No. 38618 (Repeal and Reenact): Rule R23-22. General Procedures for Acquisition and Selling of Real Property

(Repeal and Reenact)

DAR File No.: 38618
Filed: 06/16/2014 01:17:20 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The reason for the repeal and reenactment is because the Division of Facilities Construction and Management (DFCM) is updating this rule to make it easier to understand and clearer to read. The changes to this rule will make the procedures for the acquisition and selling of real property better regulated and will enhance the regulations.

Summary of the rule or change:

There are no substantive changes in this rule, since DFCM is simply making the rule clearer and easier to understand.

State statutory or constitutional authorization for this rule:

• Section 63A-5-401
• Subsection 63A-5-103 (1)(e)
• Subsection 63A-5-103(1)(e)(iii)

Anticipated cost or savings to:

the state budget:

There will potentially be a cost savings to the state because more people will be involved in the disposition process of the state's surplus real property, and that will help the state receive the best value for its surplus real property, since this rule requires more oversight and control over the process.

local governments:

Local governments' budgets will not be affected, because this rule simply states the general procedures of DFCM for the acquisition and selling of real property.

small businesses:

Small businesses' budgets will not be affected, because this rule simply states the general procedures of DFCM for the acquisition and selling of real property.

persons other than small businesses, businesses, or local governmental entities:

No other person's budget will be affected, because this rule simply states the general procedures of DFCM for the acquisition and selling of real property.

Compliance costs for affected persons:

There are no compliance costs for any person, because this rule simply states the general procedures of DFCM for the acquisition and selling of real property.

Comments by the department head on the fiscal impact the rule may have on businesses:

There is no fiscal impact on businesses, because this rule simply states the general procedures of DFCM for the acquisition and selling of real property.

Kimberly Hood, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Administrative Services
Facilities Construction and Management
Room 4110 STATE OFFICE BLDG
450 N STATE ST
SALT LAKE CITY, UT 84114-1201

Direct questions regarding this rule to:

• Alan Bachman at the above address, by phone at 801-538-3105, by FAX at 801-538-3313, or by Internet E-mail at [e-mail]
• Cecilia Niederhauser at the above address, by phone at 801-538-3261, by FAX at 801-538-9694, or by Internet E-mail at [e-mail]
• Chiarina Bautista at the above address, by phone at 801-538-3240, by FAX at 801-538-3313, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2014

This rule may become effective on:

08/07/2014

Authorized by:

Joshua Haines, Director

RULE TEXT

R23. Administrative Services, Facilities Construction and Management.

[R23-22. General Procedures for Acquisition and Selling of Real Property.

R23-22-1. Purpose.

This rule defines the procedures of the Division of Facilities Construction and Management for acquisition and selling of real property.

 

R23-22-2. Authority.

(1) This rule is authorized under Subsection 63A-5-103(1)(e), which directs the Building Board to make rules necessary for the discharge of the duties of the Division of Facilities Construction and Management (hereinafter referred to as the "Division").

(2) This rule is also authorized and intended to implement the requirements of Section 63A-5-401, as well as Subsection 63A-5-103(1)(e)(iii).

 

R23-22-3. Policy.

It is the general policy of the Board that, except as otherwise allowed by the Utah Code, the Division shall buy, sell or exchange real property in accordance with this Rule to ensure that the value of the real property is congruent with the proposed price and other terms of the purchase, sale or exchange.

 

R23-22-4. Scope of This Rule.

This Rule shall apply to all purchases, sales, donations and exchanges of DFCM, as applicable in this Rule, except as otherwise allowed by the Utah Code. The requirements of this Rule shall also not apply to a contract or other written agreement prior to May 5, 2008; or to any contract or to any purchase, sale or exchange of real property where the value is determined to be less than $100,000 as estimated by DFCM.

 

R23-22-5. Requirements for Purchase or Exchanges of Real Property.

DFCM shall comply with the following in regard to the purchase or exchange of real property that is subject to this Rule:

(1) DFCM must find that all necessary approvals have been obtained from State and other applicable authorities. DFCM will assist other State agencies in obtaining these approvals when it is deemed by DFCM to be in the interest of the State.

(2) DFCM shall coordinate as required any necessary financing requirements through the State Building Ownership Authority, or other relevant bonding authority, as authorized by the Legislature.

(3) DFCM shall assist other State agencies in accordance with DFCM's governing statutes, through financial analysis and other appropriate means, in selecting the appropriate or particular real property to be purchased and/or exchanged.

