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Eligibility for Reestablishment Expenses Payment - Leasing of Space

SUBJECT: INFORMATION: Eligibility for Reestablishment Expenses Payment - Leasing of Space
FROM: Original signed by
Barbara K. Orski
Director, Office of Right-of-Way
Washington, D. C.
TO: Regional Federal Highway Administrators
DATE: June 7, 1994

We have received a number of questions concerning the eligibililty of businesses engaged in the leasing of space for the Reestablishment Expenses payment. After due consideration, we have determined that a business whose sole activity at the site is providing space at the site to others is eligible for a Reestablishment Expenses payment.

The leasing to space is a business by definition. However, Congress restricted eligibility for the payment to small businesses and reinforced this restriction by limiting the payment to not more than $10,000.

In addition, we have received questions focusing on the eligibility of lessees who sublease space. When a lessee subleases space it generally will not be eligible for a Reestablishment Expenses payment for the business of leasing space . There are two reasons for this. First, as encountered in Federal-aid highway projects, the subleasing of space typically is not a business but merely an expendient to defray the costs of space in excess of the business' needs. Secondly, the space involved in the sublease could be all or a part of the larger space leased out by the prime lessor. In most cases, the prime lessor may be eligible for a Reestablishment Expenses payment for leasing the same space. Paying the lessee for subleasing then could constitute a second or duplicate payment for leasing the same space. However, each situation will have to be evaluated individually by the displacing agency.

We believe that this position serves both to assure that eligible businesses are not excluded from reimbursement for cost imposed by a Federal or Federal-aid project and to preclude eligiblity from those entities whom we believe Congress did not intend to compensate when it limited the payment to "small businesses."

Updated: 04/02/2013
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