Grant Administration: Section 10.5 Non-Residential Relocation under URADisplaced businesses (including non-profit organizations and farm owners) are entitled to advisory services and relocation assistance under the URA. 49 CR 24.2(a)(4) A business is defined for this purpose as:
- A for-profit business, engaged in any lawful activity involving purchase, sale of goods or services, manufacturing, processing, marketing, rental of property, or outdoor advertising when the display must be moved;
- To qualify for assistance, the business must meet the definition of a “displaced person” discussed earlier in this chapter. It must move permanently as a direct result of an assisted project involving acquisition, rehabilitation, or demolition.Handbook 1378,Chapter 1, Paragraphs 1-4
The URA provides coverage for business owners (whether they are on-site or not), for owner/occupants of a business, and for tenants operating a business in rented space.
Business versus Residential Assistance
URA coverage for moving expenses is similar for residential and non-residential displacees. Qualified businesses may choose between a fixed payment or actual moving expense. The fixed payment is based on a formula, rather than a schedule. Handbook 1378, Chapter 4, Paragraphs 4-2 & 4-5
A displaced business is eligible to choose a fixed payment if the grantee determines that:
- The business either (a) discontinues operations, or (b) it relocates but is likely to incur a substantial loss of its existing patronage (The URA presumes this unless there is a preponderance of evidence to the contrary.); and Handbook 1378,Chapter 4, Paragraph 4-3
- The business is not part of a commercial enterprise having more than three other entities which are not being displaced by the grantee, and which are under the same ownership and engaged in the same or similar business activities; and
- The business contributed materially to the income of the displaced person; and
- The business operation at the displacement property is not solely for the rental of that real property to another property management company.
- Actual moving expenses provide for reimbursement of limited reestablishment expenses.
- There are differences between coverage for residential and non-residential displaces.
- A 90-day Notice to Move may be issued without a referral to a comparable site.
- Businesses are entitled to temporary moving expenses; however, displaced businesses are not eligible for 104(d) assistance.
Owners or tenants who have paid for improvements will be compensated for their real property under acquisition rules. A complete, thorough appraisal is essential to making these decisions.
Non-residential moves are often complex. Grantees must interview business owners to determine their relocation needs and preferences. Displaced businesses are entitled to the following:
- Information about the upcoming project and the earliest date they will have to vacate the property;
- A complete explanation of their eligibility for relocation benefits and assistance in understanding their best alternatives;
- Assistance in following the required procedures to receive payments;
- Current information on the availability and cost to purchase or rent suitable replacement locations;
- Technical assistance, including referrals, to help the business obtain an alternative location and become reestablished;
- Referrals for assistance from state or federal programs, such as those provided by the Small Business Administration, that may help the business reestablish, and help in applying for funds; and
- Assistance in completing relocation claim forms.
Notices and Inspections
The grantee must provide a business to be displaced with written information about their rights, and provide them with a General Information Notice (GIN) tailored to the situation when a Notice of Interest is issued to the property owner. See Attachment 10-21: Sample GIN Non-Residential Tenant for a sample GIN to use for businesses (non-residential tenants). Handbook 1378, Chapter 2, Paragraph 2-3 B.
The General Information Notice should include:
- An explanation that a project has been proposed and caution the business not to move until they receive a Notice of Eligibility for Relocation Assistance. (See Attachment 10-22: Notice of Eligibility for Business Relocation Assistance for a sample of this notice.) Also see Handbook 1378, Chapter 7, Paragraph 7-7.
- A general description of relocation assistance payments they could receive, the eligibility requirements for these payments, and the procedures involved. The HUD Information Booklet, Relocation Assistance to Displaced Businesses, Non-profit Organizations, and Farms (HUD 1043-CPD) includes this general information and should be given to the business. See Attachment 10-23: Relocation Assistance to Displaced Businesses, Non-Profit Organizations and Farms for a copy of this HUD information booklet for businesses.
- Information that they will receive reasonable relocation advisory services to help locate a replacement site, including help to complete claim forms;
- Information that they will not be required to move without at least 90 days’ advance written notice; and
- A description of the appeal process available to businesses.
If a business must be displaced, a tailored Notice of Relocation Eligibility (NOE) must be provided as soon as possible after the ION (see Attachment 9-38 for a sample notice). This Notice should:
- Inform the business of the effective date of their eligibility.
- Describe the assistance available and procedures.
- If necessary, a 90-day Notice to Move may be sent after the initiation of negotiations.
The business must be told as soon as possible that they are required to:
- Allow inspections of both the current and replacement sites by the grantee’s representatives, under reasonable terms and conditions; Handbook 1378, Chapter 4, Paragraphs 4-7
- Keep the grantee informed of their plans and schedules;
- Notify the grantee of the date and time they plan to move (unless this requirement is waived); and
- Provide the grantee with a list of the property to be moved or sold.