(4) DFCM shall, in accordance with DFCM's governing statutes, negotiate, draft and execute the applicable Real Estate Contract with due consideration to the State agency's comments. The State agency may be required by DFCM to be a signatory to the Contract.

(5) DFCM shall obtain and review the following documents when such is determined by DFCM to be customary in the industry for the size and type of transaction or if required by another provision of this Rule or State law:

a. title insurance commitment;

b. an environmental assessment;

c. an engineering assessment;

d. a code review;

e. an appraisal;

f. an analysis of past maintenance and operational expenses, when available and relevant;

g. the situs, zoning and planning information;

h. an ALTA land survey;

i. an historic property assessment under Section 9-8-404; and

j. other requirements determined necessary by DFCM, this Rule or State law.

(6) DFCM shall review, approve and execute when in the interest of the State, closing documents as prepared by the selected title company.

(7) DFCM may use boiler plate documents approved as to form by the Utah Attorney General or shall consult with the Utah Attorney General regarding provisions of the sale or significant changes to the boiler plate documents approved as to the form by the Utah Attorney General.

(8) DFCM shall endeavor to monitor the distribution of closing documents.

 

R23-22-6. Additional Requirements Regarding R23-22-5(5).

DFCM shall comply with the provisions below. None of the provisions below shall restrict the Director from requiring or not requiring any of the following if in the Director's opinion such is advantageous to the State or if such is required or allowed by State law:

(1) Title insurance commitment. The following applies to real property that may become State property by purchase, donation or exchange: DFCM shall obtain an Owner's Policy of Title Insurance for real property valued by DFCM at $500,000 or above. For real property valued by DFCM at less than $500,000, DFCM shall obtain a title report and may obtain an Owner's Policy of Title Insurance if, in the judgment of DFCM, title insurance is advantageous to the State.

(2) Phase I Environmental Assessment or Greater. The following applies to real property that may become State property by purchase, donation or exchange: A Phase I or greater Environmental Assessment may be required by DFCM prior to a purchase or exchange of real property when the property considered to become State property has a use and/or occupancy history which in the opinion of DFCM indicates the possibility of environmental issues that would materially affect the DFCM's purchase of the property or the State agency's use of the property.

(3) Engineering Assessment. The following applies to real property that may become State property by purchase, donation or exchange: For all improved real property valued by DFCM at $250,000 or above, DFCM shall obtain an engineering assessment of mechanical systems and structural integrity of improvements located on the property. An engineering assessment may be waived by the DFCM Director if an engineering assessment has already been performed within the past 12 months or if the land is unimproved. The State may perform an engineering assessment for real property valued at less than $250,000 if, in the judgment of the Director, such an assessment is advantageous to the State.

(4) Code and Requirements Review. DFCM shall review the real property that may potentially become State property through purchase, donation or exchange to ascertain its suitability under all applicable codes and requirements, including any applicable provisions of State law.

(5) Appraisal. For real property that may potentially become State property through purchase or exchange, the State shall arrive at a fair market valuation of the property prior to purchase that is agreeable to the seller and the State. The fair market value determination used by DFCM in the negotiation shall be based upon an appraisal completed by an appraiser that specializes in the type of the subject real property and is a state-certified general appraiser under Section 61-2B-2 or by a State of Utah licensed MAI appraiser who also has such a certificate, except as follows:

(a) When this rule is not applicable under its scope;

(b) When State law otherwise provides that DFCM does not have to use fair market value; or

(c) When the Director has determined by a writing filed with DFCM, that the cost of obtaining the appraisal is not justified in the economic interest of the State of Utah.

(6) Past maintenance and operational expenses. DFCM shall endeavor to obtain, past maintenance and operational expense histories attached to any real property that may be acquired by the State, including real property that is acquired by purchase, donation or exchange, unless it is determined by the Director that the obtaining of such records is not justified in the economic interest of the State of Utah.

(7) Situs, zoning and planning information. DFCM shall endeavor to obtain preexisting situs, zoning and planning information regarding the real property that may be acquired by purchase, donation or exchange when required by State law, or if the Director determines that the obtaining of such information is advantageous to the State.

(8) ALTA land survey. For all real property acquired by DFCM through purchase, donation or exchange, and the property to become State property is valued by DFCM at $250,000 or above, DFCM shall obtain an ALTA/ACSM Land Title Survey, current revision, of the subject property. An ALTA survey shall not be required if an ALTA survey has already been performed within the past 12 months unless otherwise determined by the Director. The State may perform an ALTA survey for real property valued less than $250,000 if the Director determines that such a survey is in the interest of the State.

 

R23-22-7. Requirements for the Disposition of Real Property by DFCM.

