When easements and rights of way are condemned causing an occupant to move or modify the use of personal property, state and federal procedures apply. Learn more about who is eligible for relocation benefits and the top 5 categories of relocation benefits within state regulations and Federal Uniform Act. Find out what you can do as an eminent domain attorney, appraiser, or right-of-way professional that will improve the results of your work.
Please join me The Seminar Group’s upcoming seminar on Easements and Right of Way, Friday, November 18, 2016, Missoula, MT. You can register here.
Why can’t one very accomplished eminent domain attorney from Portland live without business relocation services?
When I first encounter an established attorney and I explain my services to them, they naturally feel resistant to the thought of adding new elements to their already successful practice. I was reminded of this common reluctance a few weeks ago when Jill Gelineau, a highly recognized eminent domain attorney with Schwabe, Williamson and Wyatt in Portland, introduced me at the Eminent Domain CLE.
Jill described how when she first met me, she had been successfully practicing eminent domain law for more than 22 years and was sceptical of the need for my services. She went on to say that now, after working with me for 7-8 years, I’ve become indispensable to her cases and she doesn’t know how she ever practiced without me.
A Common Theme If you’re like many attorneys, you may feel that you have a good understanding of the Uniform Act and its relocation guidelines, and the displacing public agency is likely being very cooperative at this time, in the early stages of the process. As such, you may not see the need for my services. This has been a common theme among many eminent domain attorneys—who are now steady clients.
Your knowledge of the URA and the relocation guidelines is certainly necessary. My work is not meant to replace your knowledge, but instead to enhance it with firsthand experience foreseeing relocation costs that will be incurred, fitting the costs into the URA’s reimbursable categories, and anticipating possible denials of claims to pre-empt denials and gain their approval for reimbursement. These are some aspects of the expertise that I bring to the table.
Connecting the Dots Here are several ways that my eminent domain business relocation services can help your practice.
My intimate knowledge of the Uniform Act (URA) and its relocation guidelines are an important part of the relocation process. My role is to connect the dots between all of the relocation issues and the Uniform Act requirements. My work can enhance your knowledge with firsthand experience in using the URA and its processes as a tool for relocation planning.
Planning a relocation before costs are incurred, foreseeing and estimating relocation costs that will be incurred, and estimating their eligibility and non-eligibility for reimbursement based on the URA, are some of the ingredients to a successful relocation. This work is paramount for the owner’s decision making and to develop a relocation plan, which often helps to improve operations at a new location.
Many of my fees for business relocation work are eligible reimbursable costs to the business, unlike attorney fees.
Improved Results Having worked with attorney Jill Gelineau at Schwabe, Williamson and Wyatt now for 7-8 years and so many other attorneys across the country, I can tell you that while your practice may certainly be successful right now, there is always room for continuous improvement.
As a Business Relocation Consultant I can work alongside your efforts as part of your eminent domain team and enable you to offer unique services that will set you apart from the competition. The partnership can bolster your firm’s equity and potential clients will take notice of the added value. Most practitioners do not provide these services, but the benefits to your clients are extensive. My services allow you to form a more complete package to your clients than any other attorney.
The people of Chicago have been wondering what’s going to happen to the Bryn Mawr Breakfast Club restaurant?
Bryn Mawr is the historic district in Chicago, Illinois that’s on the lakefront of the Edgewater neighborhood far north of the city. Northeastern Illinois University has acquired land along Bryn Mawr Avenue that includes the building that houses the Bryn Mawr Breakfast Club. The land was acquired by eminent domain.
Apparently the owner was aware that NEIU had an interest in the land but the idea seemed far off and he signed a lease anyways. The restaurant quickly became very popular with locals. Then, in August 2014, NEIU began the eminent domain proceedings with the intention to build student housing.
Many problems occur in cases of eminent domain because relocation benefits are not always offered. That appears to be the case for the Bryn Mawr Breakfast Club. Kitchen equipment, furniture, and decorations can be moved, but any upgrades that the owners made to the property may be a lost investment.
Ideally, the owners would be able to find a new location that was previously housed by a restaurant with an existing commercial kitchen. However, if such a replacement property is unavailable, a new kitchen installation could cost $30-$40k.
If federal funds were used in this project, or if state law required relocation benefits to be offered when using eminent domain, NEIU would be required to follow the federal Uniform Relocation and Acquisition Policy Act (URA). The URA provides regulations that offer a fair and equitable treatment of persons displaced. It includes regulations that allow certain relocation costs to be reimbursed to the tenant. Unfortunately, under many projects, as with NEIU’s project, relocation costs go unpaid and the business tenants end up baring a disproportionate amount of the burden of a project that benefits the public.
In the absence of providing required relocation benefits, such as with the URA, and to reduce the burden placed on business tenants, a relocation package should be negotiated where the business occupant will be entitled to relocation benefits for moving personal property and reconfiguring their operations because of the property taking. It’s valuable to have qualified people analyze the issues and facts, and prepare the necessary reports and documentation.
