uniform act Archives - Eminent Domain Services and Business Relocation Consulting

Successful Business Relocations Within Eminent Domain

Proper planning of a business relocation in eminent domain can be rewarding to the business owner by bringing new opportunities to the business with the use of relocation benefits and compensation provided by the public project and its displacing public agency. Those opportunities can include the following, with the use of relocation benefits and compensation:

Moving to a right-size facility and/or right location for your business
Replacing equipment with more productive equipment
Improving the flow or style of your business operations

Proper relocation planning can achieve those items listed above and more. I’ve experienced having relocation compensation pay for those opportunities ranging in amounts from a few thousand dollars for a very small business, and as much as $34 million for a more complicated business.

Seldom have I experienced a business relocation in eminent domain go unrewarding for the owner. 99% of the hundreds of business relocations that I’ve been a part of have benefited because their relocation put them in a better long-term business situation. This was while following relocation regulations that were based on the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended. This is also known as the Uniform Relocation Act, the Uniform Act, or more simply the URA.

Unfortunately, too many businesses not only miss out on those described relocation opportunities, but some even fail to survive, as reported in a federal study published in 2005. I want to share with you a few tips on how to not be a part of the business failed statistic, but to become a business success statistic after being relocated for a public project.

Failed Business Relocations Within Eminent Domain

In my opinion, most business failures occur, not because of inadequate relocation benefits within the Uniform Relocation Act, but because of improper implementation of the relocation regulations on the part of the public agency and the business owner. The relocation process and relocation regulations must be intimately understood and closely followed by the business and the condemning public agency for the business to properly plan the relocation so that they can receive proper reimbursements for relocation expenses. Unfortunately, those regulations are frequently improperly understood or followed at the level that is necessary by both the business and the public agency.

I’ll share with you some of my methods and recommendations for achieving excellent relocation results below. My hope is for you and your business to also complete your relocation in a better situation because of relocating within eminent domain, by fully using the available relocation benefits described in the Uniform Relocation Act, or the displacing agency’s guidelines based on the Uniform Relocation Act.

It starts with understanding some of the positive and negative influences that will impact the relocation results.

Factors Affecting the Level of Success for Business Relocations in Eminent Domain

Several key factors will influence the level of success a business experiences with relocating while following the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) and your state’s Relocation Regulations. A few of those include:

The particular circumstances of the real property being condemned
The circumstances of the business type being displaced
The condemning public agency’s approach to relocation
The ability to soften or overcome those factors listed above
The business owner’s approach to relocating their business.

For this discussion, I’ll focus on the business’s most controllable part of the process, the business owner and their approach to relocating while following the URA or state regulations.

Best Practices for Eminent Domain Business Relocation Planning

For the best relocation outcome, the business owner will want to use the proper approach to the relocation process. There is a cause and effect science to the relocation process, which we want to control to create the best results. It starts with the business owner’s approach to the relocation. Below is a list of best practices that I recommend while advising business owners through their relocations in eminent domain.