(1) Determination of disposition of real property.

(a) Notwithstanding, any other provision of this Rule R23-22, any real property that is of historical significance to the State of Utah shall not be disposed by the Division, regardless of the value amount of the property, unless approval has been obtained by the Legislative Management Committee of the Utah Legislature.

(i) "Historical significance" for the purposes of this Rule R23-22 includes real property, including any structures, statues or other improvements on the real property, that is listed on the National Register of Historic Places or the State Register.

(ii) The Division, after consultation with the State Historic Preservation Officer, shall make a recommendation to the Board as to whether a property proposed to be declared as surplus property, is historically significant based on the definition of "historically significant" in this Rule. The Board, after considering the recommendation of the Division as well as any other interested persons or entities, shall determine whether or not the property is historically significant.

(iii) A copy of the determination regarding Historical Significance shall be sent to the State Historic Preservation Officer as well as the Chair and Vice-Chair of the Legislative Management Committee, any of which may within ten (10) working days of the receipt of the determination by the Board, decide that the issue should be considered by the Legislative Management Committee and that the Division shall not proceed with the disposition of the property until the Legislative Management Committee approves the disposition.

(b) If the Board has not determined that the real property is historically significant, then the Building Board may declare the real property to be surplus under the procedures described in this Rule.

(i) Thereafter, if the appraised value of the real property is estimated by the Director to be $500,000 or below, then the Board may authorize the Division to dispose of the real property in accordance with the provisions of this Rule.

(ii) If the appraised value as estimated by the Director is above $500,000, then the Board shall refer consideration of the sale of the real property to the Legislative Management Committee.

(c) Nothing in the rule shall prohibit the Director from proceeding with easements, lot line and other minor, incidental adjustments with other State entities or other public/private persons or entities, as long as the Director reasonably determines that such property is not historically significant after consultation with the State Historic Preservation Officer, that the adjustment is in the public interest, and that the value of the adjustment as determined by the Director is less than $100,000.

(2) Determination of surplus property. If the real property is determined to not be historically significant under this rule and in addition to the policy of Section R23-22-3, it is the policy of this Board to efficiently and economically dispose of real property that is determined by DFCM or the State to be surplus in accordance with State law. In accordance with State law, DFCM may recommend to the Board that certain real property be declared as surplus. The Board shall consider the following factors in the determination of declaring the property to be surplus:

(a) the input of the Division;

(b) the input of State agencies;

(c) any other input received from concerned persons or entities; and

(d) the appraised value of the property.

(3) Detailed disposition procedures. After the appropriate determination is made that the real property is surplus, and it is determined that the property is not historically significant under this rule, then DFCM shall endeavor to sell the surplus real property on the open market, unless such property is to be conveyed to another State agency or public entity in accordance with Utah law. If there is such a sale, it shall be as follows:

(a) DFCM shall confirm that all necessary approvals have been sought for the declaration of surplus property.

(b) Unless otherwise allowed by State law, DFCM shall obtain at least fair market value for the real property to be sold. This shall be accomplished by the following:

(i) DFCM shall determine a fair market valuation of the property prior to the offer for sale. The fair market value determination used by DFCM in offer for sale shall be based upon an appraisal completed by an appraiser that specializes in the type of the subject real property and is a state-certified general appraiser under Section 61-2B-2, or by a Utah licensed MAI appraiser who also has such a certificate, except as follows:

(A) When this rule is not applicable under its scope;

(B) When State law otherwise provides that DFCM does not have to use fair market value; or

(C) When the Director has determined by a writing filed with DFCM, that the cost of obtaining the appraisal is not justified in the economic interest of the State of Utah.

(c) DFCM shall establish a listing price based on the appraisal obtained under this Rule or, if there is no appraisal based on the above, based upon DFCM's knowledge of prevailing market conditions and other circumstances customarily used in the industry for such sales.

(d) DFCM shall advertise the property for sale in such a manner that is commercially reasonable in the discretion of the Director. DFCM may set a time deadline for the submission of bids for the real property based upon the economic conditions at the time of the sale.

(e) DFCM shall endeavor to enter into a contract for sale to the highest reasonable bidder, unless the DFCM Director files a written justification statement as to why a lower bidder is more advantageous to the State or if there is a sole bidder, that such bid is unreasonable. If after a reasonable timeline set by the Director of public advertisement, no acceptable bid is submitted, then DFCM may sell the property through a private negotiated sale, provided that any sale below the fair market value initially established by DFCM for the subject property is accompanied by a written justification statement filed by the Director and a copy of which is provided to the Board prior to execution of the contract for sale.

