No. 31607: R23-22. General Procedures For Acquisition and Selling of Real Property

DAR File No.: 31607
Filed: 06/23/2008, 05:05
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule is to define procedures for the acquisition and selling of real property.

Summary of the rule or change:

H.B. 354, 2008 General Session, requires procedures be defined for the acquisition and selling of real property. This is to ensure that the value is congruent with the proposed price and other terms of this purchase, sale, or exchange. This rule defines these procedures. (DAR NOTES: H.B. 354 (2008) is found at Chapter 203, Laws of Utah 2008, and was effective 05/05/2008. A corresponding proposed new Rule R23-22 is under DAR No. 31606 in this issue, July 15, 2008, of the Bulletin.)

State statutory or constitutional authorization for this rule:

Subsection 63A-5-103(1)(e), and Chapter 203, Laws of Utah 2008

Anticipated cost or savings to:

the state budget:

This rule should assist the state budget by assuring proper values for real estate transactions.

local governments:

In accordance with H.B. 354, this rule defines and codifies procedures DFCM will follow in assessing property value. There will be no effect on local governments because many of the procedures are already DFCM's practice. Therefore, the rule has no affect on costs for these entities.

small businesses and persons other than businesses:

Again, in accordance with H.B. 354, this rule defines and codifies procedures DFCM will follow in assessing property value. There will be no effect on small businesses and persons other than businesses because many of the procedures are already DFCM's practice. Therefore, the rule has no affect on costs for these entities.

Compliance costs for affected persons:

This rule defines procedures only and does not have any financial impact.

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

This rule will assure fair and equitable DFCM real estate practices. Kimberly K. Hood, Executive Director

Emergency rule reason and justification:

Regular rulemaking procedures would place the agency in violation of federal or state law.

H.B. 354 requires rules be established for the Division of Facilities Construction and Management (DFCM) real estate transactions. The bill went into effect on 05/05/2008. DFCM was advised by the Division of Administrative Rules that prior to DFCM being able to sell, purchase, or exchange real property, that it needed to establish rules implementing this statute. As there are required transactions pending, it is necessary that this rule be in effect immediately.

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 MAIN ST
SALT LAKE CITY UT 84114-1201

Direct questions regarding this rule to:

Priscilla Anderson at the above address, by phone at 801-538-9595, by FAX at 801-538-3378, 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:

This rule is effective on:

06/25/2008

Authorized by:

D. Gregg Buxton, 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, selling and the exchanging of real property. This rule also affects donations of real property as so specified.

 

R23-22-2. Authority.

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") as well as pursuant to H.B. 354 of the 2008 General Session of the Utah Legislature.

 

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. 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; and

i. 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.

 

R23-22-6. Requirements for the Disposition of Real Property by DFCM.

In addition to the policy of 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. After the appropriate determination is made that the real property is surplus, 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:

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

(2) Unless otherwise allowed by State law or as otherwise provided in this Rule, DFCM shall obtain at least fair market value for the real property to be sold. This shall be accomplished by the following:

(a) 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:

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

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

(iii) 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.

(b) 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.

(c) 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.

(d) 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.

(e) 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.

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

(g) 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.

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

 

KEY: real estate, property transactions

Date of Enactment or Last Substantive Amendment: June 25, 2008

Authorizing, and Implemented or Interpreted Law: 63A-5-103(1)(e); Chapter 203, Laws of Utah 2008