Work with the displacing public agency as much as reasonably possible. Take advantage of the services they offer you.
Educate yourself on your relocation benefits (see my abbreviated Relocation Regulations cheat sheet), determine how best to use them for your situation, know how to qualify for them, and how to not lose them.
Avoid these common mistakes listed below and in my Top-10 business relocation mistakes when relocating within eminent domain:
1. Denying that your business can be relocated.
2. Denying that a certain item or items you own cannot be relocated.
3. Not gaining ownership or control of fixtures used in your business
4. Complaining about the public agency, project, or circumstances that interfere with properly planning your business relocation for its best outcome.
5. Assuming that you can relocate using normal business best practices and expect to receive proper relocation reimbursements. You must follow the details of the Uniform Act, no matter how seemingly nonsensical they appear.
Start planning early, start before the displacing public agency starts for you (read more on preplanning your eminent domain relocation). Continue your preplanning into relocation planning for developing an actual relocation plan report. You can use my 11-Step Business Relocation Planning as a guide for you. Start your planning with:
1. 1. Updating your lease to reflect any improvements you have made to the real property and your right to remove your improvements and trade fixtures.
2. You will want a current inventory of equipment and other personal property that is owned or controlled by your business. If you are using landlord owned fixtures in your business, this is a good time to consider negotiating a purchase of those items to give you the right to remove them and the right to relocation compensation for those items.
Begin searching for a replacement property as soon as you feel or know that your business will be displaced. However, don’t incur costs or move until you have received a Relocation Benefits Eligibility Letter from the displacing public agency.
Dedicate the time necessary for you and/or key employees to organize, plan, and perform the relocation tasks necessary for the duration of the relocation process, while not sacrificing the necessary time for ongoing business operations.
File relocation claims with the displacing public agency as you incur an obligation to the costs. File claims early and often.
Relocation claims should be well described and supported. Don’t dump unorganized costs onto the public agency’s relocation agent and expect them to arrive at the best reimbursement for you. No shoe box relocation claim submittals.
Request any public agency claim denials for relocation benefits to be in writing. Verbal denials from the public agency’s relocation agent are a frequent cause of misinformation and misunderstanding of benefits causing an unnecessary loss of eligible relocation compensation.
If your business is more complicated than a small insurance or real estate office, consider talking with an eminent domain relocation consultant.

This summary of best practices for relocation planning will hopefully get you started on the right foot with your business relocation. Business relocation planning within eminent domain is one of my favorite services I provide and topic for conversation. Please feel free to call me to discuss your situation.

Questions and Answers on Eminent Domain and Business Relocations

If you have questions, feel free to contact me for answers while planning your relocation, which may include but not limited to:

What do you do next, starting from the point where you are in your relocation process?
How do you apply the best practices to your specific business relocation planning?
What are your eligible relocation benefits and compensation?
How and when do you become eligible for relocation benefits and compensation?
How do you prevent a loss of your relocation benefits and compensation?
How can you get out of a pickle in your current relocation situation?
What do I need to know about the Uniform Relocation Act, relocation advisory services, relocation assistance, and relocation planning?
When and why would I want an eminent domain relocation consultant for planning my move? Also, see FAQ of Martyn Daniel

You can contact me at 425-398-5708 or . There’s no obligation for your contact, it will simply be a good productive conversation.

Business owners and their representatives, attorneys, appraisers, and public agency representatives are all welcome to call.

Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970

United States Code Title 42 USC Chapter 61

Code of Federal Regulations Title 49 CFR Part 24

There have been many disappointed businesses owners when finding how much out of pocket, non-reimbursable money they spent to relocate their business due to a public project taking their property. The federal relocation guidelines don’t automatically guide the business to the best relocation results. To achieve the best results, each business relocation small and large, must have some level of analysis performed to distinguish between personal property and real property, as well as, to determine the proper amounts and best methods for receiving relocation payments from the public agency while following the relocation guidelines.

To emphasize this, recently while planning a business relocation, our personal property analysis determined that a refrigeration unit was improperly classified by the public agency’s appraiser as a non-moveable fixture. The appraiser also determined that it added no value to the property so it contributed no funds to the just compensation, so it had zero value. Furthermore, because the unit was classified as real property, there were no relocation benefits available for it.

We analyzed the refrigeration unit and were able to successfully demonstrate to the public agency that the unit was actually a moveable trade fixture, therefore considered personal property and entitled to relocation benefits. Further analysis demonstrated the cost to substitute the unit with a new unit was slightly less than the estimated $1 million to move and reinstall the existing unit.

This analysis resulted in the business receiving a new refrigeration unit at the replacement property with no out of pocket costs for the business, and very importantly, no downtime for the business, which would have occurred had they relocated the existing unit.

