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July 31, 2010

Working Paper No. 10-35:

Working Paper No. 10-35:
The Really New Property: A Skeptical Appraisal

Author(s):  Steven Eagle

Date Posted: July 2010

Abstract (below)
Full text (original)   PDF file
Full text (most recent) on SSRN



This article reviews recent scholarship invoking the prophetic tradition in American jurisprudence and calling for the transformation of property law. It contrasts imposed top-down social change with Burkean and Oakeshottian gradual change derived from conversation within our legal and cultural tradition. The work of Robert Ellickson is presented as illustrating the development of property law in the Burkean tradition. Transformative property scholarship, on the other hand, largely reflects Osborne and Gaebler’s view that government should steer and private actors row, reinforced by Thaler and Sunstein’s call for soft paternalism. The article asserts, however, that Kant and Berlin’s admonition that all of humankind is “crooked timber” precludes officials from a privileged position, a postulate well supported by public choice theory.

The article views the change in conceptual thinking from Hohfeldian property to Heller’s anticommons and assertions of disintegration and entropy of property. These set the stage, for instance, for advocacy of “rightsizing,’ through the shrinking private parcels through smart growth and densification, and the supersizing of government-controlled land through condemnation for urban redevelop.

Other topics discussed are regionalism, new governance, and the creation of affordable housing, through, among other things, the rearrangement of traditional landlord-tenant relationships. The article expresses skepticism that flaws inherent in the top-down transformation of property would permit outcomes that are coherent and effective, and could withstand capture by affected interest groups.

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July 30, 2010

Minn Supremes: Property Can Be Taken To "Reawaken The Spirit And Vitality" Of City Without Statutory Development Agreement In Place

Minn Supremes: Property Can Be Taken To "Reawaken The Spirit And Vitality" Of City Without Statutory Development Agreement In Place

Posted: 29 Jul 2010 10:33 AM PDT

This just in: the Minnesota Supreme Court has issued an opinion in a case we've been watching, Eagan Economic Development Authority v. U-Haul Co. of Minnesota, No. A08-767 (July 29, 2010). This is the case in which the Court of Appeals invalidated a quick-take because the redevelopment authority -- which attempted to take property to "reawaken the spirit and vitality of [that] part of Eagan" (and, less soul-stirringly, to "replac[e] a market obsolete regional shopping center") -- could not condemn property without first having a binding development agreement in place. 

The Supreme Court reversed. The court held:


The Eagan Economic Development Authority is bound by the prohibitions and requirements of the "Redevelopment Plan for the Establishment of the Cedar Grove Redevelopment Project Area" it prepared, adopted, and submitted to the Eagan City Council for approval, which approval was granted.

Subsection 1-8 of the "Redevelopment Plan for the Establishment of the Cedar Grove Redevelopment Project Area," which deals with the proposed reuse of property, does not require the Eagan Economic Development Authority to have a binding development agreement before it can condemn private property in this circumstance.

More, after we've had a chance to digest the opinion. Our summary of the court of appeals' opinion is here.

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July 29, 2010

Seismic Hazards Zonation Program


Seismic Hazards Zonation Program 

New Official Seismic Hazard Zone Map Release - February 27, 2009

February 27, 2009 marks the release by CGS of a new Official Seismic Hazard Zone Map in eastern Alameda County - the Altamont quadrangle.   All of the 60 square-mile area covered by the Altamont quadrangle consists of unincorporated, undeveloped county land with the exception of several square miles that fall within the jurisdiction of the City of Livermore.  The Official Seismic Hazard Zone Map of the Altamont quadrangle can now be viewed and/or downloaded by clicking the “Quickview/Download PDF Maps” icon below.

LOCATE Your Map or DOWNLOAD Data http://www.conservation.ca.gov/cgs/shzp/Pages/Index.aspx

The Interactive Web Mapping site uses a java viewer. You can download it for free here

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5 things to do before signing your next PIP

5 things to do before signing your next PIP

July 29, 2010
Jim Bonanno
Hotel and Motel Management



Have you taken a good look at the real cost of the product improvement plan you are signing to transition that new hotel acquisition? You may be surprised when it costs more or takes far longer than anticipated to achieve that new room rate. Minimize the problem by following these five steps during your negotiations with the brand.

Most brands have established that converting existing assets is the only growth vehicle during this difficult period. All developers anticipate the cost of brand repositioning requirements into the equation when determining the project’s viability. These rough estimates are fine in the beginning, but before you sign the PIP, think twice.

During good times, brands often let PIPs evolve into “wish lists,” which might include every brand initiative, updating and remodeling all surfaces and every square foot of the hotel interior, and new exterior treatments that would make the old structure unrecognizable. Some PIPs even include every anticipated maintenance item that could need replacing over the next five years.

Of course, those PIPs required that all the work had to be completed in an accelerated time frame at what amounted to almost the total replacement cost of the building. Brands took this approach because the pipeline for new-build hotels was pretty healthy and conversion hotels were a low priority.

Today’s current period of slow growth has once again made some functionally obsolete hotels prime targets for brand-development teams trying to produce numbers. The dilemma, however, is how to make the tired, neglected victim glamorous, while keeping the PIP cost reasonable, and acquiring the asset before the competition, even if large changes are necessary.

The simple solution unfortunately has been to phase the renovation over a much longer period in order to spread out the cost. This extended period of renovation sounds more attractive because the point of entry seems less costly, but is it? As an old commercial aptly put it, “pay me now or pay me later,” but you will pay!

Before you agree to sign the PIP, let me offer the following five steps:

1: Thoroughly review the PIP with a professional to qualify and quantify its content. Most PIPs oversimplify elements, which results in contractors having to price the worst-case scenarios. For example, a PIP might require that all PTAC units older than five years must be replaced. How many PTAC units in the asset fit that description and what’s their condition? Are these six years old? Should they really be replaced, or is that just a guideline? Since you’re paying for it, have a professional on board to assist with these judgment calls. Negotiate!

2. Determine how many subjective items are in the PIP. Items like certain ceiling tiles or ceiling finishes can vary widely. The existing finish may be attractive and good as new, but different from what the brand requires. Ask the contractors to break out the price of those subjective items because they may be the first things to propose as value engineering points. These items can add up to thousands of extra dollars, while the guests might not even notice or care. Negotiate!

3. Any long-term maintenance items should be removed from the PIP. Yes, the hot-water heaters and roof will have to be replaced at some point, but if it’s not immediately necessary, wait. Those items are coming and will be paid for from a future capital budget and shouldn’t be part of the cost of entry. Unless these are absolutely necessary, get them out of the contractor’s bid and the PIP. Negotiate!

4. Do the work that most affects the guest first. Stretching out the work over several phases sometimes is offered to ease the repositioning. This usually increases the overall cost because the contractor has to keep restaging. They’re happy to pass this cost on to you and repeat the process often. Now you have continuous work going on in your newly converted hotel, which affects the guest experience and which in turn can cause lower guest satisfaction scores and your rate. Replacing the guestroom softgoods the first year and the furnishings the second year means the same rooms are being disrupted for two years. Discuss the options and devise a plan where entire sections are completed up-front prior to conversion, and other sections that can be sealed off from guest traffic are completed during later phases. Obviously, choose the most critical guest impression areas first. This isolates the work and will minimize the guest inconvenience. Negotiate!

5. Once you have negotiated the entire scope and timing of the PIP, be sure to select a team of professionals who specialize in hospitality work. Everyone in the construction trade is hurting and will offer great pricing but remember that adage, “pay me now or pay me later!” Choosing the wrong people can negate all the effort you made in steps 1 through 4. Remember that the best price isn’t always the best deal.
Repositioning a hotel effectively will involve compromises on all sides, but in the end, the goal of a “like-new,” well-branded, profitable hotel can be achieved. Following these steps will help you ensure you’re getting maximum value.

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LA area polystyrene manufacturer Lifoam Industries pays $450,000 over violations of federal, state clean-air laws

For Immediate Release: July 29, 2010, Contact: Francisco Arcaute, (213) 244-1815, cell (213) 703 1635, arcaute.francisco@epa.gov

LA area polystyrene manufacturer Lifoam Industries pays $450,000 over violations of federal, state clean-air laws



LOS ANGELES - The U.S. Environmental Protection Agency, the U.S. Department of Justice and the South Coast Air Quality Management District announced that Lifoam Industries, Inc. will pay $450,000 in fines, claiming the company violated the federal Clean Air Act and state air quality laws at its polystyrene manufacturing facility at 2340 E. 52 Street in Vernon, Calif.

Under the terms of a settlement entered today in U.S. District Court for the Central District of California, Lifoam Industries is required to pay a $450,000 penalty and must vent all of its manufacturing emissions through an air pollution control device.


“The effects of illegal air pollution in the Los Angeles basin are insidious, and local residents suffer a disproportionate impact,” said Jared Blumenfeld, EPA’s Regional Administrator for the Pacific Southwest. “To protect public health and the environment, we will vigilantly track down violators and bring them into compliance.”


“Since Southern California has the worst air pollution in the nation, for the sake of public health we must ensure that all businesses are operating in compliance with air quality regulations and doing their part to help improve our air,” said Barry Wallerstein, Executive Officer of the South Coast Air Quality Management District.


The city of Vernon is one of several densely populated communities closest to the I-710 Freeway, where the effects of pollution are disproportionately higher than in other areas of Los Angeles County.  Approximately 1 million people, about 70% of whom are minority and low-income households, are severely impacted by pollution from industrial activities in the area and goods movement along the freeway.


Federal, state and local regulatory agencies have formed an Enforcement Collaborative to focus resources over a multi-year effort to ensure that businesses and industries in this area are complying with environmental laws.  U.S. EPA is joining forces with Cal/EPA, the California Department of Toxic Substances Control, the Los Angeles Regional Water Quality Control Board and the California Air Resources Board in the Enforcement Collaborative, which is partnering with other local government and non-profit organizations to improve environmental and public health conditions in these communities. 


