Transcript Realty and Personalty

Don’t take it Personal, it could
be Real.
Why do we need to know the
difference?
Presenters
Richard Pino, PLRP, LLC
Robert Merryman,
O. R. Colan Associates Inc.
• The story from the appraisal side
• The story from the relocation side
Darryl Root
Overland, Pacific, Cutler Inc., Moderator
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
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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
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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
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Real Estate
• Physical land and appurtenances attached to the land, e.g.,
structures.
• An identified parcel or tract of land, including improvements, if any.
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Real Estate
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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.
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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.
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The Uniform Act
49 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]
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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
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PERSONAL PROPERTY
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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]
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HOW ARE THEY HANDLED
Real Estate
Personal Property
• We buy real estate
• We move personal property
The Uniform Act
49 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]
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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
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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
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How do we value real estate
• The three classic approaches to value:
 Comparable Sales
 Income
 Cost
• Contributory Value of specific items
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How do we move personal property
• Residential - actual cost and fixed options
• Non-residential- actual cost; with options for:
• Direct loss
• Substitution
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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 1
John is a tenant in an industrial building
He installed an overhead crane system
He has the right and/or obligation to remove this improvement when
he vacates
The owner agrees that John owns the crane
What are the options for the agency?
What should John do?
Case 2
Sally loves to cook and has an oversized commercial stove in her home
It is custom fitted between cabinets in her kitchen
What are the options for the agency?
What should Sally do?
Case 3
An 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 4
A 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 5
Owner occupant of manufacturing/distribution facility.
Best practices separating real and personal property by touring
together
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Case 6
Church - Highest & Best Use is Church
Comparable sales contained built-in organs
Is built-in church organ personal property?
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Case 7
Special ventilation system for tenant’s use installed by property owner.
Is it real or is it personal?
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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
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