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Non-regulatory Supplement for Part 24, Subpart B, Section 24.102

Federal-Aid Policy Guide
February 16, 2006, Transmittal 35
NS 49 CFR 24B
Section 24.102

Subpart B - Real Property Acquisition Basic Acquisition Policies

Non-Regulatory Supplement

  1. INTEREST ON DEFICIENCY JUDGEMENTS (49 CFR 24.102). The Declaration of Taking Act, (40 U.S.C. 258a et seq.), provides for the payment of interest on deficiency judgments in Federal condemnation cases. It requires that the interest rate on deficiency judgments be based on the "Coupon Bond Equivalent Yield of the 52-week Treasury Bill." The initial year's interest calculation is based on the rate as of the date of taking. If interest is owed for more than one year, the interest is compounded based on the T- Bill price established for each subsequent year.

  2. NOTICE TO OWNER (49 CFR 24.102(b)). Timely notice to owners must be in writing. The method of notification is determined by the acquiring agency. This notice is separate from the required relocation notices, but an agency is not precluded from combining the information with other required notices, so long as the required intent is accomplished. A time limit for general notification should be timely, but it is not specified and may vary by project.

  3. NOTIFICATION REQUIREMENTS FOR TIME SHARE AND CONDOMINIUMS (49 CFR 24.102 (b)). Acquisition notification of property owners in a time share condominium may be accomplished by advising the homeowners' association, who 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.

  4. ADMINISTRATIVE SETTLEMENTS ON PARCELS VALUED AT LESS THAN $10,000 (49 CFR 24.102(c)(2)(ii) AND (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 or the State's established waiver valuation amount. 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. Placing a monetary limit on such settlements that would automatically trigger the requirement for an appraisal is an agency option, not an FHWA requirement. 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.

  5. EXCLUSION OF COST-TO-CURE FROM WAIVER VALUATION LIMITS (49 CFR 24.102 (c)(2)(ii)). 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.

  6. LOW MARKET VALUES AND USE OF PROJECT DATA BOOKS (49 CFR 24.102(c)(2)(ii)). The Uniform Act limits the condition under which an appraisal may be waived due to low fair market value properties as provided for at 49 CFR 24.102 (c)(2)(ii). However, there are acceptable procedures or techniques that, if employed, will expedite the preparation of a large number of appraisals. The use of a project data book is an acceptable technique for mass appraisals if deemed proper for the specifics of the appraisal assignment.

  7. SPECIAL BENEFITS (49 CFR 24.102(d), 24.103(b) AND 24.104(c)). With regard to the special benefits in an appraisal, it has long been an FHWA policy that market value should be appraised both before and after the take and thereupon damages and benefits allocated and offset in accordance with State law. If damages and/or benefits exist and are not discussed or properly considered, then those portions of such appraisals are not acceptable for Federal participation.

  8. FEDERAL PARTICIPATION IN INITIAL OFFER EXCEEDING APPROVED APPRAISED AMOUNT (49 CFR 24.102(d) and Appendix A). As with an administrative settlement, Federal funding participation in an initial offer that exceeds the amount of the approved appraisal is permissible if the file contains an appropriate explanation. The decision to make such an initial offer should be made at the upper level of management of the acquiring agency and must be properly documented. The FHWA suggests that caution be exercised in this area.

  9. FORMAL APPRAISAL REQUIRED PRIOR TO CONDEMNATION (49 CFR 24.102(d)). In the event an amicable agreement cannot be reached when the original offer is based on a waiver valuation, a conventional appraisal of the property may be required to be prepared and reviewed before proceeding to condemnation. The necessity for an appraisal would depend on a State's eminent domain requirements.

  10. ESTABLISHMENT OF JUST COMPENSATION CANNOT BE DELEGATED (49 CFR 24.102(d) and 24.104(a)). The establishment of an amount believed to be just compensation on Federal-aid projects cannot 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.

  11. RELEASE OF STATE APPRAISAL(S) TO PROPERTY OWNER (49 CFR 24.102(e)). State laws govern the release of appraisal documents. There is no Federal requirement for States to provide a property owner with a copy of an appraisal document. The FHWA requires that the State give the property owner a written statement of the basis for the offer of just compensation. An appraisal document in the possession of a Federal agency would be required to be released, if requested, under the Freedom of Information Act (FOIA).

  12. SUMMARY STATEMENT REQUIRES IDENTIFICATION OF PROPERTY BEING ACQUIRED (49 CFR 24.102(e)(2)). The summary statement presented to the property owner at the time an offer is made should contain a description of the property to be acquired that is understandable to the owner. A legal description and the interest to be acquired may also be included.

  13. AGENCY CONSIDERATION OF OWNER'S PRESENTATION (49 CFR 24.102(f) and Appendix A). If a property owner volunteers information that he/she thinks is important to the valuation or acquisition of the property, it would be reasonable and fair for the acquiring agency to consider that information. Acquiring agencies are not required to solicit suggestions for a change in the offer.