Lifoam Industries manufactures expanded polystyrene foam products that contain pentane, a volatile organic compound that contributes to ozone pollution, or smog.


According to EPA, Lifoam Industries failed to ensure that the volatile organic compound emissions were less than 2.4 pounds of volatile organic compounds per 100 pounds of raw materials, a violation of the Clean Air Act.  The South Coast Air Quality Management District, which oversees air regulations in the Los Angeles Air Basin, allows polystyrene foam product manufacturers to meet this federally-enforceable emissions limit by using raw materials that release less volatile organic compounds or through the use of an adequate air pollution control device.


Both federal regulators and the South Coast Air Quality Management District also assert that Lifoam installed and operated air-pollution-emitting equipment without obtaining the necessary permits and that the facility did not properly vent volatile organic compounds to air pollution control equipment.


Volatile organic compounds react with other pollutants such as nitrogen oxide and, in the presence of sunlight, can form ozone, or smog. Smog can cause respiratory problems, including coughing, wheezing, shortness of breath and chest pain. People with asthma, children and the elderly are especially at risk, but these health concerns are important to everyone.


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ICSC Supports Legislation to Jumpstart Commercial Real Estate

ICSC Supports Legislation to Jumpstart Commercial Real Estate

Asks Congress to Support the Community Recovery and Enhancement Act

WASHINGTON--(BUSINESS WIRE)--In an attempt to forestall the looming equity crisis in commercial real estate, U.S. Rep. Shelley Berkley (D-NV) introduced the Community Recovery and Enhancement (CRE) Act of 2010, which provides short term tax incentives to jumpstart reinvestment in commercial real estate thereby stabilizing community banks as well as preventing additional foreclosures and job losses.

“This temporary and targeted legislation relies upon market factors and economic incentives, rather than direct government involvement”

With lenders finding it increasingly difficult to refinance existing commercial loans and borrowers faced with paying off loans that are greater than their current property values, the CRE Act offers tax incentives that would attract an infusion of new equity into commercial real estate. The central provision of the CRE Act is that at least 80 percent of the newly invested capital must be used to reduce the outstanding balance of the commercial loan, with the remainder going toward capital improvements, such as energy efficiency enhancements, and leasehold improvements to attract new tenants. Additionally, the new investment would qualify for a 50 percent bonus depreciation and investors would be able to deduct losses without regard to passive loss limitations. Together these incentives would provide an opportunity to lower the loan-to-value ratios of existing properties as well as improve debt coverage ratios, giving lenders the ability to responsibly refinance debt and rebalance capital reserve levels, thus freeing up additional lending capacity for the overall economy.


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July 28, 2010

Forensic Review Appraiser Positions

Forensic Review Appraiser Positions
I am seeking several forensic review appraisers to be based in Wisconsin or Illinois to work on capital markets projects. The position offers a salary with production components and quality incentives, as well as paid vacation and corporate benefits. If interested, please contact Jerri Cech at: jerri.cech@opuscmc.com or you may contact me through LinkedIn. Feel free to pass on the info to anyone interested.
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Eminent Domain Proceedings In Sewer

Eminent Domain Proceedings In Sewer

Line Acquisitions... a local perspective http://www.propex.com/C_g_edomain.htm

By Angel Banks, Metropolitan Sewerage District

Since the 1920’s, a combination of dynamic population

growth and the lack of proper maintenance to the

nation’s infrastructure have led to crumbling,

overburdened utilities and roadways. To deal with this

problem, utility companies and governmental agencies

have embarked on their largest rehabilitation projects to

date. These large projects, coupled with a more litigious

society, have led many utilities and government agencies

to invoke their power of eminent domain.

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EPA Publishes Latest Data on Industrial and Toxics Releases in the U.S.


Latisha Petteway





July 28, 2010

EPA Publishes Latest Data on Industrial and Toxics Releases in the U.S.
Data on Toxics Release Inventory available the same month it is collected

WASHINGTON As part of the Obama Administration’s continuing commitment to open government, the U.S. Environmental Protection Agency (EPA) has published the latest data on industrial releases and transfers of toxic chemicals in the United States between Jan. 1 and Dec. 31, 2009.  EPA is making the Toxics Release Inventory (TRI) data available within weeks of the reporting deadline through its Web site and in the popular tools, TRI Explorer and Envirofacts. The database contains environmental release and transfer data on nearly 650 chemicals and chemical categories reported to EPA by more than 21,000 industrial and other facilities. 

“It is vital that every community has access to information that impacts their health and environment,” EPA Administrator Lisa P. Jackson said. “The data we’re releasing provides critical insights about pollution and polluters in the places where people live, work, play and learn.  Making that knowledge available is the first step in empowering communities to protect the environment in their areas.”

The preliminary dataset allows communities to find out about releases and transfers of chemicals at the local level. Examples of industries that report to TRI include manufacturing, metal mining, electric utilities, and commercial hazardous waste treatment facilities among others.  Facilities must report their data by July 1st of each year.

The preliminary dataset includes more than 80 percent of the data expected to be reported for 2009.  EPA will continue to process paper submissions, late submissions, and to resolve issues with the electronic submissions.  The agency will update the dataset in August and again in September so citizens will have complete access to the information.  EPA encourages the public to review and analyze the data while EPA conducts its own analysis, which will be published later this year.
More information on the data: http://www.epa.gov/tri

Note: If a link above doesn't work, please copy and paste the URL into a browser.


View all news releases related to miscellaneous topics






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July 27, 2010

Online Exclusive Videos:

Online Exclusive Videos: An Interview with Shaun Donovan, HUD Secretary
In this video extra to an interview in the July issue of Architectural Record, Donovan discusses retrofitting and increasing awareness among average Americans about green buildings. Donovan also discusses how important design is to HUD's affordable-housing mission. He also talks about the Marcel Breuer-designed HUD headquarters in D.C.--and how he is embarking on a plan to renovate the space to improve how it facilitates collaboration. (construction.com/video)
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Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection

In a divided ruling, the United States Supreme Court held that a property owner had failed to establish the existence of protected property rights under Florida law to stop a beach replenishment project, and as a result, the Court need not determine whether or not a ruling by the Florida Supreme Court constituted a physical taking affecting ocean front property owners.

View the entire entry:

Takings Analysis Potentially Applies to Judicial Decisions as Well

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Wisconsin Ct App: Property Owner's "Check" Is Subject To Town's Condemnation "Checkmate"

Wisconsin Ct App: Property Owner's "Check" Is Subject To Town's Condemnation "Checkmate"

Posted: 27 Jul 2010 02:18 AM PDT

There are a host of issues in DSG Evergreen v Town of Perry, No. 2009AP727 (Wis. Ct. App. July 22, 2010) (the appellant raised seven grounds for appeal in this condemnation case), but this is the one that caught our eye. The property owner claimed that the town could not condemn its 1.5 acre parcel because it would create a lot that violated the county's minimum lot size for agriculture-exclusive parcels. Under the county land use ordinance, unless an ag parcel fronts a public road, it must be at least 35 acres. See slip op. at 12. The court held that yes, the parcel did fall below the 35-acre minimum size because it did not front a public road, but that it was the property owner who created the problem with it "swapped property with its neighbor after the appraisal." Id. at 13. Thus, the court concluded, the issue the property owner raised was "of its own making." 

We observe that, to the extent that the size of this lot may be a problem, it is plainly a problem of DSG’s own making.  It is undisputed that the 1.5-acre lot at issue did not exist when the Town had the proposed condemnation project appraised.  Shortly thereafter, however, DSG swapped property with a neighbor who owned adjoining land, thereby eliminating the access easement the Town had provided DSG, creating the possibility that if the condemnation project was successful, it would create an illegal 1.5-acre parcel.  The clear evidence is that DSG was fully aware of the property the Town wished to condemn for the Hauge Church project, but swapped the parcel with its neighbor anyway just before negotiations were to commence.  A reasonable inference from this transaction at this time in the condemnation process is that DSG was aware that through this land swap, the condemnation would result in creating a lot that did not comply with the minimum size lot ordinance. The equities of the case call for relief to the Town by not holding the Town to the alleged problem of creating a lot in an agricultural-exclusive zoned area that is less than 35 acres.


Id. The property owner tried to pull a fast one in the court's view, and the eminent domain gods won't be cheated from their due quite so easily.

The court added: "In any event, we agree with the Town that DSG lacks standing to challenge the Town’s creation of a lot of less than 35 acres in violation of Dane County ordinances. It is for Dane County to raise the challenge DSG makes here, not DSG.  DSG does not cite to any part of the Dane County zoning ordinances that permits a private citizen to enforce the minimum lot size ordinance, and we are not aware of such an ordinance." Note that this is likely a different result than would have been reached in Hawaii, since the Hawaii Supreme Court recently held that state land use statutes are "environmental" statutes that may be enforced by private party lawsuits.

The court also rejected the property owner's claim that the town did not prepare an adequate Agricultural Impact Statement. See slip op. at 8-12.

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July 26, 2010

How Safe Are Building Facades?

How Safe Are Building Facades?  http://www.astm.org/SNEWS/AUGUST_2003/peterd_aug03.html

Inspecting for Unsafe Conditions

by Michael Petermann and Jeffrey Erdly

The late Clayford T. Grimm, ASTM member and masonry guru, wrote in the March 2000 issue of The Construction Specifier that “Masonry falls off a building facade somewhere in the United States about every three weeks. Over the past few years in the United States, at least 49 such masonry failures have killed 30 persons and injured 81.”

There are over 15,000 buildings currently subject to local municipal laws in various cities throughout the United States that require periodic inspection of building facades. These local laws are typically known as facade ordinances. The purpose of these ordinances is to identify unsafe conditions — loose facade components or materials — that may fall and cause damage to property, or injury and possibly death to pedestrians. These ordinances have come about because of previous damage to property, injury to pedestrians, and loss of life suffered in some of our cities as noted by Grimm. Some cities have stringent requirements for personnel required to do the inspections while others do not (see sidebar right). Some cities require hands-on inspection (touching of facade components or materials) of all facades by licensed architects or engineers while other cities only require visual inspection of street-facing facades by architects, engineers, or contractors.

