1.2.7.3.3. Government Project Influence and the “Scope of the Project” Rule. Any increase or decrease in the market value of real property prior to the date of valuation caused by the government project for which the property is being acquired must be disregarded in developing the appraisal. Under federal law, valuations for just compensation purposes must disregard any government project influence on a property’s market value once it is within the scope of the government’s project. The resulting scope of the project rule, when properly applied, ensures fair results for both landowners and the public, as discussed in Section 4.5. 

Proper application of the scope of the project rule is complex, and virtually always requires a legal instruction.

Simply directing appraisers to follow these Standards is not a sufficient legal instruction for purposes of the scope of the project rule. See Section 4.5.

The scope of the project rule applies only to changes in value attributable to the government’s project; it does not allow an appraiser to disregard changes in value attributable to other factors. For this reason, changes in value prior to the date of valuation due to physical deterioration within the landowner’s reasonable control must be considered. 

In partial acquisitions, the scope of the project rule typically excludes consideration of government project influence on the value of the larger parcel before the acquisition, and includes consideration of government project influence on the value of the remainder after the acquisition.29 

Because the scope of the project rule involves interrelated factual and legal questions, the appraiser must request appropriate legal instruction if there is evidence the government’s project affected the market value of the property being appraised.30 The appraiser may be asked to gather and/or analyze data to inform the legal analysis. Counsel (or the Court) will instruct the appraiser as to (1) whether the scope of the project rule applies; (2) how the rule must be applied to the specific property under appraisal; and, if applicable (3) when the scope of the project rule applies, i.e., the date as of which the rule is triggered. As discussed in Section 4.5, these legal instructions are the criteria the appraiser must follow in determining the fair market value of the property. As with other complex legal questions, counsel may direct the appraiser to perform a dual-premise appraisal if the legal outcome is uncertain.31