Professionals should be brought in who understand the facts so that they can perform a proper analysis and sort items into the proper categories in hopes that the business can prevail in an acquisition or relocation dispute.
Have you heard about the most recent eminent domain case in Nashville? The City of Nashville plans to take a portion of Greyhound’s bus terminal property for their Division Street Extension project with the use of eminent domain.
The City has offered to purchase the portion of property for $870,400. The area of the taking is a parking lot, which appears to include approximately 22 parking stalls with typical landscaping, sidewalks, and lighting. No structures are included in the taking. An article about the project can be found here. The City’s project can be reviewed at: http://www.nashville.gov/Public-Works/Capital-Projects/Division-Street-Extension.aspx
This property taking offers good examples of the need to analyze each component of the eminent domain taking, both combined and individually. The criteria used in this example is based on the Federal Uniform Relocation Assistance and Real Property Acquisition Policy Act (URA).
Those components include:
The value of property taken
The damages to the remaining property
A cure for the damages
Relocation of the business occupant and landlord
Property Value The property value will be determined by the real property appraiser who will likely consider the three methods of valuation. These include:
Comparison of recent sales
Replacement value (value of land plus cost to build improvements, including depreciation)
Value based on income (income as if the property were leased to a tenant)
Damages The real property appraiser will also evaluate the damages, if any, that are caused to the remaining portion of the real property. Damages apply only to the real property and not to the business occupying the property. This may include the loss in the property’s value because of having inadequate parking after the taking. The owner is entitled to the value for damages, or, the cost to cure those damages, whichever is less. The amount would be included within the real property purchase offer.
Cost-to-Cure A cost-to-cure consultant will analyze the damages and prepare possible designs and costs to solve, or cure, the damages to the remaining property.
In this particular case, let’s say the only cure is to construct an elevated parking structure on the remaining property to replace the lost parking. Let’s say it costs $500,000 to construct. The City’s offer to purchase would have to include $500K for damages or cost to cure in their purchase offer for the owner to build the structure without dipping into their own pockets. If that amount were not included in the offer, the property owner would have to argue for that amount with the use of the cost-to-cure documentation and the real property appraiser’s calculation of damages.
Relocation The property owner (landlord) and the business occupant will be entitled to relocation benefits that may apply for moving personal property and reconfiguring their operations caused by the property taking as long as those items were not paid by the City as part of the cost to cure or elsewhere in the real property purchase.
Let’s say that Greyhound can no longer operate at this location with the loss of parking. This would entitle Greyhound to relocation benefits for moving to a replacement site. If the property is appraised as a non-special use property, relocation benefits would likely cover the costs to move, reinstall, substitute, or abandon personal property such as:
Seating, counters, computer systems, phone systems, paging systems, scheduling systems, and other items classified as personal property.
If the real property was appraised as a special use property—in other words, it’s a bus depot and cannot reasonably include another use—many of those items listed as personal property above may be valued with the real property because those items would normally be included in the purchase and sale of a bus depot. As a result, they would then not be eligible for relocation benefits. Instead, they would be valued as part of the real property, which means they may add value to the real property, but will include a depreciated value, or they may add no value with no actual payment for them. This is not a good scenario for the business when this or similar functioning personal property is needed at a replacement property.
For best results, the identification of personal property should be prepared through collaboration among the real property appraiser, a qualified relocation consultant, the tenant, and the property owner. Without this collaboration, chances are strong that someone, including the public agency, will lose and someone will be unjustly compensated.
Now let’s explore a notion and say that because of the nature of this business, it’s determined to be a utility facility. Included in the URA’s definition of a utility facility is anytransportation system. The URA goes on to say that a utility facility may be privately, publicly, or cooperatively held. In my opinion, a bus depot should qualify as a transportation system and therefore should qualify as a utility facility within the regulations.
Utility facilities are eligible for relocation benefits in a significantly different manner than a business. According to the URA, relocating a utility facility includes, in part, the displacing public agency acquiring the necessary right of way on a new location, moving, and constructing the replacement facility that has the functional equivalency of the existing facility.
If this Utility Facility notion proves to be correct, Greyhound would be entitled to a new bus depot and property with no out of pocket costs.
Conclusion In order to get the acquisition and relocation right, the condemning public agency, the property owner, and the tenant, must have qualified people to analyze the issues and facts, and prepare the necessary reports and documentation.
Because these situations are similar to any other buyer/seller scenarios, there is typically a team of specialists representing the public agency and another team representing the property owner and/or tenant. The people within each team need to work together to understand the facts and sort them into the proper categories as briefly described above.
Having the analysis performed by eminent domain experts is the best way for your team to prevail in an acquisition or relocation dispute.
