to see that the recommended or approved estimate of just
            compensation contains the appropriate allocation. The review
            and approval process should be the same, regardless of
            whether tenant-owned interests are involved.

        8.  Tenant-Owner Accompaniment During Appraisal Inspections. The
            purpose of the Uniform Act is, in part, \"To insure
            consistent treatment for owners.\" Therefore, all owners,
            whether part-owner, full-fee owner, or tenant-owner, are
            covered by the provisions of Section 301(2) of the Act. For
            tenant-owners where buildings, structures, and improvements
            are not involved, such as a tenant-owned leasehold in
            realty, then the obligations to the tenant are a matter of
            State law.

        9.  Salvage Value vs. Value for Removal. The fourth edition of
            \"The Dictionary of Real Estate Appraisal\", dated 2002,
            defines salvage value as \"The price expected for whole
            property, e.g., a house, or a part of a property, e.g., a
            plumbing fixture, that is removed from the premises, usually
            for use elsewhere.\" Thus, salvage value and value for
            removal are considered to be synonymous.

        10. Landowner Disclaimer of Tenant-Owned Improvements Required
            Prior to Payment to Owner of Tenant-Owned Improvements. In
            acquiring properties with tenant-owned improvements, a
            payment may be made to a tenant-owner only after the
            landowner has provided a disclaimer of all interest in the
            improvements of the tenant and in consideration for any such
            payment, the tenant assigns, transfers, and releases to the
            acquiring agency all right, title, and interest in and to
            such improvements in accordance with Section 302(b)(2) of
            the Uniform Act. While the provisions of Section 302 of the
            Uniform Act do not necessarily apply to life estates or
            leaseholds when the value is created by a favorable rental
            rate, releases by the owner of the real property should be
            obtained prior to making payment directly to the
            tenant-owner in these instances. State law may govern how to
            proceed with such acquisitions.

        11. Leaseholds and Life Estates. Section 301 of the Uniform Act
            provides for payment of just compensation to any owner of
            real property. A leasehold interest (leasehold estate) and a
            life estate are legally recognized real property interests.
            If the leasehold interest has value because of a favorable
            rental rate, the lessee may be entitled to a written offer,
            along with the real property owner, depending on the
            requirements of State law. Such a leasehold interest in
            itself would not invoke the provisions of Section 302(b) of
            the Uniform Act itself. To be covered by Section 302(b), the
            tenant must have an ownership interest in physical property
            improvements.

    M.  [Payment of Incidental Expenses by the Acquiring Agency for the
        Transfer of Real Property]{.underline}.[^21] An agency may pay
        for the incidental expenses incurred for the transfer of real
        property to the acquiring agency in one lump sum directly to the
        property owner or to an escrow service, which then allocates the
        funds. The purpose of the direct payment is to ensure that (to
        the extent feasible) the owner does not have to settle such
        claims with personal funds and then later seek reimbursement
        from the agency. Property owners should be informed of this
        provision early in the acquisition process.

5.  DONATIONS[^22]

    A.  [Appraisal Waiver -- Donations]{.underline}. In the case of a
        property donation covered under 49 CFR 24.108, an appraisal is
        not required if the property owner releases the Agency from its
        obligation to appraise the property and is informed of his/her
        right to receive just compensation. All releases must be signed
        by the property owner and must be maintained in the Agency's
        file for monitoring purposes.

    B.  [Date of Value of a Donation]{.underline}. The fair market value
        of a donation shall be established as of the date that the
        donation becomes effective, or when equitable title vests in the
        acquiring agency, whichever is earlier.

[^1]: U.S. Department of Transportation- Federal Highway Administration
    **Federal-Aid Policy Guide**; February 16, 2006, Transmittal 35

[^2]: ^^ "See footnote 1 on p. 5-2."

[^3]: ^^

[^4]: ^2^ The following safeguards are intended to supplement (not
    replace) any applicable program requirements for addressing
    conflicts of interest (see, e.g. 24 CFR 570.611(d)).

[^5]: ^^ "See footnote 1 on p. 5-2."

[^6]: ^^ "See footnote 1 on p. 5-2."

[^7]: ^^ "See footnote 1 on p. 5-2."

[^8]: ^^

[^9]: ^^ "See footnote 1 on p. 5-2."

[^10]: ^^

[^11]: ^^

[^12]: ^^ "See footnote 1 on p. 5-2."

[^13]: ^^

[^14]: ^^ "See footnote 1 on p. 5-2."

[^15]: ^^

[^16]: ^^

[^17]: ^^

[^18]: ^^ "See footnote 1 on p. 5-2."

[^19]: ^^ "See footnote 1 on p. 5-2."

[^20]: ^^ "See footnote 1 on p. 5-2."

[^21]: ^^ "See footnote 1 on p. 5-2."

[^22]: ^^