(f) DFCM shall, in accordance with DFCM's governing statutes, negotiate, draft and execute the applicable Real Estate Contract, with due consideration to the comments of the affected State agency. The affected State agency may be required by DFCM to be a signatory to the Contract.

(g) DFCM shall review, approve, and execute when appropriate, closing documents as prepared by the selected title company.

(h) DFCM may use boiler plate documents approved as to form by the Utah Attorney General or shall consult with the Utah Attorney General regarding provisions of the sale or significant changes to the boiler plate documents approved as to the form by the Utah Attorney General.

(i) DFCM shall endeavor to monitor the distribution of the closing documents.]

R23-22. General Procedures for Acquisition and Selling of Real Property.

R23-22-1. Purpose.

This rule defines the procedures of the Division of Facilities Construction and Management for acquisition and selling of real property.

 

R23-22-2. Authority.

(1) This rule is authorized under Subsection 63A-5-103(1)(e), which directs the Building Board to make rules necessary for the discharge of the duties of the Division of Facilities Construction and Management (hereinafter referred to as "DFCM"). All actions under this rule that refer to the DFCM shall be undertaken by the Director of DFCM or the Director's duly authorized designee.

(2) This rule is also authorized and intended to implement the requirements of Section 63A-5-401, as well as Subsection 63A-5-103(1)(e)(iii).

 

R23-22-3. Policy.

It is the general policy of the Board that, except as otherwise allowed by the Utah Code, the DFCM shall buy, sell or exchange real property in accordance with this Rule to ensure that the value of the real property is congruent with the proposed price and other terms of the purchase, sale or exchange.

 

R23-22-4. Scope of This Rule.

(1) This Rule shall apply to all purchases, sales, donations and exchanges of DFCM except as otherwise allowed by the Utah Code. The requirements of this Rule shall also not apply to a contract or other written agreement prior to May 5, 2008.

(2) This Rule contains a waiver provision in Rule R23-22-8 that is consistent with Section 63A-5-401.

(3) Nothing in the rule shall prohibit DFCM from proceeding with easements, lot line and other minor, incidental adjustments with other State entities or other public/private persons or entities, as long as DFCM reasonably determines that such property is not historically significant after consultation with the State Historic Preservation Officer, that the transaction is in the public interest, and that the value of the transaction, as reasonably determined by DFCM, is less than $100,000.

 

R23-22-5. Requirements for Purchase, Accepting a Donation, or Exchanges of Real Property.

Unless waived under Rule R23-22-8, DFCM shall comply with the following in regard to the purchase, accepting a donation, or exchange of real property that is subject to this Rule:

(1) Selection Process. In accordance with State law, DFCM shall either perform the selection process or assist the state agency with the selection process. The selection process must comply with applicable State laws and rules.

(2) Financing Requirements. As authorized by the Utah Legislature, DFCM shall assist, as appropriate with financing requirements, including, but not limited to, coordinating financing requirements through the State Building Ownership Authority, or other authorized bonding authority.

(3) Document Preparation and Approvals.

In accordance with State law, DFCM shall negotiate, draft and execute the applicable Real Estate Contract and transaction documents with due consideration to the State agency's comments. The State agency may be required by DFCM to be a signatory to the Contract. Legal documents shall either be on a form approved by the Utah Attorney General or submitted for approval to the Utah Attorney General. The same requirements shall apply to closing documents prepared by the title company.

(4) Substantive Requirements. Unless a provision below is waived under Rule R23-22-8, DFCM shall obtain and review the following:

(a) Title Insurance. DFCM shall obtain an Owner's Policy of Title Insurance for real property with an estimated value by DFCM at $200,000 or above. For real property with an estimated value by DFCM of less than $200,000, DFCM shall obtain a title report and may obtain an Owner's Policy of Title Insurance if, in the judgment of DFCM, title insurance is advantageous to the State.

(b) Environmental Assessment. A Phase I environmental Assessment or higher level environmental assessment is required.

(c) Engineering Assessment. DFCM shall obtain an engineering assessment of mechanical systems and structural integrity of improvements located on the property.

(d) Code Review. DFCM shall review the real property to ascertain its suitability under all applicable codes, laws, regulations and requirements.

(e) Appraisal. Except for transactions where State law does not require a certain value to be established, the value used by DFCM in the negotiation shall be based upon an appraisal completed by an appraiser that is a state-certified general appraiser under Section 61-2B-2 and a State of Utah licensed MAI appraiser.

