The scope and character of Federal agencies’ realty programs and projects differ significantly, as does their exposure to and experience with conducting voluntary acquisitions. Some Federal agencies, such as FHWA, FTA, and FAA, conduct relatively few voluntary acquisitions in a given year. Examples of Federal transportation programs where voluntary acquisitions are utilized include acquisitions related to corridor preservation or environmental mitigation. In contrast, other agencies, such as HUD, have numerous programs that entail the use of voluntary acquisitions under the URA. The differences in Federal agencies’ use of the voluntary acquisition requirements also results in differences in the challenges that each agency faces in implementing the voluntary acquisition requirements.
Throughout the course of the project, working group participants provided information on the issues and challenges they face when complying with the URA voluntary acquisition requirements. Issues identified by the stakeholders include:
Some of the issues identified are the result of inappropriate application of the voluntary acquisition requirements, while others are due to the nature of specific agency programs. The issues and challenges that Federal agencies face in implementing the voluntary acquisition requirements generally fall within four overarching categories. These four categories are examined in more detail below.
As previously noted, due to the nature of their programs and projects, some Federal agencies and their funding recipients have limited experience with the use of voluntary acquisitions. Because these agencies only utilize voluntary acquisitions intermittently, staff never fully develops expertise in the process and related requirements. The project stakeholders noted a general lack of understanding among Federal agency employees and funding recipients regarding what qualifies as a voluntary acquisition and the associated requirements. The stakeholders noted that common misunderstandings of voluntary acquisitions include:
While Federal agencies sometimes provide funding recipients with information and guidance on the URA requirements, they face a constant challenge in ensuring that these funding recipients are cognizant of and adequately trained in the voluntary acquisition requirements.
The URA regulations state that for programs and projects receiving Federal financial assistance, the Agency will “inform the owner in writing of what it believes to be the market value of the property.” (49 CFR 24.101[b][iv] and [b][ii]). Appendix A to the regulation further provides that “after an Agency has established an amount it believes to be the market value of the property and has notified the owner of this amount in writing, an Agency may negotiate freely with the owner in order to reach agreement.” (Appendix A Sections 24.101[b][iv] and [ii]). Agencies are not required to have an appraisal, but they must have some reasonable basis for determining market value.
We heard from one stakeholder agency that, in the context of some of their programs, the requirement to establish market value prior to making an offer presents challenges for compliance. Estimating the market value of a property typically requires that an appraisal or some other opinion of value be prepared. In private market real estate transactions, a purchase offer is typically made prior to the appraisal; the offer is often contingent on the appraisal validating the offer amount.
The requirement to inform the owner in writing of the market value of the property also presents a problem in situations where a local agency or third party acquires a property in advance of Federal authorization or a Federal project designation. In such instances, the Federal funding agency must determine if the purchaser had intent to seek Federal financial assistance when it purchased the property. If the intent of the acquisition was for use in a federally funded program or project then the provisions of the URA and the implementing regulation apply.
Agencies rely on a variety of factors, including the timing of the acquisition, to determine intent. In addition, agencies will review documents, such as resolutions, city council meeting reports, and project agreements to help determine intent. However, in some situations it can be extremely difficult for an agency to determine intent.
Depending upon the circumstances under which noncompliance occurred, sometimes funding recipients are required to retroactively determine a property’s market value as well as gather the appropriate proof or documentation of fair market value. This process can be extremely challenging. For example, in order to comply with the URA, agency/persons may be required to retroactively conduct an appraisal of the property. In some instances, if the appraisal indicates that the property is worth more than what was paid, the individual may be required to pay the seller additional monies.
Agencies note that the phrase “prior to making an offer…” which exists under §24.101(b)(2) does not exist in the requirements pertaining to eminent domain agencies under §24.101(b)(1), where it is more critical for property owners to be so informed. Some agencies indicated that this requirement seems unnecessary for use with agencies/persons with no power of eminent domain since an amicable agreement must always be reached in order for the property to be acquired.
The project stakeholders identified several challenges involved with fulfilling the voluntary acquisition document requirements. One such requirement that agencies identified as presenting challenges in certain situations is the requirement to, prior to making an offer for a property, inform the owner that the Agency/person will not acquire the property if negotiations fail to result in an amicable agreement (49 CFR 24.101[b][iii]) and (49 CFR 24.101[b][i]). The stakeholders noted that some sophisticated sellers, such as banks and developers, view the paperwork as an impediment. The same stakeholders reported similar issues with some potential acquisitions.
Several stakeholders also inquired whether the use of email to provide the required written disclosures to property owners satisfied the voluntary acquisition requirements.
The phrase “initiation of negotiations” is a term defined by the URA regulations to establish a displaced person’s eligibility for relocation assistance under the URA. The URA regulations require that tenants who may be displaced as a result of a voluntary acquisition must be fully informed as to their eligibility for relocation assistance. This includes notifying such tenants of their potential eligibility when negotiations are initiated. In the case of permanent relocation of a tenant impacted by a voluntary acquisition, the initiation of negotiations (ION) does not become effective until there is a written agreement between the Agency and the owner to purchase the real property (49 CFR 24.2(a)(15)(iv)).
Some project stakeholders noted that the URA definition of the ION for voluntary acquisitions presents challenges when dealing with purchase contracts, and sometimes results in unnecessary expenses. These individuals noted that since purchase contracts are typically contingent on satisfying a variety of requirements prior to closing (e.g. home inspection, financing,or similar requirements), it is possible that some purchase contracts will be canceled. In some cases, the cancellation of the purchase contract occurs after tenants have already been notified of their eligibility for relocation assistance. When the purchase contract is canceled, the agency must retract the tenant’s relocation eligibility, unless the tenant has already been moved, in which case the agency is obligated to pay for the person’s relocation expenses.