Grantees need to be aware of when a property will be vacated. In many situations, the grantee must be on-site during a business move to provide technical assistance and represent the grantee’s interests. In accordance with state law, any property not sold, traded or moved by the business becomes the property of the grantee. To be certain that the move takes place at a reasonable cost, an inventory containing a detailed itemization of personal property to be moved should be prepared and provided to the grantee. The grantee should verify this inventory and use it as a basis of comparison with bids or estimates and eventual requests for payment.
Reimbursement of Actual Moving Expenses
Any displaced business is eligible for reimbursement of reasonable, necessary actual moving expenses. Handbook 1378, Chapter 4, Paragraphs 4-2 and 4-3
- Only businesses that choose actual moving expenses—versus a fixed payment—are eligible for a reestablishment expense payment.
- Grantees should not place additional hardships on businesses, but they can limit the amount of payment for actual moving expenses based on a least-cost approach.
- Businesses may choose to use the services of a professional mover or perform a self-move. Eligible expenses include:
– Transportation of personal property;
– Packing, crating, uncrating, unpacking of personal property;
– Disconnecting, dismantling, removing, reassembling, and reinstalling machinery, equipment, and personal property;
– Storage of personal property;
– Insurance for replacement value of personal property in connection with the move and/or storage;
– Any license, permit or certification required at the new location;
– Professional services to plan the move, move the personal property or install the personal property at the new location;Handbook 1378,Chapter 4, Paragraph 4-3– Provision of utility service from the Right of Way to the business;
– Professional services performed prior to the purchase or lease of a replacement site to determine its suitability for the displaced person’s business operation including but not limited to, soil testing, feasibility and marketing studies (excluding any fees or commissions directly related to the purchase or lease of such site).
– Impact fees or one-time heavy utility use assessments;
– Re-lettering signs and replacing existing stationery that are obsolete due to the displacement; and
– Reasonable costs incurred while attempting to sell items that will not be relocated.
A business is eligible for either a “Direct Loss” or “Substitute Equipment” payment if the displacee will leave or replace personal property. A business can accept either of these (but not both) for an item.
A “Direct Loss” payment can be made for personal property that will not be moved. Payments can also be made as a result of discontinuing the business of the non-profit or farm. 49 CFR 24.301(g)(14)
The business must make a good faith effort to sell the personal property (unless the grantee determines it is unnecessary) in order to be eligible for a Direct Loss payment. A Direct Loss payment is based on the lesser of:
- The fair market value of the item for continued use at the displacement site, minus the proceeds from the sale, or
- The estimated cost to move the item, with no allowance for the following: storage, or reconnecting a piece of equipment if the equipment is in storage or not being used at the acquired site. If the business is discontinuing, the cost to move is based on a moving distance of 50 miles.
A “Substitute Equipment” payment can be made when an item used by the business, non-profit, or farm is left in place, but is promptly replaced with a substitute item that performs a comparable function at the new site. A Substitute Equipment payment is based on the lesser of:
- The cost of the substitute item, including installation costs at the replacement site, minus any proceeds from the sale or trade-in of the replaced item; or
- The estimated cost to move and reinstall the item, but with no allowance for storage.
Certain costs incurred while searching for a replacement location are also eligible. Businesses are entitled to reimbursement up to $2,500. Grantees can pay more than this if they believe it is justified. Costs may include reasonable levels of such items as:
- Meals and lodging away from home;
- Time spent while searching, based on a reasonable pay salary or earnings; and
- Fees paid to a real estate agent or broker while searching for the site. (Note that commissions related to the purchase are not eligible costs.)
The grantee may pay other moving and related expenses that the grantee determines are reasonable and necessary and are not listed as ineligible. Payment of other reasonable and necessary expenses may be limited by the grantee to the amount determined to be least costly without causing the business undue hardship.
There may be instances where a person is required to move personal property from real property but is not required to move from a dwelling (including a mobile home), business, farm or non-profit organization. Eligible expenses for moving the personal property are listed above. 49 CFR 24.301 (e)
Businesses may have personal property that is considered low value, high bulk such as stock piled sand, gravel, minerals, metals or other similar items in stock. When the personal property to be moved is of low value and high bulk, and the cost of moving the property would be disproportionate to its value in the judgment of the grantee, the allowable moving cost payment shall not exceed the lesser of:
- The amount which would be received if the property were sold at the site; or
- The replacement cost of a comparable quantity delivered to the new businesses location.
See Attachment 10-24: Claim for Actual Reasonable Moving and Related Expenses – Non-Residential for a sample claim form for moving and related expenses for businesses.
Only certain small businesses are eligible for reestablishment expenses, up to $25,000. “Small businesses” for this purpose are defined as those with at least one, and no more than 500 people, working at the project site. Businesses displaced from a site occupied only by outdoor advertising signs, displays, or devices are not eligible for a reestablishment expense payment.