There are four possible methods of receiving compensation for a piece of equipment or personal property depending on its classification and the needs for the item, they are:

As Real Property
1. Payment within just compensation when the item is classified as real property because it’s a non-movable fixture

As Personal Property within the relocation benefits when the item is classified as a movable fixture or personal property, which includes choices of payments as follows:
2. As abandoned personal property
3. As relocated personal property
4. As substituted personal property

A basic comparison of how acquisition and relocation proceeds related to fixtures and personal property are described and calculated as follows:

As Real Property (non-movable fixture):

Let’s say an air compressor was determined to be a non-movable fixture, therefore it is real property, and it has an appraised value of $5,000. (Often, the value can be zero when the item does not contribute to the value of the property)

Non-movable fixtures are purchased as real property by condemning agencies. Within the real property acquisition payment the property owner would receive the $5,000 for the air compressor in our example. Payments for real property are subject to capital gains tax, although the tax can be deferred with a 1033 exchange. Currently the capital gains tax rate for most businesses is at 15%. If the tax is not deferred and the compressor has been fully depreciated, the property owner would be subject to capital gains tax of $750, for a net of $4,250. (This should be reviewed by your tax advisor.)

Side notes:
• Non-movable fixture payments typically are paid to the real property owner, not the tenant, which may have purchased and installed the fixture.
• Fixtures on occasion will include foundations, electrical and plumbing infrastructure. Receiving additional compensation for these items as non-movable fixtures will eliminate the ability to receive cost reimbursements for these items when reinstalling the personal property that the foundations or infrastructure serve.

As Personal Property and/or Movable Fixture:

Let’s say the same air compressor described above was determined to be a movable trade fixture, therefore personal property. The business has three choices in dealing with the air compressor:

• Abandon
• Relocate/Move
• Substitute

Abandon
When the item of personal property is not needed at their replacement location, or the business does not relocate, the business may want to receive a payment for abandonment of the personal property.

The federal relocation guidelines’ payment formula for abandoning personal property is the lessor of the value-in-use or the estimated cost to relocate the item.

If the cost to relocate the air compressor is estimated at $10,000 then the lessor value is the value-in-use of $5,000. The business would then receive the $5,000 as part of their relocation benefits which is non-taxable.

Relocate/Move
When the personal property item is needed at the replacement location, then an analysis should include the costs for relocating the item including disconnecting, moving, foundations, reconnecting, and modification if necessary. The actual cost to relocate the compressor will be paid to the business, which in this case is $10,000. This payment is non-taxable.

Substitute
When the function of the personal property is needed at the replacement location, there may be a desire to analyze the substitution costs for the item.

The federal relocation guidelines’ payment formula for substituting personal property is the lessor of the estimated cost to move/relocate the item or the actual cost to substitute the item.

Let’s say the relocation cost of $10,000 includes costs to disconnect and modify the compressor to fit the location which will not be incurred when substituting the unit, and we find we can buy and install a new compressor that will fit the new location without modification for $9,000. The owner can then receive a substitution payment of $9,000 and enjoy the benefits of a new compressor at the replacement location. This payment is non-taxable.

Conclusion
This information will clarify the dollars at stake and emphasize the need to analyze the best method to receive payments for an asset. Based on our example of the air compressor are the following results:

Non-Movable Fixture – Payment resulting in $4,250, or $0 if the item does not contribute value

This payment will likely be paid to the real property owner.
If the compressor is needed at the replacement location the business will have to spend $5,999 to replace it

Abandonment of Personal Property – Payment of $5,000 (non-taxable)

The business receives value for an item no longer needed.

Relocation/moving – Payment of $10,000 (non-taxable)

The compressor continues to function as it did at the acquired property with no out of pocket expenses for the business.

Substitution – Payment of $9,000 (non-taxable)

The function of the compressor is replaced with a new compressor with no out of pocket expenses for the business.

Each business relocation and its payments are different because of the different types of personal property the business has and the future plans of the business, requiring separate analysis for each business.

This explanation should clarify an often overlooked and important monetary issue that will occur during relocation of the business and the acquisition of the property.

If you wish to discuss this further or should you have any questions, or comments, please contact me…..

Martyn Daniel

Tag Archives: uniform act

How to Begin Planning Your Business Relocation in Eminent Domain