Offer to Purchase Real Property v. Settlement Amount
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Discussion
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We have a recently asked question by a commercial property owner, one that is a common issue. The owner wants to purchase a replacement property as soon as possible but cannot find a comparable property for the amount offered by the condemning public agency. Their anticipated counteroffer is more in line with available comparable properties. However, finalization of the settlement will likely take a year or more past the agency’s possession of the property. Can you suggest to this property owner what options they may have?
Discussion Tags: 24.205 (C) (2) (iii), 24.303(a), 24.303(b), 24.304
Code: Condemnation
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Offer to Purchase Real Property v. Settlement Amount
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Is there a Non-Residential Relocation component associated with this acquisition? Either an Owner Occupant or a Landlord Business displacement? If yes, then the displacing agency should be providing current and continuing information on the availability of suitable replacement properties.
24.205 (C) (2) (iii)
Provide, for nonresidential moves, current and continuing
information on the availability, purchase prices, and rental costs of
suitable commercial and farm properties and locations. Assist any
person displaced from a business or farm operation to obtain and become
established in a suitable replacement location.
Also, and assuming that there is most likely a Relocation component, this owner may want to consider that even though a replacement property may not be suitable "as-is" .... that there may be relocation entitlements available in addition to the acquisition payment that may assist. For example: If the business requires 3-Phase power and the owner is currently only looking at replacement properties that already have this utility, then he/she may want to consider other options that may have this utility available in the nearby ROW and then have that expense covered under Relocation.
Then there is also the additional and available Reestablishment entitlement to consider.
It is important for this owner to understand upfront that the Uniform Act does not require that displaced businesses, including Landlord businesses, be made whole. Unfortunately this is often the expectation.
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Hunter kindly provided a list of relocation benefits that may apply to the property owner which are beyond the final settlement of the real property’s just compensation.
He mentions that the displacing agency will be providing advisory services, 24.205 (C) (2) (iii), which include providing ongoing property listings of suitable replacement sites. This service may assist the property owner with finding a comparable replacement property.
Notable are relocation benefits that would apply to the property owner as a landlord business or a business occupant of the acquired property. One of the relocation benefits includes the connection of utilities within the adjacent right of way to the improvements, as described in 24.303(a). This can be a significant cost reimbursement for connecting to water, power, sewer, gas, steam, storm sewer, etc. Cost reimbursements for this category can range from a few thousand dollars to hundreds of thousands.
Adding to Hunter’s list of relocation benefits is 24.303(b) Professional services performed prior to the purchase or lease of a replacement site to determine its suitability for the displaced person’s business operation including but not limited to, soil testing, feasibility and marketing studies (excluding any fees or commissions directly related to the purchase or lease of such site). We recently saw a reimbursement amount for this category at around $60K.
And finally, reestablishment expenses as described in 24.304. The federal cap on reestablishment expenses is listed at $10,000, however, it’s generally treated at the Fed’s updated $25,000. Many states have a higher cap and a few have no cap on this category of expenses.
The property owner will want to consider how the above-described benefits may apply and assist them when considering the purchase of potential replacement properties. These benefits are in addition to the just compensation for the acquired real property.
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