ACQUISITION 102

PART B

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TABLE OF CONTENTS 5200 BASIC ACQUISITION/NEGOTIATION PROCEDURES

PAGE

5202 MISCELLANEOUS NEGOTIATION PROCEDURES .......................................... 52-1 5202.01 5202.02 5202.03 5202.04 5202.05 5202.06 5202.07 5202.08 5202.09 5202.10 5202.11 5202.12 The RE 95 Process ................................................................................. 52-1 Plan Changes ........................................................................................ 52-3 Purchase of Improvements ..................................................................... 52-3 Recognizing Tenants .............................................................................. 52-5 Release of Liens and Encumbrances ...................................................... 52-6 Mortgage Releases ................................................................................. 52-6 Taxes ...................................................................................... 52-10

Real Estate Acquisitions and Utility Connections ............................... 52-10 Negotiating with a Party Representing the Owner ............................... 52-11 Minors and Incompetents ..................................................................... 52-12 Conflict of Interest ............................................................................... 52-12 Estates ...................................................................................... 52-13

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5202 MISCELLANEOUS NEGOTIATION PROCEDURES

5202.01 The RE 95 Process A. The form RE 95 is completed whenever there is man-made improvement in the take area. Common examples to be included on the RE 95 are: (1) Signs and/or inserts; (2) buildings/sheds/garages/pole barns/barns; (3) spas/pools/above-ground pools; and (4) fencing, light poles. 1. 2. Natural things are not included on the RE 95 as they are a part of the earth. These things include: (1) trees; (2) shrubs; (3) grass; and (4) ponds. Also, things which are so obviously a part of the site that it is abundantly clear that they are owned by the fee owner and are considered to be real property are not included on the RE 95. These things include: (1) driveways; (2) septic systems; (3) leach fields; and (4) curbing and asphalt. However, on occasion, these items may be owned by a third party. When these items are owned by a third party, they are to be listed on the RE 95. The purpose and function of the RE 95 is to assist with project management decisions for appraisal, negotiation and relocation. This is accomplished by: a. Identify man-made improvements in the take area This information allows managers to determine the complexity of the appraisal and negotiation function, if the agency is dealing with a relocation parcel and the amount of time needed to perform the acquisition, appraisal and relocation functions. This information will also alert project managers to any plan problems that must be addressed. Identify the ownership of the improvements taken An improvement may be owned by the fee owner, a tenant or another third party interest. Offers of compensation must be made to the correct owner. The Districts staff should not be making the decision about ownership. The RE 95 is to document agreement between the various owners as to who owns each improvement acquired for the project. Tenant owners of real property need to be identified as early as possible as a separate negotiation is required per 49 CFR 24.106. Appraisers also need scoped to address this issue in the valuation report. Classify the improvements taken as real property or personal property. The RE 95 is to document agreement with the owner as to the classification of the property taken. Improvements classified as real
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3.

b.

c.

property are valued in the appraisal and the District Office will acquire the property. Improvements classified as personal property are not valued or acquired, but are removed from the project area by the relocation process. d. Identify disputed improvements The RE 95 documents if there is a dispute about the ownership of an improvement being taken for the project. Disputes that cannot be resolved may require the appropriation of the property.

4.

The sooner an RE 95 is prepared and signed by all parties the easier it is for project managers to manage their projects. Therefore, if possible, project managers should have the RE 95 process completed early in the acquisition phase of the project and prior to engaging the appraiser for the appraisal assignment. (See section 4100.02 (F) (6) of the manual for guidance on the RE 95 and the FMVE delivery process). If the parcel is a relocation parcel, the relocation agent is to prepare the RE 95 during the pre-acquisition survey. Because an RE 95 is prepared in the presence of the owner, it is one of the few forms where it is acceptable to have hand-written information. Care must be taken so that the form is legible. The name of each person signing an RE 95 should be printed legibly below his/her signature.

5. 6.

E.

Information Required on the RE 95 1. 2. 3. 4. Original signatures from the ODOT agent, the fee owner and the tenant-owner, or other third party interest owner, of the improvement taken. Clarification from the fee owner and tenant-owner, or other third party interest owner, regarding which of them owns the improvement. Classification of the improvement into real property or personal property. When the owner or occupant of the property refuses to sign the RE 95: a. The Districts agent shall complete the RE 95 to the best of his/her ability and must insert sufficiently detailed comments on the second page of the RE 95 form to enable other readers of the RE 95 to understand fully the reasons why the owner or occupant refused to sign the RE 95. The District agent must sign the RE 95 and insert the date on which the agent physically inspected the property.
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b.