(f) Maintenance and Operation History. DFCM shall obtain, if reasonably available, an analysis of past maintenance and operational expenses.

(g) Land Use Information. DFCM shall obtain, if reasonably available, the plat map, zoning and planning information.

(h) Survey. DFCM shall obtain an ALTA/ACSM Land Title Survey, current revision, of the subject property. An ALTA survey shall not be required if an ALTA survey has already been performed within the past 12 months unless otherwise determined by DFCM;

(i) Historic Assessment. DFCM shall undertake an historic property assessment under Section 9-8-404; and

(j) Other. DFCM shall also comply with other requirements determined necessary by law, rule, regulation or by DFCM.

 

R23-22-6. Determination of Surplus Real Property.

(1) In accordance with State law, DFCM may recommend that certain real property be declared as surplus.

(2) If DFCM estimates that the value of the real property is less than $100,000, then DFCM need only notify the Executive Director of the Department of Administrative Services prior to any declaration of surplus or disposition of the real property. DFCM shall also consult with the State Historic Preservation Office prior to any such declaration or disposition if the property is historically significant.

(3) If DFCM estimates that the value of the real property is $100,000 or more, then the DFCM shall notify the Director of the Department of Administrative Services as well as the staff of the Building Board, as well as receive approval from the Building Board prior to any declaration of surplus or disposition of the real property. The Utah State Building may declare the property surplus after considering the following:

(a) the recommendation and any comments by the Division;

(b) the input from state agencies and institutions, including, but not limited to, whether any state agency or institution has a need for the subject property;

(c) any input from concerned persons or entities;

(d) the appraised value of the property; and

(e) whether the property is historically significant. The property shall be considered historically significant if the real property, structures, statues or other improvements on the real property, is listed on the National Register of Historic Places or the State Register, or if he Board determines that it is historically significant after considering input from the State Historic Preservation Officer and others that have relevant input at the Board meeting.

meeting.

(4) If the Utah Legislature directs that the DFCM sell the property, then it shall be deemed as declared surplus under this Rule without the need for any Board approval.

 

R23-22-7 Detailed Disposition Procedures.

After the appropriate determination is made that the real property is surplus, DFCM shall endeavor to sell the surplus real property on the open market, unless such property is to be conveyed to another State agency or public entity in accordance with applicable law. The sale shall be processed as follows:

(1) Approvals. DFCM shall confirm that all necessary approvals have been sought for the declaration of surplus property.

(2) Appraisal. Except for transaction where State law does not require a certain value be established or when the Director of DFCM estimates that the value of the property is less than $100,000, the value used by DFCM in the sale shall be based upon an appraisal completed by an appraiser that is a State of Utah certified general appraiser under Title 61, Chapter 2g, of the Utah Code and is a State of Utah licensed MAI appraiser.

(3) Listing Price. DFCM shall establish a listing price based on the appraisal or, if no appraisal is required, based upon DFCM's knowledge of prevailing market conditions and other circumstances customarily used in the industry for such sales.

(4) Advertise. DFCM shall advertise the property for sale in such a manner that is commercially reasonable in the discretion of the DFCM. DFCM may set a time deadline for the submission of bids.

(5) Award of Contract. DFCM shall endeavor to enter into a contract with the bidder that provides the best value to the State of Utah taking into account the price, other terms and factors related to the sale. If the contract is with a person that does not have the highest bidding price, then DFCM shall file a written justification statement describing the circumstances in which the selected bidder represents the best value to the State of Utah.

(6) Document Preparation and Approvals. In accordance with State law, DFCM shall negotiate, draft and execute the applicable Real Estate Contract or transaction documents with due consideration to the State agency's comments. The State agency may be required by DFCM to be a signatory to the Contract. Legal documents shall either be on a form approved by the Utah Attorney General or submitted for approval to the Utah Attorney General. The same requirements shall apply to closing documents prepared by the title company.

 

R23-22-8. Waiver for Requirements, Other Than R23-22-6.

(1) The requirements under Rule R23-22-6 may not be waived.

(2) To the extent allowed by law, any provision of this Rule R23-22, other than Rule R23-22-6, may be waived by the DFCM Director when the adherence to the provision of the rule is not economically efficient or other special circumstances are documented which indicate that the enforcement of the rule would not be in the public interest.

 

KEY: [real estate, historical significance, property transactions]procedures, selling, surplus, real property

Date of Enactment or Last Substantive Amendment: [July 8, 2010]2014

Notice of Continuation: February 20, 2013

Authorizing, and Implemented or Interpreted Law: 63A-5-103; 63A-5-401

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