ASTM Subcommittee E06.55 on Performance of Exterior Wall Systems has approved a standard practice that outlines the requirements and procedures for conducting facade inspections. The standard is intended for adoption by model building codes, local municipalities, or private owners of multiple buildings, such as universities. The availability of this standard will make it possible for many cities that do not have a facade ordinance to adopt one. Cities with existing ordinances may wish also to adopt ASTM’s new standard.

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The Appraisal Institute shall be suspended as an Appraisal Sponsor effective September 15,

1155 15th Street, NW, Suite 1111
Washington, DC 20005
T 202.347.7722
F 202.347.7727
The Board of Trustees of The Appraisal Foundation met in open session on Tuesday, June 15, 2010 to hear allegations that the Appraisal Institute had engaged in conduct detrimental to the interests of The Appraisal Foundation. The Board then went into Executive Session to deliberate the matter and subsequently recessed the meeting prior to the completion of its agenda. The Board reconvened on Monday, July 12, 2010 to
complete its work and we want to advise you of the actions taken by the Board of Trustees.
The following resolutions of the Board of Trustees were adopted by the required two-thirds majority as set forth in the Foundation Bylaws:

RESOLVED, that upon consideration of the information and materials presented to the Board of Trustees with respect to the conduct of the Appraisal Institute related to an amendment to Title XI, namely, “to maintain the independence of the Appraisal Standards and Appraiser Qualifications Boards and to avoid potential conflicts of interest, the Appraisal Foundation shall not directly or indirectly offer or sponsor any qualifying or continuing education courses for certified or licensed real estate appraisers beyond the National Uniform Standards of Professional Appraisal Practice course specifically required for licensure and certification” The Board of Trustees has concluded that the Appraisal Institute engaged in conduct materially and seriously prejudicial to the purposes and interests of the Foundation;

RESOLVED, that as a result of engaging in such conduct, the Appraisal Institute shall be sanctioned as follows:

1) The Appraisal Institute shall be suspended as an Appraisal Sponsor effective September 15, 2010 and ending on April 15, 2011;

2) Permission by The Appraisal Foundation to the Appraisal Institute to reproduce the Uniform Standards of Professional Appraisal Practice (USPAP) without charge and (b) its discount on the purchase price of USPAP shall be revoked for a period commencing September 15, 2010 and ending on July 1, 2012;

Statement to The Sponsoring Organizations

Page Two

RESOLVED, The Chair of The Appraisal Foundation shall promptly appoint a task force comprised of not less than three nor more than five members from the Board of Trustees to liaison with the Appraisal Institute during the period of suspension, or for such longer period as the Chair may determine, for the purpose of rehabilitating the relationship of the Appraisal Institute with The Appraisal Foundation as an Appraisal Sponsor.

The bylaws of The Appraisal Foundation outline a process for Sponsors who are about to be expelled or suspended from the Foundation to address the Board of Trustees. Section 5.04 (c) (ii) states:

“The Sponsor shall be given an opportunity to be heard (either orally or in
writing at the election of the Sponsor) not fewer than ten (10) days prior to the
effective date of any proposed suspension or expulsion. If requested by a
Sponsor, a hearing shall be held by the Board of Trustees to determine whether
the suspension or expulsion should take place. If a written statement is
submitted by the Sponsor, such written statement shall be considered by the
Board of Trustees prior to determining whether the suspension or expulsion
should take place.”

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July 21, 2010

Cost Segregation Audit Techniques Guide - Chapter 2 - Legal Framework

Cost Segregation Audit Techniques Guide - Chapter 2 - Legal Framework


Note: Each chapter in this Audit Techniques Guide (ATG) can be printed individually. Please follow the links at the beginning or end of this chapter to return to either the previous chapter or the Table of Contents or to proceed to the next chapter.

Chapter 1 |Table of Contents | Chapter 3



In order to better understand the tax controversy surrounding the use of cost segregation studies, it is important to review the relevant legal history and the motivations of taxpayers to allocate costs to personal property. The legislative and judicial history of depreciation, depreciation recapture, and Investment Tax Credit (ITC) are closely related. Accordingly, much of the discussion will focus on the rules and decisions impacting several interrelated Code sections (including ITC that was generally terminated in 1986). By establishing a legal framework for § 1245 and § 1250 property, examiners will have a better understanding of this issue and have a basis for determining property classifications and cost allocations.

The Internal Revenue Code (IRC) has historically authorized depreciation as an allowance for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or for the production of income (IRC § 167 and the regulations thereunder). Several different methods are described for calculating depreciation under IRC §§ 167 and 168, including straight line, declining balance, sum-of-the-years digits, and income forecast. The deduction has generally been calculated with respect to the adjusted basis and useful life of (or recovery period for) the property and by utilizing an appropriate depreciation method. At one time, salvage value was also a factor in the computation. The shorter the useful life (or recovery period), the larger the current tax deduction, thus providing an incentive for tax purposes. Buildings and structural components have substantially longer depreciable lives than personal property. Therefore, it is desirable for taxpayers to maximize personal property costs in order to accelerate depreciation deductions and, hence, reduce tax liability. The remainder of this chapter provides a brief historical perspective of the statutes, rulings and major court cases that relate to depreciation and cost segregation studies.

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Many attempts have been made to provide bright-line tests for classifying property by its useful life (or recovery period) due to the frequent controversies that have arisen with the determination of economic life. For example, IRS Publication Number 173 (also known as "Bulletin F") was published in 1942 and provided a useful life guide for various types of property based on the nature of a taxpayer's business or industry. Bulletin F identified over 5,000 assets used in 57 different industries and activities and described two procedures for computing depreciation for buildings:

  1. Composite Method: A depreciation chart provided a composite rate for buildings, including all installed building equipment. The recommended rates ranged from 1.5% per year for good quality warehouses and grain elevators to 3.5% per year for inexpensive theaters.
  2. Component Method: Taxpayers could elect to depreciate the building equipment separately from the structure itself. A list provided lives for various types of structures, ranging from 50 years for apartments, hotels, and theaters, to 75 years for grain elevators and warehouses. A separate list provided lives for over 100 items of installed building equipment, ranging from 5 to 25 years, or the life of the building.

Regulation § 1.167(a)-7(a) allows taxpayers to either depreciate individual items on a separate basis or to combine assets into group accounts and depreciate the group account as a single asset. Historically, some taxpayers have interpreted this to mean that assets can be segregated into components and depreciated separately.

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In 1959, the Tax Court recognized the right of taxpayers to calculate depreciation using a component method for newly constructed property Shainberg vs. Commissioner, 33 T.C. 241 (1959)]. While the building shell was given a useful life of 40 years, the plumbing, wiring, and elevators were assigned a life of 15 years, and the paving, roof, and heating and air conditioning systems were given a useful life of 10 years.

Revenue Procedure 62-21, 1962-2 C.B. 418, superceded Bulletin F and provided safe harbor useful lives based on industry-specific asset classes for taxpayers that met the reserve ratio test (a complex provision). As long as the taxpayer could demonstrate that its retirement policies were consistent with the selected class life, the Service would not challenge the useful life. The asset class for buildings included "…the structural shell of the building and all integral parts thereof…", as well as equipment which services normal heating, plumbing, air conditioning, fire prevention and power requirements, and equipment such as elevators and escalators. Except to the extent the class lives were incorporated into the Class Life Asset Depreciation Range System (ADR), this revenue procedure was revoked for all years after 1970.

Revenue Ruling 66-111, 1966-1 C.B. 46 (subsequently modified by Revenue Ruling 73-410, 1973-2 C.B. 53), addressed the use of component depreciation for used real property, in light of the decision in Shainberg. The ruling concluded that "When a used building is acquired for a lump sum consideration, separate components are not bought; a unified structure is purchased… Accordingly, an overall useful life for the building must be determined on the basis of the building as a whole."

Revenue Ruling 68-4, 1968-1 C.B. 77, concluded that the asset guideline classes outlined in Revenue Procedure 62-21 "…may only be used where all the assets of the guideline class (building shell and its components) are included in the same guideline class for which one overall composite life is used for computing depreciation."

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The elective ADR system was developed for tangible assets placed in service after 1970, with the intent of minimizing controversies about useful life, salvage value, and repairs. It also abolished the controversial reserve ratio test. Under the ADR system as enacted by former IRC § 167(m) and implemented by Revenue Procedure 72-10, 1972-1 C. B. 721, all tangible assets were placed in one of the more than 100 asset guideline classes (which generally corresponded to those set out in Rev. Proc. 62-21). The classes of assets were based on the business and industry of the taxpayer. In addition, each class of assets other than land improvements and buildings was given a range of years (called "asset depreciation range") that was about 20 percent above and below the class life. As long as taxpayers did not deviate from this range in useful lives, the Service would not challenge the useful life. An optional repair allowance method was also permitted at the election of the taxpayer.

If the taxpayer did not elect the ADR system, Revenue Ruling 73-410, 1973-2 C.B. 53, clarified that a taxpayer may utilize the component method of depreciating used property if a qualified appraiser "…properly allocates the costs between non-depreciable land and depreciable building components as of the date of purchase."

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Issues involving salvage value and useful life continued to arise, as well as controversy regarding the repair allowance, so Congress enacted IRC § 168 in 1981 (generally effective for property placed in service after December 31, 1980). The Accelerated Cost Recovery System (ACRS) was intended to provide a less complicated method for computing depreciation (known as "cost recovery") by eliminating salvage value and specifying recovery periods for various classes of assets. Depreciation deductions were calculated based on the applicable depreciation methods, recovery periods and placed-in-service conventions outlined in § 168. In contrast to the elective ADR system, ACRS was mandatory and provided only five (later six) recovery periods. ACRS also allowed for a faster write-off of assets than had been allowed under previous rules (e.g., the 40-year life for real property was reduced to either a 15, 18, or 19-year recovery period, as reflected by the 1985 amendments to ACRS).