The analysis and classification of property plays a critical role in the success of your eminent domain case. An analysis must be performed to define between personal property (including trade fixtures), permanent fixtures, and other forms of property. The real property offer that a displacing public agency makes depends on this analysis, but it’s dangerous to assume that their analysis is, by its nature, automatically accurate. Misclassification can cost a displaced business millions of dollars in out of pocket expenses. A close examination of the analysis should be performed to weigh the benefits and drawbacks of the classifications that have been made.
I recently worked with a business that would have been $4.5m out of pocket had they accepted the offer from the displacing agency. It came down to the issue of permanent fixtures vs. trade fixtures (personal property). The displacing agency made an offer of $4m for items that the agency classified as permanent fixtures. In order for the displaced business to reestablish its operations, the business would, in fact, have had to buy these “fixtures” back from the agency at salvage value, estimated by the agency at $500k. By my estimation, the relocation costs would have cost $8m in reinstallation at the new location. The result would have been $4.5m out of pocket, all because of the acceptance of the property analysis.
Defining Fixtures:
Permanent fixtures are typically equipment that cannot be moved and therefore becomes part of the real property. They will be purchased as real property, and are not eligible for relocation benefits.
Trade fixtures are typically items used in the business trade, which can be easily detached, thereby, converting to personal property when detached, which then are eligible for relocation benefits. The definitions and criteria used for classifying permanent fixtures and trade fixtures will be discussed at another time in the future.
Understanding the Advantages and Disadvantages of Classifying Items as Fixtures
Example 1: Case Study – COMPANY X & AGENCY Z
I was asked to evaluate Agency Z’s real property acquisition offer, which included a personal property and fixture analysis for COMPANY X. There were three areas of concern:
#1: Permanent Fixture v. Personal Property
#2: Installation Classified as Fixture v. Reinstallation of Personal Property
#3: Infrastructure Classified as a Fixture v. Reinstallation of Personal Property
#1: Permanent Fixture v. Personal Property – AGENCY Z classified many items as permanent fixtures, which are typically classified as personal property. It was in COMPANY X’s interest to re-classify some or all items as personal property.
Value: AGENCY Z valued approximately $4.2m of the items as permanent fixtures, which could, or should, have been classified as personal property.
Adverse effects of a permanent fixture classification:
Permanent fixtures are not eligible for relocation benefits; therefore if COMPANY X desired to relocate an item classified as a permanent fixture, the costs for moving, reconnecting, and/or modifying, were not reimbursable and would have been COMPANY X’s responsibility.
The permanent fixture classification of items is not good when:
The item will be needed at the replacement property
Code upgrades are needed for the item’s reinstallation
Significant infrastructure is needed for the item’s reinstallation such as, plumbing, footings, venting, power, etc.
Positive effects of a permanent fixture classification:
Fixtures can be abandoned and paid out for the amount of the fixtures Value in Use, which can potentially be greater than abandoning the same item if it were classified as personal property.
When abandoning an item as personal property, the amount received is the lesser of; the Value in Use, or, the estimated cost to move and reinstall.
When abandoning an item classified as a fixture, the amount received is the appraised “Value in Use”, or also called “Value in Place”.
In other words, reimbursements for abandoning an item as a fixture will always be equal to, or better than, abandoning the same item when it is classified as personal property.
Fixtures are good when:
The fixture is not needed at the replacement property
The business is closing
The item’s Value in Use is greater than the cost to buy it at salvage value plus its reinstallation cost (not common)
Changing items classified as permanent fixtures to a classification of personal property:
In the case of COMPANY X, these items included machinery and equipment, which was installed for the business of treating customer products. These items were not installed for operating the real property, as would a permanent fixture.
#2: Installation Classified as Fixture v. Reinstallation of Personal Property – AGENCY Z classified the installation as a fixture for items they classified as personal property. Typically, the installation of personal property items is not classified as a fixture or personal property. Installation is simply part of relocating and reinstalling the personal property.
Value: AGENCY Z had valued approximately $1m installation of personal property as a fixture.
Negative effects: (same as above)
Positive effects: (same as above)
#3: Infrastructure Classified as a Fixture v. Reinstallation of Personal Property – AGENCY Z had classified the infrastructure items as fixtures, such as: plumbing and electrical.
Value: Electrical $195k; Plumbing $739k
Negative effects of infrastructure as a fixture:
Most replacement buildings would not have had the level of infrastructure needed to support COMPANY X’s equipment needs for plumbing and electrical. If the plumbing and electrical had costs exceeding AGENCY Z’s fixture value, COMPANY X would have have had to pay the extras out of their own pocket.
Positive effects of infrastructure as a fixture:
If COMPANY X happened to locate a replacement building that included most of their needed plumbing and electrical (which was doubtful), then AGENCY Z’s infrastrucure value and payment may have put money in COMPANY X’s pocket.
If COMPANY X chose to go out of busines, then having the infrastructure catagorized as a fixture would have been good for COMPANY X.