  14. ACCELERATED RIGHT-OF-WAY NEGOTIATIONS, PERSONAL CONTACT WITH STATE RESIDENT OWNERS - COST AVOIDANCE (49 CFR 24.102(f)). Initiating property negotiations by mail can save considerable manpower and travel costs, and they could accelerate the acquisition process. This procedure may be used as an alternative to a personal contact. It begins with a mailing to the property owner the following: offer letter, summary statement, deed or option form, and property plat or sketch showing the effect of the taking. In approximately 2 weeks, there is a follow-up telephone call. At that time, questions are answered or, at the property owner's option, an appointment for a personal contact is made. From this point, negotiations follow the normal sequence. All requests for personal contacts by property owners must be honored. This accelerated procedure may not be used on parcels where relocation is involved.

  15. UPDATING THE OFFER OF JUST COMPENSATION (49 CFR 24.102(g)). Updating an offer of just compensation should not be required after filing for condemnation and making the deposit to the court. By the time condemnation is filed, the agency should have fulfilled its appraisal and negotiation obligations to the owner. However, the agency does have discretion in this area. An updating of the appraisal, if required, cannot generally be accomplished through an administrative settlement, for an administrative settlement is not a substitute for a properly updated appraisal and offer. In a few isolated instances where negotiations have begun, it might be reasonable and cost effective to handle minor adjustments as a part of the administrative settlement process. An alternative would be to have a review appraiser provide the justification needed for an update.

  16. WAIVER OF RIGHTS RELATIVE TO WITHDRAWAL OF COURT DEPOSIT (49 CFR 24.102(h)). 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.

  17. INCREASED USE OF ADMINISTRATIVE SETTLEMENTS IN RIGHT-OF-WAY ACQUISITION - COST SAVINGS (49 CFR 24.102(i)). 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.

  18. INCLUSION OF RELOCATION PAYMENTS AS SUPPORT FOR ADMINISTRATIVE SETTLEMENTS (49 CFR 24.102(i)). 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.

  19. JUSTIFICATION FOR ADMINISTRATIVE AND LEGAL SETTLEMENTS (49 CFR 24.102 (i)).  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. The States 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.

  20. ALTERNATIVE DISPUTE RESOLUTION - USE OF MEDIATION BY AGENCIES IN ACQUIRING RIGHT-OF-WAY (49 CFR 24.102(i)). Mediation falls within the administrative settlements provision of 49 CFR 24.102(i). Mediation is a viable alternative and affords flexibility in resolving conflicts that may arise in the acquisition process through reduced administrative costs. Each agency considering the use of mediation in its acquisition program should develop a policy on its use consistent with State laws and regulations. The FHWA may participate in the cost of mediation services and the cost of a mutually-agreed-to settlement between the State and the property owner.

  21. WITHHOLDING OF PAYMENT IN LIEU OF SECURITY DEPOSIT (49 CFR 24.102(j)). 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.

  22. COMPENSATION FUNDS DEPOSITED WITH COURT AT TIME OF FILING FOR CONDEMNATION (49 CFR 24.102(j)). Filing condemnation actions (taking legal possession) without concurrent deposit of just compensation funds has a clear potential for coercion of affected property owners. Deposit of funds and physical possession normally take place sometime later at the discretion of the State, whenever the property is needed for construction. 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.

  23. RIGHT-OF-ENTRY WITHOUT AVAILABILITY OF PAYMENT (49 CFR 24.102(j)). If an agency requests a right-of-entry before making an appraisal and an offer, e.g., probably because of lead-time conflicts, it should be for only a few parcels on an infrequent basis and with good reason. If done routinely, such action would result in noncompliance with the Uniform Act and Federal regulations. This is based on Section 301(4) of the Uniform Act, which states that an owner shall not be required to surrender possession until payment is made available to the owner.

  24. ESCROW OF ACQUISITION PAYMENT (49 CFR 24.102(j)). 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.

  25. OWNER HAS RIGHT TO WITHDRAW FULL AMOUNT DEPOSITED WITH COURT PRIOR TO SURRENDERING POSSESSION (49 CFR 24.102(j)). 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.

  26. CONDEMNATION OF UNECONOMIC REMNANTS (49 CFR 24.102(k)). 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.

  27. CONFLICT OF INTEREST - SINGLE APPRAISER/NEGOTIATOR (49 CFR 24.102(n)(3)). The same person may both appraise and negotiate an acquisition if the value is $10,000 or less.  Section 24.104 requires that all appraisals be reviewed prior to negotiations. States may develop an innovative, cost-effective review process tailored to their operations. It would include the use of electronic mail transmission, dictation of the appraisal over the telephone for subsequent review, or an early project visit by the reviewer.

Updated: 9/5/2014
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