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Significant modifications, generally less favorable to taxpayers, were made to ACRS by the Tax Reform Act of 1986 (effective for property placed in service after December 31, 1986). Under the Modified Accelerated Cost Recovery System (MACRS), the recovery period for buildings and structural components increased dramatically. For example, the 15, 18, or 19-year recovery periods for real property are now 39 years for nonresidential real property (or 31.5 years for nonresidential real property placed in service by the taxpayer before May 13, 1993) and to 27.5 years for residential rental property, under the general depreciation system of § 168(a). Equipment and machinery generally fall into the 3, 5, or 7-year recovery periods. Land improvements generally have a 15-year recovery period under the general depreciation system of § 168(a). The wide gap in MACRS recovery periods provides a strong incentive for taxpayers to allocate or reallocate costs of long- lived property to short-lived property, wherever possible.

Revenue Procedure 87-56, 1987-2 C. B. 674, provides the class lives and recovery periods for most MACRS assets. These determinations are based on the specific industry of a taxpayer and the specific activity for which the assets are used. But see discussion of Duke Energy Natural Gas Corporation v. Commissioner, 109 T.C. 416 (1997), rev’d, 172 F.3d 1255 (10th Cir. 1999), nonacq., 1999-2 C.B. xvi; Saginaw Bay Pipeline Co., et al v. United States, 124 F. Supp. 2d 465 (E.D. Mich. 2001), rev’d and rem’d, 2003 FED App. 0259P (6th Cir.) (No.01-2599); and Clajon Gas Co. LP, et al v. Commissioner, 119 T.C. 197 (2002), rev’d, 2004 U.S. App. LEXIS 284 (8th Cir. Mo. Jan. 12, 2004), and Revenue Ruling 2003-81, 2003-2 C.B. 126, on page 6.3-10. Appendix Chapter 6.3 provides an overview of recovery period determinations.

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Another incentive for allocating costs to shorter-lived property is the expensing provision of IRC § 179. The ceiling limitation for expensing capital amounts invested in qualifying section 179 property (qualifying tangible personal property acquired by purchase for use in the active conduct of a trade or business) has steadily increased over time, from $10,000 to over $25,000 per year ($100,000 per year, adjusted annually for inflation, for certain qualifying property placed in service for taxable years beginning after December 31, 2002, and before January 1, 2008). By maximizing the costs allocable to tangible personal property, the taxpayer can not only get an immediate write-off under § 179, but also qualifies for a shorter recovery period under § 168 for any remaining basis in the property. Also, the 30-percent additional first year bonus depreciation allowance pursuant to § 168(k), enacted by the Job Creation and Worker Assistance Act of 2002 (Public Law 107-147), provides even further incentive for taxpayers to segregate property into shorter recovery periods. The Jobs and Growth Reconciliation Tax Act of 2003 recently increased the bonus depreciation under § 168(k) to 50 percent for certain qualifying property acquired after May 5, 2003, and placed in service before January 1, 2005 (January 1, 2006, for certain property with a longer production period). Code section 1400L provides special rules for qualifying property used by a business in the New York Liberty Zone.  Also, Code section 1400N, as inacted by the Gulf Opportunity Zone Act of 2005, extends some of the rules to property acquisitions after August 28, 2005, and before December 31, 2007, (December 31, 2008, for residential rental and nonresidential real property), for use in areas impacted by Hurricanes Katrina, Rita, and Wilma.

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While § 167 provides an allowance for depreciation for both tangible and intangible property, § 168 (as written) only applies to tangible property. Since neither § 167 nor § 168 provides a definition of tangible property, one must look to § 48 and the regulations thereunder (prior to the passage of Public Law 101-508) for definitions and examples of tangible property (as well as for buildings and structural components). This area will be discussed further in the following sections.

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In order to stimulate the economy, Congress enacted Code § 48 in 1962. The ITC was designed to encourage the modernization and expansion of productive facilities through the purchase of certain new or used assets for use in a trade or business. Section 48 generally allowed a tax credit for investment in tangible depreciable property placed in service during the taxable year. The amount of the credit was the "applicable percentage" of the investment in qualifying property placed in service during the taxable year, depending on the useful life of the property and whether it was new or used when acquired. The percentage was initially 7 percent but was later increased to 10 percent (Revenue Act of 1978). The amount of the qualifying investment was limited and the ITC was subject to recapture if the property was not held for its entire useful life. Over the years, many other changes were made to the rules, including reductions in the depreciable basis of property for which ITC was claimed, temporary suspensions, termination, reinstatement, and, ultimately, the general repeal of ITC in 1986. Most of these revisions were related to the perceived economic needs of the country at the time they were enacted.

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Eligible ITC property is defined in former IRC § 48(a)(1) with reference to IRC § 38 (in fact, eligible property is often referred to as "section 38 property"). It included tangible personal property (other than heating or air conditioning units) and other tangible property (primarily machinery and equipment) that was closely integrated into the taxpayer's trade or business. Land, buildings, structural components contained in or attached to buildings, and other inherently permanent structures, generally were not eligible for ITC. Local law was not controlling with regard to property qualifying as tangible personal property for purposes of ITC.

Treas. Reg. § 1.48-1(c) provides examples of qualifying property, and states that

…'tangible personal property' means any tangible property except land and improvements thereto, such as buildings or other inherently permanent structures (including items which are structural components of such buildings or structures).

This same subsection states that "tangible personal property" includes

…all property (other than structural components) which is contained in or attached to a building. Thus, such property as production machinery, printing presses, transportation and office equipment, refrigerators, grocery counters, testing equipment, display racks and shelves, and neon and other signs, which is contained in or attached to a building constitutes tangible personal property for purposes of the credit allowed by section 38. Furthermore, all property that is in the nature of machinery (other than structural components of the building or other inherently permanent structure) shall be considered tangible personal property even though located outside a building. Thus, for example, a gasoline pump, hydraulic car lift, or automatic vending machine, although annexed to the ground, shall be considered tangible personal property.

In addition, the regulations provide examples of non-qualifying property. For example, "…buildings, swimming pools, paved parking areas, wharves and docks, bridges, and fences are not tangible personal property."

The Senate Report accompanying the enactment of the Revenue Act of 1978 provided additional insight into Congressional intent by providing further examples of qualifying and non-qualifying property.

…[T]he committee wishes to clarify present law by stating that tangible personal property already eligible for the investment tax credit includes special lighting (including lighting to illuminate the exterior of a building or store, but not lighting to illuminate parking areas), false balconies and other exterior ornamentation that have no more than an incidental relationship to the operation or maintenance of a building, and identity symbols that identify or relate to a particular retail establishment or restaurant such as special materials attached to the exterior or interior of a building or store and signs (other than billboards). Similarly, floor coverings which are not an integral part of the floor itself such as floor tile generally installed in a manner to be readily removed (that is it is not cemented, mudded, or otherwise permanently affixed to the building floor but, instead, has adhesives applied which are designed to ease its removal), carpeting, wall panel inserts such as those designed to contain condiments or to serve as a framing for picture of the products of a retail establishment, beverage bars, ornamental fixtures (such as coats-of-arms), artifacts (if depreciable), booths for seating, movable and removable partitions, and large and small pictures of scenery, persons, and the like which are attached to walls or suspended from the ceiling, are considered tangible personal property and not structural components. Consequently, under existing law, this property is already eligible for the ITC.

[S. Rep. No. 1263, 95th Cong., 2d Sess. 117 (1978), reprinted in 1978-2 C.B. Vol. 1 315,415.]

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Treas. Reg. § 1.48-1(e)(1) provides a detailed explanation of buildings and their structural components for ITC purposes and has been the primary source for guidance, both with respect to component depreciation and cost segregation studies. The term "building" is described as

…any structure or edifice enclosing a space within its walls and usually covered by a roof whereby the structure improves the land, and provides shelter or housing for work, office, display, or sales space. The term includes, for example, structures such as apartment houses, factory and office buildings, warehouses, barns, garages, railway or bus stations, and stores. Such term includes any such structure constructed by, or for, a lessee even if such structure must be removed, or ownership of such structure reverts to the lessor, at the termination of the lease.

Specifically excluded from the definition of the term "building" are the following:

i. a structure which is essentially an item of machinery or equipment, or

ii. a structure which houses property used as an integral part of an activity specified in section 1.48(a)(1)(B)(i) if the use of the structure is so closely related to the use of such property that the structure clearly can be expected to be replaced when the property it initially houses is replaced. Factors which indicate that a structure is closely related to the use of the property it houses include the fact that the structure is specifically designated to provide for the stress and other demands of such property and the fact that the structure could not be economically used for other purposes.

The term "structural components" is defined in § 1.48-1(e)(2) of the Regulations as

…includes such parts of a building as walls, partitions, floors, and ceilings, as well as any permanent coverings therefor such as paneling or tiling; windows and doors; all components (whether in, on, or adjacent to the building) of a central air condition or heating system, including motors, compressors, pipes and ducts; plumbing and plumbing fixtures, such as sinks and bathtubs; electric wiring and lighting fixtures; chimneys; stairs, escalators, and elevators, including all components thereof; sprinkler systems; fire escapes; and other components relating to the operation or maintenance of a building.

However, the term "structural components" does not include machinery the sole justification for the installation of which is the fact that such machinery is required to meet temperature or humidity requirements which are essential for the operation of other machinery or the processing of materials or foodstuffs. Machinery may meet the "sole justification" test provided by the preceding sentence even though it incidentally provides for the comfort of employees, or serves, to an insubstantial degree, areas where such temperature or humidity requirements are not essential. For example, an air conditioning and humidification system installed in a textile plant in order to maintain the temperature or humidity within a narrow optimum range which is critical in processing particular types of yarn or cloth is not included within the term "structural components".