F.

Updating the RE 95 1. If the RE 95 needs to be updated, a new RE 95 is to be created with new signatures and dates. If there is only a minor change, the change can be added to the original RE 95 and all parties are then required to place their initials and the date of their initialing adjacent to the change.

5202.02 Plan Changes A. When the owner requests the highway plan to be changed: 1. 2. The District will consider the request and make a decision regarding the change. Should the District decide to amend the plan based on the owners request, the change is made on behalf of the owner for the benefit of the owner and the District is not obligated to compensate the owner due to issues arising from the plan change. When the owner requests a plan change during the negotiation process, the negotiator shall use form RE 76 (Agreement For Construction Not In Accordance With Plan) to document the change.

3.

B.

When the District makes a change due to a required correction: 1. 2. The District Office must review the plan change and determine if the change affects compensation. Negotiations with an owner are to continue when it is absolutely obvious the change does not affect compensation. Depending on the extent of the plan change, the negotiator may need to advise the property owner of the plan change and that the amount offered has not changed. When a plan change requires FMVE to be reestablished, the District must make another offer, subsequent to the original offer, to the owner. See Section 5201.04 of this Real Estate Manual for more information about the subsequent offers. a. A subsequent offer to an owner due to a plan change shall be made on the Updated Good Faith Offer form.

3.

5202.03 Purchase of Improvements A. The District must determine if an improvement within the area to be acquired for the
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project is real or personal property and, if determined as real property, must purchase the improvement. The purchase of the real property improvement must be documented in the acquisition file. The instrument executed by the owner to convey the property to ODOT does not document the purchase of the real property improvement. There are several forms that may be used to document the purchase of an improvement within a take area. Which forms to use depends on who owns the improvement, the type of take (easement or fee), and the extent or nature of the improvement. The forms are: 1. 2. B. Contract For Sale and Purchase of Real Property / RE 220-B or RE 220-L Bill of Sale / RE 69 AC or RE 69 CC

The procedure to acquire an improvement classified as real property is as follows: 1. 2. There must be an RE 95 in the acquisition file prior to the negotiator starting the negotiation process. If the improvement taken is owned by the fee owner of the property and at least one of the parcels is a WD or WL the Contract For Sale and Purchase of Real Property is adequate to document the purchase of the improvement. Without regard to whether the take is a fee or easement parcel, if the improvement taken is owned by someone other than the fee owner, or if a Contract for Sale and Purchase of Real Property will not be used (usually when none of the parcels is a WD or WL) and the improvement is owned by the fee owner, then: a. b. c. Use the Bill of Sale to document the purchase of the improvement. If the owner of the improvement is not the fee owner, use the RE 69 CC Bill of Sale. If the owner of the improvement is the fee owner and the improvement is located on an easement parcel, use the RE 69 AC Bill of Sale. Note: If a Contract for Sale and Purchase of Real Property is used for the acquisition, the Contract adequately documents the purchase of the fee owners interest in the improvement, thus an RE 69 AC is not required. d. A Bill of Sale is not recorded, but must be part of the acquisition file.

3.

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4.

When the District agrees that an owner may retain an improvement located in a take area, standard procedure requires the negotiator to document how the improvement was first purchased by ODOT before allowing the owner to buyback the improvement at its salvage value. See Owner Retention in the 5300 section of this Manual for more detail.

5202.04 Recognizing Tenants A. The District Office must recognize any tenant having an interest in the property to be acquired and must determine whether the tenant is entitled to receive any portion of the FMVE. This is based on an Ohio Supreme Court decision that a leasehold interest is an owner as defined in Section 163.01(E) of the Ohio Revised Code: Owner includes an individual, partnership, association, or corporation having any estate, title or interest in any real property sought to be appropriated. 1. A tenant may own an improvement that is taken. If the improvement is determined to be real property, it is known as a tenant-owned improvement and there will be a separate negotiation with the tenant in these circumstances as required under 49 CFR 24.105. A tenant may not own any improvement, but by virtue of the lease may have a contractual right to share in the compensation. In this instance, a copy of the lease/rental contract should be obtained from the owner during either the appraisal process or the negotiation process. The negotiator must review the lease carefully to determine if the lease contains an eminent domain clause or other terms dealing with eminent domain or condemnation issues. The eminent domain clause or other provisions may specify the tenants right to receive part of the compensation if the property is acquired/ appropriated. a. b. A tenant with a long term lease may have a reasonable right to share in the offer of just compensation. A tenant having a contract rent that is significantly below market rent and having a long duration remaining on the lease agreement may have a reasonable right to share in the offer of just compensation.