Example 2: Heat Treating Furnace
A very specific example of the pitfalls of accepting an offer from the displacing agency can be illustrated with this heat treating furnace as one particular item owned by this business. In this case, the agency offered to purchase this item as a permanent fixture at $66k and made it eligible for purchase by the owner from the agency for $8.5k.
However, permanent fixtures, as this furnace was classified by the agency, are not eligible to receive reimbursements for moving and reinstalling. The cost to move and reinstall a furnace like this is estimated at $140k, as shown in the Relocation Cost Analysis spreadsheet below.
For the business to have opened shop at another location using the agency’s valuation the business would have had to purchase this furnace for $8.5k and then spend $140k to move and reinstall it. They would have received $66k from the agency but would have been out of pocket $82.5k.
Reclassifying a furnace like this from a permanent fixture to personal property allowed relocation benefits to pay for the full relocation costs of $140k with no out of pocket expenses for the business.
As these examples illustrate, it’s critical to understand the advantages and disadvantages of classifying items as fixtures. It’s potentially extremely expensive and detrimental to a displaced business to assume that an analysis is automatically correct. If you are at risk of having your property taken by eminent domain, scrutinize the analysis of fixtures v. personal property to weigh the benefits and drawbacks of the classifications that have been made in your case. If you have any questions regarding the question of fixtures, personal property, relocation, or other areas of eminent domain, get in touch and I’d be happy to discuss the matter with you.
When it comes time to defend your appraisal, are you sure that it will stand up to opposing council? Whether it’s your appraisal or your opinion on the replacement costs for buildings and other improvements for cost-to-cure designs and cost estimates, the opposing council will be ready to poke holes in your case.
As an appraiser, sometimes you are working on an eminent domain case where part of a parcel of property is condemned and the use of the remaining property is impacted. In such cases, a consultant can support your work with customized, reasonably calculated cost-to-cure estimates and designs that follow agency guidelines and eminent domain law.
When the new right-of-way severs a structure or improvements, the consultant will develop a design for removing the portions of the improvements affected by the right-of-way, while renovating the remaining portions to cure the damages caused by the property taking.
An experienced cost-to-cure consultant can assist appraisers and other interested parties by enhancing their appraisals for complex structures, improvements, and cost-to-cure values. The cost-to-cure consultant with the added benefit of relocation expertise on eminent domain projects can help in a number of ways by providing a single source and point of contact with expert knowledge in eminent domain issues including cost-to-cure, replacement costs, separation of relocation costs from cost-to-cure and replacement costs, preliminary design, and commercial construction.
Cost-to-Cure Services are Time and Cost Effective
Benefits of Cost-to-Cure estimates and designs for appraisers include:
Quick understanding of the assignment and project issues.
Efficient turn around of costs and reports.
The ability to speak on most of the issues with knowledge of when to hand additional detailed explanations to other experts.
Knowledgeable identification of additional experts that may be necessary for the project.
Coordination of those experts for the project for their scope of work and reports.
Distinguishing between cost-to-cure issues and relocation issues saves time and offers a comprehensive package to the client that includes cost-to-cure needs and relocation needs.
Perform analysis of plans and costs developed by the opposing side to determine their effectiveness and reasonableness.
I support appraisers in Eminent Domain cases with timely and affordable cost reports and designs that are, typically, self-supporting.
If challenged, I stand ready to further support and clarify the cost reports in mediation, deposition, or even trial when necessary. My status as a recognized specialist in this niche comes from an extensive history of creative solutions, credibility and clarity. The documents that I prepare for appraisers are based on defensible fact and stated in detailed but understandable language and also include design drawings that are approachable for the layman.
When you have a difficult or questionable Eminent Domain matter to appraise, please feel free to give me for a free telephone consultation. I look forward to hearing from you.
I have been following the eminent domain case for the City of St. Louis bid to the National Geospatial-Intelligence Agency and have some comments in response to the Paul Berry III Congressional Exploratory Committee statement that was released November 2nd, 2015.
Mr. Berry makes an excellent point of gaining support by the effected property owners and tenants for the NGA project.
To gain that support, I recommend going a few steps further than he suggests. I recommend that the City implement the Federal Uniform Relocation and Acquisition Act (URA). The URA provides guidelines for relocating residents and businesses on federally funded projects and many other projects without federal funding, while using eminent domain to acquire the property.
The URA sets rules and guidelines for the government, as well as for the displaced person to follow, creating fairness and reasonableness for each side during the relocation process. The guidelines make it fairer for the displaced person than many other methods used. However, the URA does not necessarily make the displaced person whole after their relocation, particularly if the guidelines are not properly implemented.
For the City to come closer to this goal of fairness without sacrificing reasonableness and controls, the City could enhance certain parts of the guidelines, as many public agencies and states have successfully done through properly setting up its implementation.