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The benefits of the ITC were somewhat offset by the provisions of IRC §§ 1245 and 1250, also enacted in 1962. These Code sections result in the conversion of capital gain to ordinary income on the disposition of a property, to the extent its basis has been reduced by an accelerated depreciation method. The definitions of property for purposes of §§ 1245 and 1250 are very similar to that for ITC and make reference to the regulations under § 48 and the definitions under § 38 property. These interrelated Code sections and the regulations (38, 48, 1245 and 1250) provide the pertinent authority for determining eligibility for ITC. They also determine eligibility for the immediate write-offs under section 179, the appropriate recovery periods for depreciation (§§ 167 and 168) and for depreciation recapture upon a disposition.

The primary issue in cost segregation studies is the proper classification of assets as either § 1245 or § 1250 property. Accordingly, the ITC rules are critical in determining whether a taxpayer has classified property into the appropriate asset class.

Section 1245(a)(3) provides that "section 1245 property" is any property which is or has been subject to depreciation under § 167 and which is either personal property or other tangible property used as an integral part of certain activities. Such activities include manufacturing, production or extraction; furnishing transportation, communication, electrical energy, gas, water, or sewage disposal services. Certain other "special use" property also qualifies as § 1245 property, but is not of a primary concern for purposes of this discussion. It is important to note that § 1245(a)(3) specifically excludes a building or its structural components from the definition of § 1245 property.

Treas. Reg. § 1.1245-3 defines "personal property," "other tangible property," "building," and "structural component" by reference to Treas. Reg. § 1.48-1. As previously discussed, those regulations (§ 1.48-1) provide definitions of tangible personal property that qualifies as § 38 property for ITC.

Section 1250(c) defines "section 1250 property" as any real property, other than section 1245 property, which is or has been subject to an allowance for depreciation. In other words, § 1250 property encompasses all depreciable property that is not § 1245 property.

Land improvements (i.e., depreciable improvements made directly to or added to land), as defined in Asset Class 00.3 of Rev. Proc. 87-56, may be either § 1245 or § 1250 property and are depreciated over a 15-year recovery period. Buildings and structural components are specifically excluded from 15-year property. Examples of land improvements include sidewalks, roads, canals, waterways, drainage facilities, sewers, wharves and docks, bridges, fences, landscaping, shrubbery, and radio and television towers. Note that some activity asset classes also include land improvements such as asset class 57.1 of Rev. Proc. 87-56.

From a statutory standpoint, the primary test for determining whether an asset is § 1245 property eligible for ITC is to determine whether or not it is a structural component of a building. In other words, if an asset is not a structural component of a building, then it can be considered to be § 1245 property. The structural component determination hinges on what constitutes an inherently permanent structure and how permanently the asset is attached to such a structure. Clearly, this is a factually intensive determination and explains the lack of bright-line tests for segregating property into § 1245 and § 1250 classifications.

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The early administrative rulings on ITC focused on a "functional use test" to determine whether an asset constituted § 1245 property. Rather than examining the inherent permanency characteristics of the asset, the test evaluated the purpose for which the asset was used. For example, if the asset served a function normally attributable to a structural component or permanent structure, it was not treated as tangible personal property even if it could be moved. However, following several conflicting court decisions which addressed the inherent permanency of particular assets, the Service shifted its focus from the functional use test to an evaluation of factors indicating inherent permanency.

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Revenue Ruling 75-178, 1975-1 C.B. 9 outlined several criteria to determine § 1245 property classification. These criteria included (1) whether the asset is movable or removable; (2) how the asset is attached to real property; (3) the design of the asset; and (4) whether the asset bears a load.

The classic pronouncement addressing inherent permanency was Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664, 672-673 (1975). The Tax Court, based on an analysis of judicial precedent, developed six questions designed to ascertain whether a particular asset qualifies as tangible personal property. These questions, referred to as the "Whiteco Factors," are:

  1. Can the property be moved and has it been moved?
  2. Is the property designed or constructed to remain permanently in place?
  3. Are there circumstances that show that the property may or will have to be moved?
  4. Is the property readily movable?
  5. How much damage will the property sustain when it is removed?
  6. How is the property affixed to land?

It should also be noted, however, that moveability is not the only determinative factor in measuring inherent permanency. In L.L. Bean, Inc. v. Comm., T.C. Memo. 1997-175, aff'd, 145 F.3d 53 (1st Cir. 1998), it was determined that, even though the structure could be moved, it was designed to remain permanently in place. Thus, it was determined to be an inherently permanent structure.

Examiners should also consider the following points when addressing the Whiteco factors:

  • The manner in which an item is attached to a building or to the land,
  • The weight and size of the item,
  • The time and costs required to move the components,
  • The number of personnel required in planning and executing a move,
  • The type and quantity of equipment required for a move,
    The history of the item or similar items being moved,
  • The time, cost, manpower and equipment required to reconfigure the existing space if the item is removed,
  • Any intentions regarding the removal,
  • Whether the item is designed to be moved, and
  • Whether the item is readily usable in another location.

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Due to the significant tax benefits derived from ITC-eligible property, the use of component depreciation proliferated during the 1970's and created problems not unlike those faced today by taxpayers, practitioners, and the Service regarding cost segregation studies. The problem became so pronounced during the late 1970’s that Congress disallowed component depreciation as a method of computing depreciation for buildings, simultaneously with the enactment of ACRS in the Economic Recovery Tax Act of 1981 (ERTA) [see IRC § 168(f)(1)]. In addition to the controversies surrounding the determination of qualifying § 1245 property, the driving force behind this action was the disadvantage suffered by smaller taxpayers that could not afford to have expensive ITC studies performed.

In 1986, MACRS reiterated that the use of component depreciation was not allowable. Section 168(i)(6) provides that depreciation for any addition or improvement to property shall be computed in the same manner as the depreciation for the underlying property, as if the underlying property had been placed into service at the same time. [Prior to 1981, an asset composed of separately replaceable components could have been fragmented for depreciation purposes even though the interdependent components were parts of an integrated whole.].

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A recent landmark decision, Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997)("HCA"), provided the legal support to use cost segregation studies for computing depreciation. In effect, this decision has reinstated a form of component depreciation.

In HCA, the Service took the position that certain property items were structural components of a building and that § 168(f)(1) prohibited the use of a component depreciation method for computing depreciation on buildings (including structural components). The Service also argued that § 168(f)(1) effectively changed the definition of tangible personal property for ACRS purposes (i.e., after the enactment of ACRS in 1981) by excluding any item attached to the building from being § 1245 property. Accordingly, the prohibition against component depreciation precluded an item from being treated as § 1245 property if it was attached to a building and had utility beyond its relationship to the particular piece of property.

However, Judge Wells ruled that the property at issue was § 1245 property and rejected the Service’s argument that findings based on Treas. Reg. § 1.48-1(e) were inapplicable following the enactment of ACRS in 1981. Based on his review of the statutory and regulatory language, as well as case law, Judge Wells concluded that the enactment of ACRS did not redefine § 1250 property to include property that had been § 1245 property for purposes of ITC. Accordingly, the court determined that §168(f)(1), prohibiting component depreciation, applied only to §1250 property.

The HCA ruling effectively reinstated a form of component depreciation for certain building support systems, such as the electrical and plumbing systems that directly serve tangible personal property. Therefore, cost segregation methodologies previously used to allocate the cost of a building between structural components and ITC property can now be used for § 1245 and § 1250 property.

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The Service did not appeal HCA since it could not state that the court's reasoning and decision were clearly erroneous. In an Action on Decision (AOD CC-1999-008), the Service acquiesced to the validity of the method approved by the court (i.e., pre-1981 ITC tests remained applicable for determining tangible personal property under both ACRS and MACRS). However, the Service non-acquiesced to the court’s findings as to which specific assets qualified as tangible personal property. Two cases, LaPetite Academy and Boddie-Noell, were specifically referenced in the AOD with respect to the determination of structural components and tangible personal property. In Boddie-Noell Enterprises, Inc. v. United States, 36 Fed. Cl. 722 (1996), aff’d without op., 132 F.2d 54 (Fed Cir. 1997), the court held that acoustical tile ceilings, a portion of an electrical system and a plumbing system were structural components under the regulations. In LaPetite Academy, Inc. v. United States, 95-1 U.S.T.C. (CCH) 50,193 (W.D. Mo. 1995) aff'd without op., 72 F.2d 133 (8th Cir. 1995), wall panels, kitchen plumbing, bathroom accessories and a portion of the electrical system were held to be structural components under the regulations.

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Chief Counsel issued further guidance to the field in the form of an advice memorandum dated May 28, 1999. It made the following observations and recommendations for field agents examining cost segregation studies:

  • The determination of whether an asset is a structural component or tangible personal property is a facts-and-circumstances assessment.
  • The use of cost segregation studies must be specifically applied by the taxpayer.
  • Allocations must be based on a "logical and objective measure" of the portion of the equipment that constitutes § 1245 property.
  • An accurate cost segregation study may not be based on non-contemporaneous records, reconstructed data, or taxpayer's estimates or assumptions that have no supporting records.
  • Cost segregation studies should be closely scrutinized by the field.
  • A change in depreciation method is a change in method of accounting, requiring the consent of the Secretary or his delegate.

[Note, however, that the recent 5th Circuit opinion in Brookshire Brothers Holding, Inc. & Subsidiaries v. Commissioner, 320 F.3d 507 (5th Cir. 2003), aff’g T.C. Memo. 2001-150, reh’g denied (March 31, 2003), which was adverse to the Service, may impact cases in that circuit. The court affirmed the Tax Court decision that the regulations allow taxpayers to make temporal changes in their depreciation schedules, as well as changes in the classification of property, without the consent of the IRS. However, the 10th Circuit opinion in Kurzet v. Commissioner, 222 F.3d 830 (10th Cir. 2000), was favorable to the government on this issue. Clearly, the issue is unsettled. However, Treas. Reg. § 1.446-1T(e)(2)(ii)(d)(2)(i), effective for taxable years ending on or after December 30, 2003, provides that a change in the depreciation or amortization method, period of recovery, or convention of a depreciable or amortizable asset is a change in method of accounting. See Example 9 of Treas. Reg. § 1.446-1T(e)(2)(iii), which specifically relates to changes based on a cost segregation study. On January 28, 2004, Chief Counsel Notice CC-2004-007 was issued, setting forth Chief Counsel’s Change in Litigating Position on the application of § 446(e) to changes in computing depreciation. Examiners may contact the Change in Accounting Method Technical Advisors, for the most current information. 