2.

3.

If the tenant does not own any of the improvements located on the leased real estate that is to be acquired/taken, and the District Office has determined the tenant is to share in compensation, as a general rule there will be only one offer made for the entire FMVE amount. That offer will identify the owner of the property to be acquired as fee owner and the tenant. If the fee and tenant owners cannot agree on the price or terms, then the entire property is to be appropriated.
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4.

When valuation issues are simplistic, compensation is low and it is clear there are no damages to the property; the District Office has the discretion to negotiate with only the fee owner. If the acquisition/taking can negatively impact the property, then all leases must be identified and dealt with, whether or not the lease is recorded. With due consideration of all such leases, the District shall determine whether the offer will be made to the fee owner or to the fee owner and the tenant(s). Issues involving the rights of fee owner(s) and tenant(s) may be complicated. The District should not hesitate to seek guidance from AGO, especially when dealing with multiple tenants or occupants (e.g. apartment complexes, condominium complexes and shopping centers).

5.

6.

5202.05 Release of Liens and Encumbrances A. When the District Office acquires real property from an owner, it purchases the property free and clear of all liens and encumbrances. 1. 2. The Title Report describes all liens and encumbrances of record against the property to be acquired for the highway project. During the initial negotiation visit with the owner, the negotiator shall verify the accuracy of the information on the Title Report and if there are any liens or other encumbrances not mentioned in the Title Report. The negotiator shall obtain assurances from the owner that the owner is willing to secure releases of liens/ mortgages/ leases/ encumbrances. When a release of a lien/ mortgage/lease/encumbrance that affects the validity of the owners title to the property cannot be obtained, an appropriation may need to be filed. The District Office shall seek direction from AGO regarding the validity of the title acquired for the project and if the property should be purchased subject to the lien or if the property should be appropriated.

3.

5202.06 Mortgage Releases A. Except in those instances where mortgage releases are not required pursuant to Section B of these procedures, mortgage releases are required for any property right acquired by ODOT that is encumbered by any mortgage.

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1.

A mortgage holder (mortgagee) is a part of the ownership of the property to be acquired / appropriated and must provide a release of the mortgage lien as part of the process of ODOT taking title to the property. Most mortgages, conventional or private contain an eminent domain/condemnation clause and/or an acceleration clause requiring the proceeds of the acquisition/appropriation to be applied to the unpaid balance of the mortgage. If the proceeds are not applied to the unpaid balance, the mortgage holder may be able to declare the entire unpaid balance as due and payable. In exchange for providing a mortgage release, a mortgage holder, at its election, may require all or some portion of the compensation to be paid by ODOT to be applied against the unpaid balance of the mortgage. A complete and general release (satisfaction) of a mortgage is required anytime the parcel to be acquired is a total take of the owners property (i.e., no residue) that is encumbered by the mortgage. When only a part of the property is acquired, a partial release of mortgage shall be obtained from the mortgagee. When a mortgage release is needed and cannot be secured, the parcel is to be appropriated.

2.

3.

4. B.

Exceptions to the procedure of requiring a mortgage release 1. At the discretion of the District Office or an official from the LPA for local projects, a mortgage release is not required when FMVE has been established at an amount that is $5,000 or less. However, this exception cannot be used when the real property is mortgaged and there is an improvement or fixture in the acquired area (see Section 5301.61 of the Ohio Revised Code that controls the removal of fixtures or improvements from mortgaged property). For the purposes of these procedures, improvement of fixture shall mean building or structure. When a District Office elects to not secure a mortgage release, the negotiator must inform the property owner to review their loan and mortgage documents concerning possible requirements to apply proceeds from a public acquisition to the outstanding loan balance, or to contact their lender about their responsibilities and obligations when part of the property is acquired for public use. The NIAGFO references this procedure and the negotiator shall explain this information during presentation of the offer to the owner.

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2.

There is an exception for temporary construction easements, but only when the temporary easement does not create permanent, negative affect on the residue (e.g. removal of a structure).

