Grant Administration: Section 9.2 Voluntary AcquisitionsSometimes there is confusion about what is actually considered “voluntary.” A common misconception is that “willing seller” or “amicable agreement” means a transaction is “voluntary.” This is not true under URA. The applicable requirements of the regulations at 49 CFR 24.101(b)(1)-(5) must be satisfied for a transaction to be considered voluntary.
Three requirements define voluntary acquisitions, all three must be in place for a voluntary acquisition to occur:
- No use of eminent domain power or threat to use it, even if the entity acquiring the property is a municipality with such authority.
- Projects in which no specific site or property needs to be acquired.
- All or substantially all of the property within the area will NOT be acquired within a specified time frame.
Below are several examples of projects or situations and how they meet or do not meet the requirements for a voluntary acquisition. Those that do not meet the requirement become involuntary acquisitions:
- No Eminent Domain Requirement:
Voluntary Example: Sub-recipient working on behalf of a municipality issues notice to owner of intent to acquire a property that includes a commitment in the notice that the municipality will not use eminent domain powers to acquire if the sub-recipient cannot reach an agreement on sale of property. The municipality may not change the decision on use of eminent domain even if no agreement is reached with the property owner.Handbook 1378, Chapter 5, Paragraph 5-3 AInvoluntary Example: Municipality issues notice to owner of intent to acquire a property but does not include a commitment to not invoke eminent domain. The owner is a willing seller and agrees to the offer of just compensation from the municipality.
- Not Site-Specific Requirement:
Voluntary Example: Municipality plans to build a new community center but will seek an alternative site if negotiations fail to result in an amicable agreement.
Involuntary Example: Non-profit that is expanding an existing community center by acquiring an adjacent property is a site-specific project.Involuntary Example: Non-profit conducts a feasibility study that shows only one site is possible/feasible to meet program requirements.
Voluntary Example: Non-profit conducts a feasibility study and multiple properties are possible, but one is most desirable due to financial reasons.
- Not Acquiring All Properties:
Involuntary Example: Municipality plans to acquire 15 of 20 homes in a redevelopment plan area for new housing construction.Voluntary Example: Non-profit is acquiring 15 homes as part of a city-wide rehab for resale program.
The steps of voluntary acquisitions and the URA requirements are generally described as follows:
1. Determine Property and Ownership: The first step should include a review every to determine property acquisition needs and identify any properties to be obtained. Activities such as street widening, water and sewer improvements, or sidewalk construction do not have an obvious property acquisition requirement but may necessitate acquiring easements. The grantee must provide proof of ownership for the easement, land, or building by conducting a title search of properties and easements to be acquired for the project. The grantee should obtain either an attorney title opinion letter, or purchase title insurance. Grantees should require owners to transfer the property with clear title.
2. Notify Owner: As soon as feasible, the grantee shall notify the owner in writing of the grantee’s interest in acquiring the real property or easement using federal funds. The grantee may want to add explanation of the process and steps prior to closing on the acquisition. The Voluntary Acquisition Notice (VAN) must state that if a mutually satisfactory agreement cannot be reached, the grantee will not buy or condemn the property for the same purpose.
Attachment 9-1: Voluntary Acquisition Notice (VAN) with Power of Eminent Domain contains a sample VAN letter for grantees with the power of eminent domain or sub-recipients acting on the behalf of such grantees. Attachment 9-2 VAN without Power of Eminent Domain contains a sample letter for sub-recipients that do not have the power of eminent domain and are not representing a municipality that does. Both sample letters in Attachment 9-1 and 9-2 include a proposed sales price. This provision may be removed when providing early notice before the determination of value has occurred.
The grantee should indicate that owner-occupants are not eligible for relocation benefits in the VAN and the acknowledgement form should be attached to the purchase offer.
While owner-occupants of a property acquired through voluntary acquisition are not eligible for relocation benefits, all tenants in legal occupancy (including non-residential occupants are protected by the URA and are eligible for relocation benefits under the URA. (See several sections below regarding relocation for more information.)
3. Determine Value: A formal appraisal is not required by the URA in voluntary acquisitions. However, the purchase may involve a private lender requiring an appraisal. While an appraisal for voluntary transactions is not required, grantees may still decide that an appraisal is necessary to support their determination of market value. Grantees must have some reasonable basis for their determination of market value.
If an appraisal is not obtained, someone with knowledge of the local real estate market must make this determination and document the file. That person should demonstrate knowledge through holding a real estate broker license recognized by the state of New Hampshire.
Additional explanation about appraisals and determining value is found in Section 9.7 Appraisals and Just Compensation later in this chapter.
4. Make Offer: Grantee shall make a written offer to the owner to acquire the property for the amount determined. There is nothing in the regulations to preclude negotiations resulting in agreements at, above, or even below the agency’s estimate of market value after the property owner has been so informed. Grantees cannot take any coercive action in order to reach agreement on the price to be paid for the property. Again, additional explanation is found in Section 9.7 Appraisals and Just Compensation later in this chapter. When making a written offer to the owner to acquire a property, the notice should include all the following:
- Amount offered which also must inform the property owner of what the grantee believes to be the market value of the property. The offer amount may be different than fair market value based on negotiations.
- Description, location, and identification of the real property and the interest in the real property to be acquired (e.g., fee simple, easement, etc.).
5. Complete Acquisition or Decide Not To Acquire: The grantee should discuss the offer to purchase the property, including the basis for the fair market value and offer made. The owner should be given a reasonable opportunity to consider the offer and present material that the owner believes is relevant to determining the value of the property and/or to suggest modifications in the proposed terms and conditions of the purchase.
Once the property owner has accepted the written offer, a purchase option agreement must be signed. No binding purchase agreements may be signed until the environmental review process has been completed. (See Chapter 5: Environmental Review)
If the seller refuses to accept the offer, the buyer/individual must look for another property to purchase.
Tip: Homebuyers assisted with CDBG funds to purchase a home fall under voluntary acquisition. Homebuyers must provide the requisite information to the sellers of homes to be purchased.
NOTE: Regardless of the form of acquisition used, it is strongly recommended that the grantee maintain a log of contacts with the owner in the acquisition file.