Offering an enhanced version of the URA relocation guidelines for this project will go a long way toward gaining the support of the effected property owners and tenants needed while controlling the process. This would shed a good light of fairness on this project location to enhance the likeliness of the NGA choosing this site.
I am available to assist with recommendations for enhancements to the URA and the proper procedures for its implementation to support Mr. Berry’s recommendation.
Why a Displaced Business Should Be Concerned with Relocation Assistance Advisory Services, and Why a Displacing Public Agency Should Diligently Provide These Services
Federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA)
On public projects where a public agency is using eminent domain laws to condemn private property, the agency often elects to, or in many cases is required to, follow the URA. For example, a department of transportation might use eminent domain laws in the case for expanding a highway right of way, or adding a new light rail line.
When the project includes federal funds, the public agency is required to follow the URA. When the URA is used, it provides regulations and guidelines that the public agency must follow when acquiring private property and displacing business and residential tenants for the agency’s project. The URA’s regulations are the rights of the property owners, displaced businesses, and displaced residents to receive from the displacing public agency.
Relocation Assistance Advisory Services
The URA requires a condemning public agency to provide six key relocation advisory services to a displaced business. A list of these services follows – Relocation Advisory Service #1-6. I have also included my comments for each of these services as a relocation consultant working for displaced businesses, as well as, working as a relocation agent for public agencies providing these services.
Relocation Assistance Advisory Services vs. Relocation Consulting Services
Relocation Assistance Advisory Services, not to be confused with Relocation Consulting Services, also known as Move Planning Services, are a required service provided by a condemning public agency to a displaced person or business. Relocation Consulting Services are provided by a private consultant hired by the displaced business to plan and coordinate their relocation. Relocation consulting services are a reimbursable relocation expense eligible to the displaced business within the URA regulations.
Success and Failure of Relocation Assistance Advisory Services
When a public agency fulfills these services properly, they will gain important information that will help the agency prepare for the timely use, implementation, and payment of the relocation benefits provided. This is meant to better assist the displaced business to successfully relocate with minimal downtime and minimal out of pocket expenses.
When the public agency fails to fulfill these services, they find themselves ill prepared to provide the necessary relocation benefits in a timely manner. Delay causes unnecessary damages to the displaced business including excessive downtime and excessive out of pocket expenses. For the public agency, they will likely experience needless relocation payments, and unnecessary expenses for appeals and legal fees. The community may also suffer from a loss of jobs, local tax revenues, and productivity if the displaced business fails to survive the relocation.
Appeal or Tort Claim of Relocation Assistance Advisory Services
A business can appeal most anything related to their relocation benefits. Unfortunately, most of the damages caused by the lack of these Relocation Advisory Services are non-compensable within the URA, leaving little to no recovery of costs or damages from the appeal process. A lack of these services inflicts damages in the way of loss of income, loss of customers, and loss of employees, which are specifically excluded from eligible cost reimbursements. Increased costs for the business are another effect, falling into the capped Reestablishment category of the URA and leaving little if any recovery of costs. In addition to or in place of an appeal, some businesses have had success treating this issue as a Tort claim.
CFR Title 49, §24.205(c) Relocation Assistance Advisory Services
This section of the URA outlines the Services to be provided as follows:
Services to be provided. The advisory program shall include such measures, facilities, and services as may be necessary or appropriate in order to:
Determine, for nonresidential (businesses, farm, and nonprofit organizations) displacements, the relocation needs, and preferences of each business (farm and nonprofit organization) to be displaced.
Explain the relocation payments and other assistance for which the business may be eligible, the related eligibility requirements, and the procedures for obtaining such assistance.
This shall include a personal interview with each business.
At a minimum, interviews with displaced business owners and operators should include the following items:
Relocation Advisory Service #1
The Regulation:
24.205(c)(2)(i)(A) The business’s replacement site requirements1, current lease terms2 and other contractual obligations3, and the financial capacity of the business to accomplish the move4.
Comments on replacement sites and financial capacity to relocate:
Replacement site requirements – Changed zoning may mean relocating outside of the business’s customer and/or employee base. Some businesses may have special needs that are not readily found in the market place.
Current lease terms – Leases that are several years old may be very different from what is currently available in the market, causing extra expenses for many years.
Contractual obligations – We often find that the displaced property owner or landlord sold the business that is currently the tenant and is now receiving payments for the sale of the business. This creates a need and desire to continue receiving those payments by providing a replacement property to the tenant. In addition, the business may have a contract to supply products or services that may be disrupted by the relocation.
Financial capacity – Most businesses having to relocate do not have the financial capacity or cash flow to finance their own business relocation. Additionally, the move can drain any available cash and cause a loss of sales or income during the move. Knowing the financial capacity of the displaced business should alert the public agency to be ready to provide available tools within the Relocation Guidelines that will assist the business to minimize downtime and out of pocket costs for the move. This may include advance payments, recommending professional services, and assuring the displaced business understands which relocation costs are eligible and not eligible for reimbursement.