C. D.

Every mortgage release must be recorded and, the recorded release shall be a part of the acquisition file documenting the acquisition. General steps to secure a mortgage release 1. The process to secure a mortgage release can be time consuming requiring much persistence from those managing the acquisition phase of the project. Therefore, the process to secure a release needs to start as soon as possible. To ensure adequate time to obtain releases from lenders and to record these releases, it may be prudent to start the process to secure mortgage releases immediately after the initial offer of compensation. a. The negotiator should verify the existence of any mortgage with the owner, should explain to the owner the need to secure a release and should obtain contact information about the lender from the owner. The negotiator (or the owner) may then contact the lender explaining the property is being acquired for a transportation project and determine the lenders process for providing a release of mortgage.

2.

The negotiator should work with the owner to secure a mortgage release. The first step in the process to secure a mortgage release is to telephone the mortgage holder to determine the mortgage holders requirements for the release. a. Often, a mortgage holder will not give information to the negotiator without permission from the property owner. It is recommended the negotiator have the owner sign ODOT form RE 100 (Authorization to Obtain Partial Mortgage Release). The RE 100 is sent by the negotiator to the mortgage holder. Once the mortgage holder has received the RE 100, the mortgage holder may provide to the negotiator the information needed to obtain a release. The person securing the mortgage release should use ODOTs release form, either the RE 240 or RE 241. The lender may use their form and this is acceptable if the District Office reviews the form to ensure it releases the property described in the Exhibit(s) A from the mortgage. i. The RE 240 is the Release of Part of Premises From Lien of Mortgage. This form is used for all types of mortgages, but not land contracts. The Exhibit A (i.e., the RX form with the legal description of the take area) is attached to the release form.
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b.

ii.

RE 241 is the Release of Part of Premises From Land Contract and is used for land contracts. The Exhibit A (i.e., the RX form with the legal description of the take area) is attached to the release form.

c.

Often, a mortgage holder will request ODOT to provide copies of its right of way plans, appraisal report, instrument and legal description, and to advise when ODOT anticipates closing the acquisition. Mortgage holders may charge a processing or service fee for a mortgage release. The service charge for a mortgage release shall be paid by ODOT as an incidental expense as required by 49 CFR 24.106; however, ODOT may elect to not pay excessive fees charged by the mortgage holder. When a mortgagor holder demands an excessive fee for a release of mortgage: i. The negotiator should bypass the telephone clerk and negotiate with a higher level manager having decision-making authority at the lending institution. The negotiator shall attempt to negotiate with the mortgage holder, explaining that ODOT will pay recording fees and will do most of the work associated with the release. If the mortgage holder refuses to reduce its fee to a level ODOT deems reasonable, the negotiator shall inform the District Office who may need to seek assistance from AGO.

d.

ii.

iii.

e.

If the service fee insisted on by the mortgage holder is excessive, or the mortgage holder makes other demands ODOT deems to be unreasonable, or the mortgage holder fails to provide adequate information in a reasonable period of time, then ODOT may need to appropriate the property. Once the mortgage holder states the amount of money it wants from the compensation to be paid for the property, the negotiator shall communicate this amount to the owner. If the owner and the mortgage holder cannot agree on the amount each is to receive, the property shall be appropriated. Unless the parcel has to be appropriated, it will move forward in the acquisition process and a closing will be scheduled.
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f.

g.

3.

Paying the Mortgage holder a. If the owner and mortgage holder agree on the allocation of the compensation to be paid for the property, the negotiator shall obtain two warrants and make separate payments to the owner and mortgage holder. i. The negotiator/closing agent must be aware that no payment can be made to any mortgage holder unless there is a signed W-9 and Vendor Information Change form (VIF) on file with ODOT.

b.

The process described in the above-referenced paragraph (C)(1)(a)may not always be possible. Another option is to use a local bank to disburse funds, especially if the mortgage is held by the local bank. The negotiator/closing agent may deposit the states warrant for the full amount of compensation in the bank. The bank may deduct the amount required for it to execute a release of mortgage and can issue a bank check to the owner for the amount of the owners share of compensation. If the bank holding the mortgage is not local and a local bank will not act as an escrow agent, the negotiator/closing agent may use a title company. The process is the same as discussed in subsection 3.b above. i. A title company may charge a fee for performing this service. If the fee is reasonable, ODOT may pay the fee as an Incidental Expense as permitted in 49 CFR 24.106.

c.

d.