Eligible items included in the $25,000 maximum figure are:
- Repairs or improvements to the replacement site, as required by codes, or ordinances;
- Modifications to the replacement property to accommodate the business;
- Modifications to structures on the replacement property to make it suitable to conduct business;
- Construction and installation of exterior advertising signs;
- Redecoration or replacement at the replacement site of soiled or worn surfaces, such as paint, paneling, or carpeting;
- Other licenses, fees, and permits not otherwise allowed as actual moving expenses;
- Feasibility surveys, soil testing, market studies;
- Advertisement of the replacement location;
- Estimated increased costs of operation for the first two years at the replacement site for such items as:
– Lease or rental charges,
– Utility charges,
– Personal or property taxes, and
– Insurance premiums.
- Other reestablishment expenses as determined by the grantee to be essential to reestablishment.
- See Handbook 1378,Chapter 4, Paragraph 4-6 and 4-7 & 49 CFR 24.304 & 42 U.S.C. 4622(a)(4)
The following are ineligible for payment as an actual moving expense, as a reestablishment expense, or as an “other reasonable and necessary expense”:
- Loss of goodwill;
- Loss of profits;
- Personal injury;
- Interest on a loan to cover any costs of moving or reestablishment expense;
- Any legal fees or other costs for preparing a claim for a relocation payment, or for representing the claimant before the grantee;
- The cost of moving any structure or other real property improvement in which the business reserved ownership;
- Costs for storage of personal property on real property already owned or leased by the business before the initiation of negotiations;
- Costs of physical changes to the replacement site above and beyond that required to move and reestablish the business;
- The purchase of capital assets, manufactured materials, production supplies, or product inventory, except as permitted under “moving and related costs;” or
- Interior and exterior finishes solely for aesthetic purposes, except for the redecoration or replacement of soiled or worn surfaces described in “reestablishment expenses.”
- See49 CFR 24.301(h) & 49 CFR 24.304(b)
A displaced business may select a fixed payment instead of actual moving expenses (which include reestablishment expenses) if the grantee determines that the displacee meets the following eligibility criteria: Handbook 1378, Chapter 4, Paragraph 4-7 & 49 CFR 24.305
- The nature of the business cannot solely be for the purpose of renting the site/property to others.
- The business discontinues operations or it will lose a substantial portion of its business due to the move. (The latest regulations state that a business is presumed to meet this test unless the grantee can demonstrate it is not “location sensitive”.)
- The business is not part of an operation with more than three other entities that are not being acquired/displaced and:
– The ownership is the same as the displaced business, and
– The other locations are engaged in similar business activities.
- The business contributed materially to the income of the displaced business. The term “contributed materially” means that during the two taxable years prior to the taxable year in which the displacement occurred (or the grantee may select a more equitable period) the business or farm operation:
– Had average gross earnings of at least $5,000; or
– Had average net earnings of at least $1,000;
– Contributed at least 33 1/3 percent (one-third) of the owner’s or operator’s average annual gross income from all sources;
– If the grantee determines that the application of these criteria would cause an inequity or hardship, it may waive these criteria.
The amount of the fixed payment is based upon the average annual net earnings for a two-year period of a business or farm operation.
Net earnings include any compensation obtained from the business that is paid to the owner, the owner’s spouse, and dependents. Calculate net earnings before federal, state, and local income taxes for a two-year period. Divide this figure in half. The minimum payment is $1,000; the maximum payment is $40,000. Handbook 1378,Chapter 4, Paragraph 4-7 and 42 U.S.C. 4622(c)
The two-year period should be the two tax-years prior to the tax year in which the displacement is occurring, unless there is a more equitable period of time that should be used:
- If the business was not in operation for a full two-year period prior to the tax year in which it would be displaced, the net earnings should be based on the actual earnings to date and then projected to an annual rate.
- If a business has been in operation for a longer period of time, and a different two-year period of time is more equitable within reason, the fixed payment should be based on that time period.
- When income or profit has been adjusted on tax returns to reflect expenses or income not actually incurred in the base period, the amount should be adjusted accordingly.
- When two or more entities at the same location are actually one business, they are only entitled to one fixed payment. 49 CFR 24.305(b)
This determination should be based on:
– Shared equipment and premises, and
– Substantially identical or inter-related business functions and financial affairs that are co-mingled, and
– Entities that are identified to the public and their customers as one entity, and
– The same person or related persons own, control, or manage the entities.
Businesses must furnish grantees with sufficient documentation of income to justify their claim for a Fixed Payment. This might include:
- Income tax returns,
- Certified or audited financial statements,
- W-2 forms, and
- Other financial information accepted by the grantee.
The HUD form “Claim for Fixed Payment in Lieu of Payment for Actual Reasonable Moving and Related Expenses” (HUD Form 40056) should be used to claim the fixed payment. If another form is used, it should provide the same information in at least the same level of detail (see Attachment 10-25: Claim for Fixed Payment in Lieu of Actual Moving and Related Expenses – Nonresidential ).