Reference may also be made to  Appendix Chapter 6.2 for additional information and details regarding Notice CC-2004-007 (January 28, 2004).]

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A myriad of court cases has addressed the classification of property for ITC purposes. All of the cases are factually-intensive and quite often the opinions of the courts conflict. In addition, though the Service has issued numerous revenue rulings to address specific fact patterns, no bright-line tests have evolved. Because of this problem, significant controversy still exists regarding property classification for depreciation purposes.

It is beyond the scope of this chapter to review all the applicable cases. However, Appendix Chapter 6.4 provides a summary of the major court decisions and pronouncements in this area. This chapter is organized by case name and by construction division per the Construction Specification Institute (CSI) Master Format Division. In addition, specific guidance for the casino, restaurant, ahd retail industries is provided in Appendix Chapter 7.1, Appendix Chapter 7.2Appendix Chapter 7.3, and Appendix Chapter 7.4, respectively.

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This chapter has provided a legal framework for distinguishing § 1245 property from
§ 1250 property and for determining appropriate recovery periods. It cannot be overemphasized that the classification of assets is a factually intensive determination. Based on HCA, the recent AOD, and the 1999 Chief Counsel Advice Memorandum, the use of cost segregation studies is expected to increase. Thus, examiners need to examine and evaluate a cost segregation study in light of the applicable statutes and judicial precedent established for a similar fact pattern.

In the next chapter, we will take a closer look at the methodologies used to prepare cost segregation studies.

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Legislator Makes Fool of Himself

Legislator Makes Fool of Himself

State Representative Garth Everett claimed that eminent domain is the taking only of “surface land.”  Simply because people do not know that their property is being trespassed upon does not mean they have no right to compensation.  Basic law requires that what is taken is paid for.  The historical colloquialism for this is that people own to the heavens and to the center of the earth in a cylindrical form.  State Representative Everett needs a copy of a property book.


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July 20, 2010

NCAHMA's 10th Annual Affordable Housing Underwriting Forum & Annual Meeting

NCAHMA's 10th Annual Affordable Housing Underwriting Forum & Annual Meeting
October 5-6, 2010
The Doubletree Hotel-Magnficent Mile, Chicago, Illinois

Can't miss sessions on critical tax credit underwriting and development issues

Unique networking opportunities

Affordable pricing

There is only one thing missing...You!

Early registration discounts are still available. Visit our website an register today! Questions? Contact Thom Amdur at 202-939-1753 or tamdur@housingonline.com. See you in Chicago!

Conference Agenda

October 5, 2010

11:00 am

NCAHMA Executive Committee Meeting

Executive Session

1:30 pm

Welcome & Introductions

2:00 pm

Affordable Housing & Tax Credit Policy Update

This Spring was one of the busiest on record for affordable housing and tax credit policy advocates. This session will convene industry experts to update our members on critical policy developments from Congress and HUD. Highlights include:

  • FHA Underwriting Changes
  • Securing the Future of the LIHTC
  • Expanding Opportunities to Preserve Affordable Housing Through Transformation of Rental Assistance and Preservation Legislation
  • Taxation of Carried Interest: What Does It Mean For Developers & Investors?
  • ...and more

Glenn Graff, Applegate & Thorne-Thomsen LLP, Chicago, IL
Ronne Thielen, Centerline Capital Group, Irvine, CA
Peter Bell, NH&RA, Washington, DC

3:15 pm

State-of-the States: Tax Credit Allocators Roundtable

Executives from housing finance agencies discuss trends and issues in their qualified allocation plans. Special focus on policy impacting the allocation of 9% LIHTCs, Tax Exempt Bonds and 1602/Exchange funds.

4:30 pm

Affordable Housing Investors Council Update

This panel brings key leaders from the Affordable Housing Investors Councils to discuss key developments in underwriting, risk rating, asset management and more...

Gina Bender, Bank of America Merrill Lynch
Linda Hill, AEGON USA Realty Advisors,Inc., San Francisco, CA

5:30 pm

Underwriting Tax Credit Equity

In the wake of the financial downturn, developers, syndicators and housing finance agencies continue to seek a workable equilibrium in the equity market. This panel will bring together active syndicators and investors to discuss key issues impacting the access to tax credit equity including:

  • The Effect of Recapitalization and Deconsolidation On Equity Providers
  • New LIHTC Fund Structures
  • Attracting New Tax Credit Investors
  • Tax Credit Portfolio Trends
  • State of the Market Place, Pricing & Terms

John Simon, Sidley Austin LLP, Chicago, IL
Ronne Thielen, Centerline Capital Group, Irvine, CA
Pat Nash, JP Morgan Chase, Chicago, IL
Mandy Kozminske, US Bank, St. Louis, MO

6:30 pm

Networking Reception

October 6, 2010

8:00 am

Committee Meetings and Networking Breakfast

All participants welcome!

9:30 am

Committee Reports

10:00 am

Understanding The Implication of New Area Median Incomes & Fair Market Rents On Affordable Housing Development & Market Analysis

Bud Clarke, Boston Financial Investment Management, Boston, MA
Brad Weinberg, Novogradac & Company, Bethesda, MD

11:15 am

Demographic & Census Update

This panel will explore the transition that data producers and analysts will be making the 2010 Census annd the American Community Survey.

Julia Lavigne, Ribbon Demographics, Newcastle, CO
Ken Hodges, Nielson Claritas, Ithaca, NY

12:00 pm

Networking Lunch & Regional Market Updates

1:30 pm

Measuring and Projecting Absorption: Reconciling Conflicting Economic, Construction & Demographic Data

John Prior, Prior & Associates, Denver, CO
Tad Scepaniak, RealPropertyResearchGroup, Woodstock, GA

2:45 pm

Key Issues & Developments In Market Analysis Part II

This session will explore key issues in affordable housing market analysis including defining scope of work, MAP market study guidelines and best practices. A can't miss session for analysts and users of market studies. This session is a follow-up from the Part I session held at NCAHMA 2010 Spring Underwriting Forum.

3:45 pm

Alternative Field Work Business Opportunities: Site Inspections and Asset Management Inspection

Linda Cargill, Cargill Investment Group, Boston, MA
Doug Koch, Douglas P. Koch, MAI, AICP, Newton, MA
Lolita Sereleas, Fund Consulting, Chicago, IL

4:30 pm

End of Meeting


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Reis’s preliminary National 2Q 2010 findings on Apartment, Office, Retail, and New Construction activity have been cited frequently in the business press this week. Second quarter performance was relatively grim. The best Reis’s economists can say about the Retail and Office sectors is that the pace of deterioration appears to be slowing. Conditions in the Apartment sector have improved since the recession began, but that is not saying much.
However, because national averages can mask significant variation in performance at the metro and submarket levels, it is vital that local commercial real estate professional be armed with the best information available pertaining to their markets. ReisReports can help you find the latest rent and vacancy figures, sales transactions, and rent comparables in your areas of interest: Los Angeles, Orange County and Ventura County. 2Q findings will be published on August 1. Now is the time to set up your free trial account with ReisReports.
ReisReports provides instant access to:
  • Apartment, office and retail coverage
  • Metro and Submarket performance statistics (rent, vacancy, new construction, etc.)
  • Sales Comparables
  • Rent Comparables
  • Impartial information that is trusted on both sides of a deal
  • Personalized reports that can include your business logo and contact information
  • Affordable pricing: $75 per month—less than your monthly cell phone bill
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  • Commercial real estate prices increased 3.6% in May, Moody's says
    Moody's/REAL Commercial Property Price Indices showed that commercial real estate prices rose 3.6% in May. That followed a 1.7% increase in April. The ratings agency warns, however, that an industry recovery will not follow a straight path. "We expect commercial real estate prices to remain choppy in the coming months," said Moody's Managing Director Nick Levidy. "The positive news of increasing prices over the past two months is tempered by low transaction volumes, forecasts for slowing macroeconomic growth and the rising risk of a double-dip recession." The Wall Street Journal/Developments blog (7/19) LinkedInFacebookTwitterEmail this Story
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New Book: Property Rights - Eminent Domain and Regulatory Takings Re-Examined (2010)

New Book: Property Rights - Eminent Domain and Regulatory Takings Re-Examined (2010)

Posted: 20 Jul 2010 04:10 AM PDT

Property_1800 I recently picked up a copy of Property Rights - Eminent Domain and Regulatory Takings Re-Examined (Bruce L. Benson, ed., Independent Institute 2010), available on-line here.

At 299 pages and with 13 entries, I haven't had a chance to read the whole thing yet. But after an initial skim, a few of the chapters stand out: Steven Eagle on Assembling Land for Urban Development - The Case for Owner Participation, Ilya Somin on The Limits of Backlash - Assessing the Political Response to Kelo, and Scott Bullock on The Inadequacy of the Planning Process for Protecting Property Owners From the Abuse of Eminent Domain for Private Development








We will post more as we get further into the book, but for now, here's the publisher's summary: 

The U.S. Supreme Court decision, Kelo v. New London, has become a dramatic focal point for the broad use of eminent domain by the government, and has resulted in a widespread backlash. State legislatures all over the country have responded to the backlash by considering, and often attempting to impose, new constraints on the ability of local governments to take property from one private party and transfer it to another. There has also been a revival of academic interest in the issues of eminent domain and of takings. Property Rights explores the uses and abuses of eminent domain and regulatory takings in four areas: proposed constraints on the use of eminent domain, compensation issues in theory and practice, eminent domain from a public choice perspective, and the spillover costs of takings. This comprehensive book brings together a diverse group of scholars and experts to explain the implications of this decision. Contributors include the attorney who represented Susette Kelo before the U.S. Supreme Court, the legal scholar who wrote Regulatory Takings, and experts on land value determination, land-use policy, environmental regulation, regulatory policy, entrepreneurial activities, and economic behavior.