Relocation Advisory Service #2
The Regulation:
24.205(c)(2)(i)(B) Determination of the need for outside specialists in accordance with §24.301(g)(12) that will be required to assist in planning the move, assistance in the actual move, and in the reinstallation of machinery and/or other personal property.
Comments on outside specialists:
Most, but not all, displaced businesses need some level of outside specialist support. The public agency, through their agents and consultants, must recognize early on in the project this need for specialists to help a business successfully relocate in a timely timeframe.
Otherwise, the displaced person can also decide that they need a specialist. A specialist may be needed to deal with the business’s unique needs, or, to help free up time for the business owner and key personnel so they can focus on running the business, while the specialist undertakes the planning and coordination of the business move.
I like to see a displaced business have the opportunity to have one person in charge of planning and coordinating their move who will assist them with making the move as though it had been planned and executed for sound business reasons, rather than eminent domain reasons.
Choosing to use a relocation consultant is similar to choosing the use of a general contractor to work on your house compared to you hiring and managing all of the subcontractors yourself and dealing with issues you’re not used to handling, all while you’re at your office working at your day job. There are good reasons why general contractors exist; they are key to achieving your desired results including quality, timeliness, and budget, particularly when multiple trades or vendors are involved.
Much like a general contractor, a relocation consultant can plan, organize, coordinate, and schedule other experts, contractors, and vendors in a manner that minimizes unnecessary costs and downtime, where the business owner participates as much or as little as they desire while they continue to run their business. An example of avoiding downtime is recognizing equipment that needs code upgrades before it’s disconnected and moved, or, as simple as preparing a layout plan for the new location during the planning stage that will maintain or improve the flow of operations or visual appearance to the customers. Unfortunately, relocation agents working for the government agency just don’t have that much time or budget to dedicate to a single displaced business.
For many reasons, it’s helpful for the relocation consultant to be conversant on eminent domain issues. Particularly because the most displaced businesses are not prepared financially for the move. The relocation consultant can help disseminate between acquisition and relocation issues, and assist with qualifying the business for available funding sources such as the relocation benefits. Additionally, many relocation decisions are based on available finances. During the planning stage of the relocation, the business needs to know what they will have to pay for out of pocket and where relocation benefits will help them. This is where the relocation consultant can to offer critical guidance. This marks an important difference when planning the relocation and can mean the difference between the business moving as-is, with the possibility of being in a worsened business situation, or moving in a manner that helps them continue their business success equal to or better than they experienced at their displacement location.
Relocation Advisory Service #3
The Regulation:
24.205(c)(2)(i)(C) For businesses, an identification and resolution of personalty/realty issues. Every effort must be made to identify and resolve realty/personalty issues prior to, or at the time of, the appraisal of the property.
Comments on personalty and realty issues:
When a fixture is classified as realty, the public agency’s payment for the fixture is made to the owner based on its depreciated value, if it is determined to have value. The depreciated value is usually less than the cost of replacing the item. Additionally, the realty payment often goes to the property owner or the real property mortgage holder rather than the displaced business. Finally, realty is not eligible for relocation benefits, leaving the owner to pay from their own pocket to replace this item at their new location. It’s clearly very important to get this right.
Knowledge of the business, personal property, and the laws that distinguish personalty from realty are key to proper personalty/realty classification. Unfortunately, too often the relocation agent and the appraiser do not collaborate on personalty and realty issues or one is not conversant on the issue, leaving flawed or incomplete appraisal reports. This occurrence creates confusion and debate during the business move causing additional relocation costs, delay, and downtime.
To improve on this issue, appraisers (real property appraisers, and FF&E appraisers) should be accompanied on the appraisal walk-through by a relocation agent (as the URA suggests) who has knowledge on this issue. Discussions between those parties should resolve most personalty/realty issues before they become a relocation problem.
Additionally, the business owner will benefit from having their own relocation consultant who is knowledgeable on these issues and involved prior to and during the appraisal walk-through, particularly when there is equipment and machinery involved. This will enhance the collaboration and understanding among all parties including the business owner, which will improve the relocation planning and process. In addition, the cost for this service is often a reimbursable expense to the displaced business or property owner.
Relocation Advisory Service #4
The Regulation:
24.205(c)(2)(i)(D) An estimate of the time required for the business to vacate the site.
Comments on estimated time to vacate:
A relocation schedule must be prepared to take advantage of the available time to properly plan, prepare, and perform the move. Without a schedule, a business may incur unplanned and unnecessary downtime. Downtime can cause a business to lose employees and customers along with income and profits, none of which are eligible for reimbursement, and any of which can cause business disruption and possibly devastation.
For the public agency, a relocation schedule is a tool to reduce unnecessary relocation costs and missed vacate dates. It will also improve the agency’s success with relocating displaced businesses, and improve the usage of public funds.
