Don ’ t take it Personal, it could be Real

Don’t take it Personal, it could be Real.

Why do we need to know the difference?

Presenters

Richard Pino, PLRP, LLC

• The story from the appraisal side

Robert Merryman, O. R. Colan Associates Inc.

• The story from the relocation side

Darryl Root Overland, Pacific, Cutler Inc., Moderator

Realty and PersonaltyRealty and Personalty

What is the problem?

We need to precisely determine what is being acquired and what is being moved.

• Reasonably clear for residential property• Not so clear for non-residential property


What Do We Need To Do

• Determine what is real estate and what is personal property

• Value the real estate

• Inventory the personal property

• Move or purchase the personal property


How do we know the difference

• How is an item attached• Does the removal of an item damage the item or building• What was the intent of the parties• Lease


Real Estate

• Physical land and appurtenances attached to the land, e.g., structures.

• An identified parcel or tract of land, including improvements, if any.


Real Estate


Real Property

• All interests, benefits and rights inherent in the ownership of physical real estate.

• The bundle of rights with which the ownership of the real estate is endowed.


Real Estate / Real Property

In most states, the two terms are considered interchangeable and both include the physical property along with the rights and interests of ownership.


The Uniform Act49 CFR Section 24.102 (e)(3)

Requires that the owner or tenant be given a written statement of the basis for the offer of just compensation which includes:

“An identification of buildings, structures and other improvements (including removable building equipment and

trade fixtures) which are included … [and] … any other separately held ownership interest in the property e.g., a

tenant-owned improvement, and indicate that such interest is not covered by this offer”. [emphasis added]


Personal Property

• Identifiable portable and tangible objects that are considered by the general public to be “personal”

• All property that is not classified as real estate

• Includes movable items that are not permanently affixed to, and part of, the real estate


PERSONAL PROPERTY


The Uniform Act

49 CFR Section 24.103 (a)(1)

Identification of realty and personalty in the appraisal

“The appraisal report should identify the items considered in the appraisal to be real property, as well as those identified as

personal property” [emphasis added]


HOW ARE THEY HANDLED

Real Estate• We buy real estate

Personal Property • We move personal property


The Uniform Act49 CFR Section 24.205(c)(2)(i)(C)

Addresses services to be provided and states:

“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.” [emphasis added]


Determining classification

• Information is needed by the appraiser, negotiator, relocation personnel and the owner

• Best Practice: Develop a “Realty/Personalty Report”

• Produced prior to completion of the appraisal• Input from property owner, tenant, appraiser and relocation

personnel• Copy provided to all parties


Our realty/personalty reports shows:• The item name, location, any other reference• Who (owner, tenant, third party) owns the item or notes that

ownership is in dispute• Classification of item- realty or personalty


How do we value real estate

• The three classic approaches to value: Comparable Sales Income Cost

• Contributory Value of specific items


How do we move personal property

• Residential - actual cost and fixed options

• Non-residential- actual cost; with options for:• Direct loss• Substitution

The strange case of tenant owned improvements

• Considered to be real property if owned by the owner of the real property

• Valued as the greater of contributory value or salvage value• Tenant must have right or obligation to remove; owner must waive

interest in item

Some Examples

Case 1John is a tenant in an industrial buildingHe installed an overhead crane system He has the right and/or obligation to remove this improvement when he vacatesThe owner agrees that John owns the crane

What are the options for the agency?What should John do?

Case 2Sally loves to cook and has an oversized commercial stove in her homeIt is custom fitted between cabinets in her kitchen

What are the options for the agency?What should Sally do?

Case 3An antique chandelier has been in the Smith family for 150 years. They moved it from their prior home and they inform you that they would never leave it behind when their home is sold to the Agency.

What are the options for the agency?What should the Smiths do?

Case 4A display pond in front of a “pond store” was called personal property. The Agency made that determination since the pond was part of the store inventory and used as a display.

What are the options for the agency?What should the business owner do?


Case 5Owner occupant of manufacturing/distribution facility. Best practices separating real and personal property by touring together


Case 6Church - Highest & Best Use is ChurchComparable sales contained built-in organs Is built-in church organ personal property?


Case 7

Special ventilation system for tenant’s use installed by property owner.Is it real or is it personal?


The law is not precise regarding the distinction between personal and real property.

In general, an item is considered to be real property if:• A typical buyer of the real property would consider the item to be part of the

real property; or

• The item cannot be removed without injuring the structural integrity of the building, structure or other permanent improvement

• Always check your state law

Documents

Don ’ t take it Personal, it could be Real