Worth reading.

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July 2010 Past Issues | Printer-friendly version | Advertise
Order Forms | Title Wizard | Consumer Library | Department of Insurance
> Message from the President
A Message From the President, Jeff Brown
It is with pleasure and pride that I recently accepted the CLTA's appointment as President for the coming year.  I thank Roger Jewkes for his professionalism and leadership over the last year, and I thank Craig Page and all of his staff for their hard work and continuing support.


> CLTA News
CLTA Committee Openings
Are you interested in shaping the title industry's future by serving on one of CLTA's important committees? We currently have vacancies on the following committees...

> Sacramento Report
CLTA Works with Author of Copy Services Bill
Assembly Bill 1373 (Lieu) would have potentially prohibited title companies from providing grant deeds and other documents to consumers, lenders, and realtors. ...

Superpriority Proposed for Postponed Property Taxes
Assembly Bill 1718 (Blumenfield) modifies the senior citizen property tax postponement program. The current program, which was suspended in February 2009 for budgetary reasons, gives ...

Transfer on Death Deed Bill Awaits Budget
Assembly Bill 724 (DeVore) establishes a new procedure for transferring real estate upon the owner's death – based on a new deed form for a property owner to complete. A Transfer on Death (TOD) deed would name ...

> Industry News
Federal Insurance Office in Financial Reform Package
A new Federal Insurance Office ("FIO") is created by the financial reform legislation within the Treasury Department. The main purpose of the FIO seems to be ...

Federal Mortgage Lenders Cast Doubt on Future Solar Loan Programs
Fannie Mae and Freddie Mac issued letters stating that Property Assessed Clean Energy, or PACE, programs may violate the mortgage lenders' rules because counties receive ...

Appraisals and Financial Reform
The financial reform legislation allows regulators to issue regulations on the portability of appraisals from one lender to another and has provisions for regulating ...

> Court Cases
Luna v. Brownell (B212757)
A deed transferring property to the trustee of a trust is not void as between the grantor and grantee merely because the trust ...

Trustee's Sales
Mabry v. Superior Court (G042911)
The court answered, and provided thorough explanations for, a laundry list of questions regarding Civil Code Section 2923.5, which requires a lender to explore options for ...


Contact CLTA? Find A Member? CLTA Home CLTA Articles of interest
Advertising? Join Our Mailing List? CLTA Committees CLTA Publications
Submit an Article? Become A Member? CLTA Calendar  
PO BOX 13968, Sacramento, CA 95853 / 1215 K Street, Suite 1816, Sacramento, CA 95814
(p) 916-444-2647, (f) 916-444-2851, www.clta.org, mail@clta.org

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Mobile phone users can view an optimized version here.
If you cannot see this email properly, you can view this page in your browser.

You are receiving this email because you are a member of CLTA. If you no longer wish to receive this newsletter, you can unsubscribe.

July 2010 Past Issues | Printer-friendly version | Advertise
Order Forms | Title Wizard | Consumer Library | Department of Insurance
> Message from the President
A Message From the President, Jeff Brown
It is with pleasure and pride that I recently accepted the CLTA's appointment as President for the coming year.  I thank Roger Jewkes for his professionalism and leadership over the last year, and I thank Craig Page and all of his staff for their hard work and continuing support.


> CLTA News
CLTA Committee Openings
Are you interested in shaping the title industry's future by serving on one of CLTA's important committees? We currently have vacancies on the following committees...

> Sacramento Report
CLTA Works with Author of Copy Services Bill
Assembly Bill 1373 (Lieu) would have potentially prohibited title companies from providing grant deeds and other documents to consumers, lenders, and realtors. ...

Superpriority Proposed for Postponed Property Taxes
Assembly Bill 1718 (Blumenfield) modifies the senior citizen property tax postponement program. The current program, which was suspended in February 2009 for budgetary reasons, gives ...

Transfer on Death Deed Bill Awaits Budget
Assembly Bill 724 (DeVore) establishes a new procedure for transferring real estate upon the owner's death – based on a new deed form for a property owner to complete. A Transfer on Death (TOD) deed would name ...

> Industry News
Federal Insurance Office in Financial Reform Package
A new Federal Insurance Office ("FIO") is created by the financial reform legislation within the Treasury Department. The main purpose of the FIO seems to be ...

Federal Mortgage Lenders Cast Doubt on Future Solar Loan Programs
Fannie Mae and Freddie Mac issued letters stating that Property Assessed Clean Energy, or PACE, programs may violate the mortgage lenders' rules because counties receive ...

Appraisals and Financial Reform
The financial reform legislation allows regulators to issue regulations on the portability of appraisals from one lender to another and has provisions for regulating ...

> Court Cases
Luna v. Brownell (B212757)
A deed transferring property to the trustee of a trust is not void as between the grantor and grantee merely because the trust ...

Trustee's Sales
Mabry v. Superior Court (G042911)
The court answered, and provided thorough explanations for, a laundry list of questions regarding Civil Code Section 2923.5, which requires a lender to explore options for ...




Contact CLTA? Find A Member? CLTA Home CLTA Articles of interest
Advertising? Join Our Mailing List? CLTA Committees CLTA Publications
Submit an Article? Become A Member? CLTA Calendar  
PO BOX 13968, Sacramento, CA 95853 / 1215 K Street, Suite 1816, Sacramento, CA 95814
(p) 916-444-2647, (f) 916-444-2851, www.clta.org, mail@clta.org

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July 18, 2010

Welcome to CARETS Commercial

CARETS/Property Centric MLS California Real Estate Technology Services

A property-centric MLS means that the database that underlies your MLS system is structured and patterned upon an inventory of all the commercial parcels and buildings in your region. This is how ePropertyData builds and structures its MLS systems using technology that has been developed over the past 11 years. A broker's ability to access analytics and communicate marketbased sales and lease history to help his or her client make a buy/lease decision is critical. In a changing market, having accurate and detailed information at your fingertips can make the difference in winning the client or not...and ultimately, getting the deal done.

Building a property-centric database and maintaining it is critical to the efficacy of a MLS system. The quality of transaction information that is compiled and stored in connection with each parcel/building varies widely among property-centric systems. Technology, quality assurance process and financial commitment are important elements in making sure that the system provides its users with accurate and timely transaction information.

Without a property-centric system, tracking sale and lease transaction history is nearly impossible. Without transaction history most of the desired analytics that illustrate market and sub-market occupancy and availability are not possible. The alternative to a property-centric system is a sale and lease listing data system and although useful, it is not comprehensive.

Public Side of MLS System—Places CARETS on the Map:
  1. Newly designed website for CARETS with Text & Map Search capabilities
  2. Searchable For Sale/Lease and Business Opportunity listings
  3. Detail listing pages for all search types with links to maps, demographics information, aerial views, photos and flyers/pdf files
  4. Featured property display
  5. Searchable member directory
  6. Event Calendar, including "featured" event functionality
  7. Your MLS News section Custom static content pages based on the needs of each MLS (such as an affiliate page, a support page, a contact page, a membership benefits page, an "about our MLS" page, etc.)
Private Side of MLS System—Exclusive to CARETS Members:
  1. Listing management for active and off-market listings
  2. Commercial Market Analysis and reports
  3. Load Business Opportunities
  4. Enter your listings once and use often
  5. Ability to load additional floor plans, marketing flyers, photos to listings
  6. Enhanced Listing Package on CommercialSource
  7. Advanced listing search capabilities, including map searches and saved searches
  8. Reporting functionality including access to our report catalogue: can send reports to your browser, to an email address or to a PDF file
  9. Reports include: Listing Detail/Office Inventory/Agent Inventory/Multi-Property Map/Property Showing
  10. Custom downloads of search results to Excel
  11. Daily Hot-Sheet notifications via email based on member's custom criteria
  12. Searchable building directory
  13. Searchable commercial property transaction data for sale or for lease
  14. Automatic reminder notification via email of approaching listing expiration dates
  15. Personal profiles for each member, including photo, specialty, market areas serviced and custom text for display in member directory searches
  16. Online address book Links to compiled research reports put together by the MLS staff
  17. User dashboard where you can view your listings, traffic and other metrics to monitor your marketing efforts and produce reports that can be provided to clients.
  18. Custom static content pages based on the needs of each MLS (such as links to public records, a training page, MLS bylaws/rules or a Forms page with downloadable forms applicable to that MLS)

Let's work together

For years we've taken complex technology and simplified it for the commercial real estate professional.

ePropertyData™ is an industry-leading, Commercial Information Exchange "CIE" solutions provider that is owned by the National Association of Realtors® "NAR"—on behalf of the commercial real estate industry. Since 1998, our company has provided associations with robust CIE solutions that are custom designed to meet the latest media-rich, data-driven demands of the industry. We are a broker and client-centric group of technology and real estate professionals dedicated to providing commercial associations and their members the highest quality products and services.

  1. All members will have access to a fully dedicated commercial information exchange system.
  2. A property centric system that sets the stage for growth and expansion of the system if and when needed.
  3. Fully integrated system with a national listings website owned and sanctioned by NAR that is growing every day.
  4. We are unique in offering you a system where you own and control your listing data..
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2012-2013 edition of USPAP


Second Exposure Draft of proposed changes to the 2012-13 edition of USPAP

The ASB’s goal for the 2012-2013 edition of USPAP is to review and revise as needed specific identified areas of USPAP. These include reporting requirements, report options and a review of STANDARDS 7 and 8, which are the development and reporting standards for the appraisal of personal property. The Board is also considering other revisions and additions that may be necessary to ensure clarity and relevance.

First Exposure Draft of proposed changes to the 2012-2013 edition of USPAP:

In January, the ASB issued the First Exposure Draft of proposed changes for the 2012-13 edition of the Uniform Standards of Professional Appraisal Practice and Request for Public Comment. That exposure draft introduced a proposed new rule, the COMMUNICATION RULE, which addressed an appraiser’s communication responsibilities. Broader than the reporting Standards, the draft included two distinct versions of the proposed new Rule with different positions. All the written comments that were received on the First Exposure Draft are available for public viewing on The Appraisal Foundation’s website at

www.appraisalfoundation.org. The ASB also heard oral remarks at public meetings in Las Vegas on February 5, 2010, and in San Diego on April 30, 2010.