Once the mortgage holder is paid, the negotiator/closing agent must ensure the mortgage release is secured, recorded and a copy of the recorded mortgage release must be maintained in the acquisition file.

5202.07 Taxes For information pertaining to real estate taxes, reference the 5600 section of the Real Estate Manual. 5202.08 Real Estate Acquisition and Utility Connections A. Real estate acquisition issues may arise if a highway project impacts a utility that is outside of existing right of way. The acquisition may sever the utility connection to the dwelling or structure and, the reconnection may not be part of the construction project, therefore, the FMVE will need to consider reconnection costs.

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Utilities are so varied that no hard and fast procedures can be established. If an unusual situation arises, the negotiator, appraiser and project manager need to identify issues in the plans, talk with the District Utility Coordinator as well as the Utilities Section, Office of Real Estate, Central Office. More information concerning utilities is found in Section 8200 of ODOTs Real Estate Manual. B. Utilities generally include, but are not limited to, water, electric, gas, telephone/ communications and sewerage. Generally, utilities located within the existing right of way are not reimbursed for relocation. Conversely, utilities located outside the existing right of way, but within the take area are reimbursed for relocation as part of the construction of the project. The construction plans should identify and detail the issues relevant to utilities located within the existing highway or the proposed right of way. Utility relocation costs associated with the acquisition process are used to determine if the cost of re-establishing utility service to an impacted owner would an expense of the owner. ODOTs Utility Section is responsible for paying eligible relocation costs for transmission and distribution utility facilities. Paying the costs associated with reconnecting utility service facilities to a property is handled through the acquisition process. It is important to contact the District Utility Coordinator early in the acquisition process to assist with making this determination. EXAMPLE: A water distribution line is located within the take area and the cost to relocate this line is a project cost. However, the distribution line is attached to old service lines that lead directly to several residences. The service lines contain lead solder, are located outside the take area and environmental regulations will not allow reconnection to the distribution line until the old, lead soldered service lines are replaced. The cost of replacing the old service lines is to be addressed in the appraisal report and the owner is compensated as part of the FMVE.

C.

D.

5202.09 Negotiating With a Party Representing the Owner An owner may nominate another to represent them in negotiations. Before a negotiator deals with any owner representative, the negotiator must request the owner provide written notice to the negotiator identifying the owners representative as their nominee in these negotiations. If the representative is the owners attorney, the negotiator may accept a letter from the attorney stating the attorney is representing the owner. The negotiator should also verify this information, in writing if possible, with the owner.

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5202.10 Minors and Incompetents When it is apparent the owner, or one of the owners, is either a minor or incompetent, the AGO shall be contacted for consultation and guidance in acquiring the property. The costs associated with acquiring property from a minor or incompetent, including the cost of having a guardian appointed and obtaining the courts consent to sell the property is to be paid by the agency. This procedure complies with 49 CFR 24.106(b). The Transportation Section of the Attorney Generals Office is to assist in determining what costs are usual, reasonable and actually incurred for this process. 5202.11 Conflict of Interest A. The regulations governing conflict of interest when acquiring rights of way are 49 CFR 24.102(n) and Ohio Administrative Code, Section 5501:2-5-06 (B)(14). The requirement of these regulations is implemented into procedure as follows: 1. Persons functioning as negotiators may not supervise nor formally evaluate the performance of the appraisal or appraisal review work done by any appraiser or review appraiser. The appraiser, review appraiser, or preparer of a value analysis who is preparing the appraisal, appraisal review or Value Analysis for a particular parcel may be authorized by the agency to act as the negotiator for that particular parcel, but only if the offer to acquire the property is $10,000 or less. a. If the person who prepared the appraisal, appraisal review or Value Analysis must be authorized or approved by ODOT to perform the negotiation function. FMVE must be $10,000 or less. The $10,000 limit relates to only the established FMVE. It is not a conflict of interest to acquire a parcel by administrative settlement for more than $10,000 provided the established FMVE was $10,000 or less.

2.

b. c.

B.

Another form of conflict of interest may exist when a government employee has an interest in the property to be acquired for the highway project. This category of conflict is regulated by 23 CFR, Part 1, Section 1.33 and Section 2921.42(A)(1) of the Ohio Revised Code. See Section 5322 of ODOTs Real Estate Manual.

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5202.12 Estates Estates do not have the authority to warrant title which is contrary to the ODOT instrument requiring an owner to warrant title. Properties owned by estates are usually acquired by appropriation.

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