At a minimum, the schedule should include three milestones: 1) Notice of Eligibility, 2) Acquire Replacement Property, and 3) Vacate Displacement Property. Including some known tasks between these milestones will produce a basic beginning schedule as shown below (dates and task durations are excluded for clarity).
Notice of Eligibility
Plan relocation
Search for replacement site
Acquire Replacement Property
Plan relocation
Design and permitting for replacement property improvements
Prepare replacement property to receive relocated personal property
Send change of address notices
Disconnect, move, and reinstall personal property
Vacate Displacement Property
Finalize move
This basic schedule will give the business owner a starting point for planning purposes. The public agency’s relocation agent should be cautious of including too much detail for liability reasons. Additional tasks and durations can be added, as they become known by the business owner or the relocation consultant.
This basic schedule may be more than is required by this regulation, however, it is an excellent tool that supports the required task. The schedule also makes a significant improvement to most business relocations and is well worth the small amount of effort invested in its preparation for the benefits it produces.
Relocation Advisory Service #5
The Regulation:
24.205(c)(2)(i)(E) An estimate of the anticipated difficulty in locating a replacement property.
Comments on locating a replacement property:
Planning and finding the perfect replacement property that’s affordable and in the proper location can be challenging in the best of times. Because the displaced business was not likely in the process of planning their move before the notice to vacate was delivered, it’s critical for the business to find the right replacement property more quickly than under normal conditions to allow the needed time to prepare the replacement property for the business and to relocate the business. Otherwise, if the vacate date is too near, the business may incur downtime. However, spending the necessary time to find the right replacement property can be essential to the longevity of the displaced business. There is a fine balance between finding the perfect replacement property and avoiding business downtime. That balance point varies for each business.
The fast-food industry is a good example of the effort that goes into selecting store locations. One prosperous displaced fast-food business couldn’t wait for the normal, long, yet successful process of site selection provided by the franchisor, and there was only a year to go until their vacate date. The franchisee short-circuited the proven franchisor’s process in order to quickly find the replacement property without any assistance of the franchisor. The franchisee leased and successfully prepared the replacement site, opening the doors just in time to vacate the displacement property, avoiding any business downtime.
However, during the first year of operating at the replacement property, the franchisee spent an extraordinary amount of money on advertising in an effort to attract customers to his new location and struggled with poor sales. Within the second year of operating at the replacement property while continuing to advertise, the business closed for lack of cash flow resulting from too few sales.
The project’s vacate date will be fixed and unlikely to change. Early on in the project, the displaced business needs to fully understand the project’s inflexible timeline, the tasks, and challenges facing them. To hasten the property search, the displacee needs to know how relocation benefits may or may not help make a particular property suitable and affordable for their business. It is the displacing public agency’s job and/or challenge to inform the displaced business of these issues to help them avoid downtime, as well as find an affordable replacement property that fits their needs, all while meeting the project’s schedule. This begins with the public agency estimating the difficulty in locating a replacement property.
Relocation Advisory Service #6
The Regulation:
24.205(c)(2)(i)(F) An identification of any advance relocation payments required for the move, and the Agency’s legal capacity to provide them.
Comments on advance relocation payments:
Advance payments are often necessary, as well as critical for a displaced business, which often has shallow pockets. Advance payments are often needed for ordering substitute personal property, ordering materials needed for the reinstallation of personal property, and starting design services. A public agency must recognize the need and be ready to offer advance payments. Otherwise, the business relocation may stall at the beginning of the process, which could cause missing the vacate date and delaying the public project, and can cause an unnecessary hardship on the displaced business.
Conclusion
These six Relocation Assistance Advisory Services are critical to prepare for and to accomplish a successful business relocation. Any shortcomings in their implementation leave a wider opportunity for unnecessary costs and downtime to occur.
The public agency must initiate the inquiries of the business to gain the information necessary to properly provide relocation benefits. It is the business’s responsibility to provide the necessary information to the public agency.
I would be pleased to answer any questions you may have on this matter or other eminent domain and condemnation matters you may want to discuss as they relate to relocation and cost-to-cure. Please contact me either by phone 425-398-5708 or email . I look forward to hearing from you.
A wise man once said, “Failing to plan is planning to fail.” That same man, Alan Lakein, also said “Planning is bringing the future into the present so that you can do something about it now.” This wisdom could not be truer and better applied than when it comes to eminent domain relocation preplanning.
Did you know that by time a business has been made eligible for relocation benefits, it’s likely too late to prevail? Unknown to most displaced business owners, it is after the public agency has completed their analysis and has determined the business’ eligibility for relocation benefits, that the business becomes eligible to incur and receive reimbursements for relocation costs incurred.
However, it’s not until this stage that the public agency actually explains the relocation benefits to the business owner. As a result, most businesses don’t begin planning their relocation until the analysis is complete. The problem is that by waiting until the analysis has already taken place, the business is either obliged to plan their relocation around what the public agency has already determined, or they must appeal those decisions. It becomes too late to pre-plan the relocation. Waiting uses up unnecessary time and resources and concludes with uncertain results. The only option is to attempt to undo what would likely have been prevented with preplanning.
Benefits of Preplanning an Eminent Domain Relocation
Preplanning gives a business the opportunity to guide the public agency’s decision-making process as they determine the eligible relocation benefits. Preplanning a business relocation refers to planning before the business has received their notice of eligibility for relocation benefits and before the public agency’s offer has been made on the real property.
Preplanning differs from relocation planning or Move Planning, as it’s described in the Uniform Act relocation guidelines. Relocation Planning is performed after the business has been determined eligible for relocation benefits by the agency but before the business actually moves.
A few of the many benefits of preplanning business relocation due to eminent domain:
1. Preplanning creates an increased amount of time for evaluating and making critical decisions such as: a. Evaluating the best of the potential replacement properties. b. Understanding how relocation benefits will and will not assist with making a potential replacement property functional for the business.
2. Preplanning ensures that your decisions will be made on facts of relocation benefits rather than on misleading information or assumptions on what the relocation benefits do or do not provide to you. 3. Preplanning relocation establishes time for preparation of plans for minimizing downtime with the use of relocation benefits. 4. Preplanning grants you more time and knowledge of the process, which opens up more business relocation options. 5. Proper preplanning sets the stage for your actual relocation, saving you out of pocket expenses because of a rushed move, lack of choices, and excessive key employee time spent on the relocation. 6. Preplanning allows you to put your best foot forward while working with the public agency representatives. Beginning with their first contact with you, your level of organization and knowledge will be evident which is important since this is the time when information, both proper and improper or misinterpreted, is generally traded. With the right preplanning, you can avoid the misinformation that usually causes the process to derail and veer off in a direction that can be costly to your business.
The preplanning window that opens before the public agency’s analysis has been completed is a pivotal — but fleeting — opportunity for businesses. Preplanning empowers business owners with informed knowledge that will enable them to take positive action. The difference between taking advantage of the preplanning stage and missing that opportunity can be the difference between real business savings of both money and efficiency vs. expensive business hardship and stress. Don’t miss the preplanning window. Avoid being swept up in an overwhelming, inefficient, and expensive relocation tide for you and your business by seizing the window of preplanning opportunity today.
As an eminent domain attorney for owners, you offer important services to your clients. You work to protect the interests of private property and business owners through a process that is complicated and confusing for those who are inexperienced and vulnerable in a relocation situation. Your services help to ensure fair compensation for your clients.
What if there was a way to add additional value and benefit to your clients, and to improve your overall service offerings? A business relocation consultant, when brought in early for preplanning a business location, can steer things in a direction that will produce better results to the business/property owner that you’re working with. Including a business relocation consultant as part of your team can result in considerable advantage to your clients.
Because federal relocation guidelines don’t automatically guide businesses to the best relocation results, each business relocation, must have some level of analysis performed to distinguish between personal property and real property. It’s also essential to determine the proper amounts and bestmethods for receiving relocation payments from the public agency while following the relocation guidelines. By adding expert relocation consultation to your client offering, your practice can avoid the disappointment of clients who find out how much out of pocket, non-reimbursable money they spent to relocate their business because of a public project taking their property.
You will benefit from offering preplanning services to prospective clients because you will be offering a more complete package than any other attorney. Preplanning services provide you with something to offer the client right away, while other attorneys are in a holding pattern. This offering will increase the chances of securing the client’s business.
Preparing appeals, planning relocation logistics, and orchestrating and coordinating the actual move itself toward maximum efficiency and minimum client downtime are examples of how business relocation consultation can add value to your attorney services and your clients.
Business relocation consultation and preliminary planning services for those businesses that will be displaced by the project can result in thousands and sometimes millions of dollars in cost reimbursements for your clients that often otherwise go unrecognized and unclaimed. Preplanning a business relocation while following relocation guidelines based on the Uniform Act can greatly improve the outcome of the relocation. Taking appropriate action can result in improved relocation reimbursements received from the displacing public agency, frequently in amounts of twice or more. In many cases when the business becomes eligible for relocation benefits, the relocation consultation services are eligible for reimbursement within the relocation guidelines.
These services are quite unique within the eminent domain industry. By augmenting your professional services to include the expertise of my business relocation consultancy, you can set your practice apart from that of other eminent domain attorneys. If you wish to discuss this further or should you have any questions, or comments, please contact me.
When easements and rights of way are condemned causing an occupant to move or modify the use of personal property, state and federal procedures apply. Learn more about who is eligible for relocation benefits and the top 5 categories of relocation benefits within state regulations and Federal Uniform Act. Find out what you can do as an eminent domain attorney, appraiser, or right-of-way professional that will improve the results of your work.
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