The Board received numerous and widely divergent written comments concerning the proposed COMMUNICATION RULE, both as a concept and regarding the different options. Opinions varied on the question of allowing draft, interim or preliminary communications. There were challenges to whether the COMMUNICATION RULE was necessary. There were suggestions on alternative ways to approach the issue, and most importantly, there were numerous comments that relayed how these proposed changes may impact current practice.

Comments ranged from those that were very strongly opposed to any provision that would allow for draft reports, in any form, to those who believed that there should be an unrestricted allowance for drafts with no record keeping requirements for those drafts.

The comments the Board received also showed a considerable diversity of opinions among appraisers, users of appraisal services and other interested parties in what the terms "draft," "interim" and "preliminary" mean. The most obvious related to the meaning of draft report. Second Exposure Draft of Changes for the 2012-13 USPAP 3

There were many comments that addressed drafts and what constituted a draft report. To some, a draft was submitted to the client for acceptance in the appraiser’s assumed final form. If the client approved, the appraiser removed "draft" from the report label and resubmitted it. In other cases, the draft was an excerpt from a report that was sent as an interim submission. The comments indicated that some clients require drafts, while others consider any report a draft until it has their acceptance.

The First Exposure Draft also included a proposed revision to the definition of report. That revised definition was proposed to eliminate the linkage with "completion of an assignment" and to eliminate the limitation on how a report is communicated ("written or oral"). These edits also elicited many comments. One issue related to the definition of report that became apparent after the First Exposure Draft was a common lack of understanding of the current definition of assignment results. The current definition is very broad and includes any opinion developed specific to an assignment. Assignment results are not, per USPAP, just the final opinion, recommendation or conclusion that is the ultimate objective of the assignment. Yet there seems to be a common misconception that assignment results are only the final opinion.

The Board’s underlying concern is always public trust. Looking at the issue of draft reports while giving highest priority to public trust, the ASB believes that USPAP should address preliminary communication of opinions and conclusions in appraisal practice. The Board also believes that appraisers must be accountable for their work. This Second Exposure Draft includes changes that attempt to achieve both of these objectives.



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Precondemnation Best Practices


Welcome to our webinar:Precondemnation Best PracticesStrategies and Steps to Avoid Unnecessary Costs and Delays

We will begin in a few moments. The call will be on mute for the duration of the presentation. If you have a question, please use the Q&A pane on your screen. Questions will be answered at the end of the presentation.A copy of the presentation is available for download and can be found at the top right corner of your

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July 17, 2010

Getting Pinched by Charles E Jack, MAI Appraisal Institute

Getting Pinched by Charles E Jack, MAI Appraisal Institute
[ Follow Ups ] [ Post Followup ] [ Appraisers Talk Back ]


Posted by Cochise on July 13, 2010 at 15:11:23:

" One thing I don’t like is that the Clark County Assessor charges $2,500 for a snapshot in time of the Assessor’s Parcel Layer. So I buy the parcel layer like once every couple of years unless I can bill it directly to a consulting or litigation job I’m working on. "

Charles E. Jack Appraisal & Consulting, Inc. MAI, Appraisal Institute

"Admitting high geek factor over here…

Here’s some examples of what I’ve done with ARC GIS 9.3. (See attached.)

However, I find ARC very easy to use with the exception of perhaps the highly detailed features. Great book is ESRI’s “Getting to know ARC GIS Desktop”. Between that book and trial and error, I taught myself. Very easy in my opinion. But for those who are not electronically inclined it can be challenging… The book includes a free full version trial that will work for like 3-6 months or something. Real good deal if you’re just screwing around wanting to test a few things out…

One thing I don’t like is that the Clark County Assessor charges $2,500 for a snapshot in time of the Assessor’s Parcel Layer. So I buy the parcel layer like once every couple of years unless I can bill it directly to a consulting or litigation job I’m working on.

Shape files are readily available from Clark County GISMO…


(See GIS Data and GIS Data Subscr1ptions)…

Full real time data subscr1ption is probably beyond the reach of most local appraisers. Something like $15K-$20K or so. Probably would be over-kill for small projects. You’d have to need and want to use GIS on every single assignment in a larger office before this would start making sense.







Charles E. Jack IV, MAI


Charles E. Jack Appraisal & Consulting, Inc.

8324 Antler Ridge Avenue

Las Vegas, NV 89149-4505

Phone: (702) 395-5962

Fax: (702) 656-0610

Cell: (702) 595-6484



MSN Messenger: charlesjack@hotmail.com"

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July 16, 2010

See a sample reprint in PDF format. Order a reprint of this article now


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To Fix Sour Property Deals, Lenders 'Extend and



Some banks have a special technique for dealing with business borrowers who can't repay loans

coming due: Give them more time, hoping things improve and they can repay later.

Banks call it a wise strategy. Skeptics call it "extend and pretend."

Banks are applying it, in particular, to

commercial real-estate lending, where, during

the boom, optimistic borrowers got in over their

heads to the tune of tens of billions of dollars.

A big push by banks in recent months to modify

such loans—by stretching out maturities or

allowing below-market interest rates—has

slowed a spike in defaults. It also has helped

preserve banks' capital, by keeping some dicey

loans classified as "performing" and thus

minimizing the amount of cash banks must set

aside in reserves for future losses.

Restructurings of nonresidential loans stood at

$23.9 billion at the end of the first quarter, more than three times the level a year earlier and

seven times the level two years earlier. While not all were for commercial real estate, the total

makes clear that large numbers of commercial-property borrowers got some leeway.

But the practice is creating uncertainties about the health of both the commercial-property

market and some banks. The concern is that rampant modification of souring loans masks the

true scope of the commercial property market weakness, as well as the damage ultimately in store

for bank balance sheets.

In Atlanta, Georgian Bank lent $13.5 million to a company in late 2007, some of it to buy land for

a 53-story luxury Mandarin Oriental hotel and condo development. The loan came due in

November 2008, but the bank extended its maturity date by a year. The bank extended it again to

May 2010, with an option for a further extension to November 2010, according to court


Darryl James for The Wall Street Journal

A Portland, Ore., bank has extended the original 2007

loans taken out to purchase this lot. The planned

residential community remains undeveloped.

View Full Image

Bank Fix for Unpaid Commercial Property Loans: 'Extend and Pretend' - WSJ.com Page 1 of 5

http://online.wsj.com/article/SB10001424052748704764404575286882690834088.html 7/16/2010

Georgia's banking regulator shut down the bank last September. A subsequent U.S. regulatory

review cited "lax" loan underwriting and "an aggressive growth strategy…that coincided with

declining economic conditions in the Atlanta metropolitan area." Some of Georgian Bank's assets

were assumed by First Citizens Bank and Trust Co. of Columbia, S.C., which began foreclosure

proceedings on the still-unbuilt luxury development. The borrowers contested the move, and

settlement talks are in progress.

Also in Atlanta, Bank of America Corp. has extended a loan

twice for a high-end shopping and residential project. Three

years after a developer launched the Streets of Buckhead

project as a European-style shopping district, all there is to

show for it is a covey of silent cranes and a fence. The

developer, Ben Carter, says he is in final negotiations for an

investor to come in and inject $200 million into the

languishing development.

Regulators helped spur banks' recent approach to commercial

real estate by crafting new guidelines last October. They gave

banks a variety of ways to restructure loans. And they allowed

banks to record loans still operating under the original terms

as "performing" even if the value of the underlying property

had fallen below the loan amount—which is an ominous sign

for ultimate repayment. Although regulators say banks

shouldn't take the guidelines as a signal to cut borrowers more slack, it appears some did.

Banks hold some $176 billion of souring commercial-real-estate loans, according to an estimate

by research firm Foresight Analytics. About two-thirds of bank commercial real-estate loans

maturing between now and 2014 are underwater, meaning the property is worth less than the

loan on it, Foresight data show. U.S. commercial-real-estate values remain 42% below their

October 2007 peak and only slightly above the low they hit in October 2009, according to

Moody's Investors Service.

In the first quarter, 9.1% of commercial-property loans held by banks were delinquent, compared

with 7% a year earlier and just 1.5% in the first quarter of 2007, according to Foresight.

Holding off on foreclosing is often good business, says Mark Tenhundfeld, senior vice president

at the American Bankers Association. "It can be better for a bank to extend a loan and increase

the chance that the bank will be repaid in full rather than call the loan due now and dump more

property on an already-depressed market," he says.

But continuing to extend loans and otherwise modify them, rather than foreclosing, amounts to a

bet that the economy will rebound enough to enable clients to find new demand for the plethora

of offices, hotels, condos and other property on which they borrowed. If it doesn't work out this

way, the banks will end up having to write off the loans anyway.

At that point, if they haven't been setting aside sufficient cash all along for potential losses on

such loans, the banks will face a hit to their earnings.

Bank Fix for Unpaid Commercial Property Loans: 'Extend and Pretend' - WSJ.com Page 2 of 5

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Banks' reluctance to bite the bullet on some deteriorating commercial real estate can have

economic repercussions. The readiness to stretch out loans puts a floor under commercial real

estate and keeps it from hitting bottom, which may be a precondition for a robust revival.

More broadly, the failure to

get the loans off banks' books

tends to deter new lending to

others. It's a pattern

somewhat reminiscent,

although on a lesser scale, of

the way Japanese banks'

failure to write off souring

loans in the 1990s

contributed to years of


It's a Catch-22 for banks. As

long as some of their capital

is tied up in real-estate loans

that are struggling—and as

the banks see a pipeline of

still-more sour real-estate

debt that will mature soon—

their lending is likely to remain constricted. But to wipe the slate clean by writing off many more

loans would mean an even bigger hit to their capital.

"It does not take much of a write-down to wipe out capital," says Christopher Marinac, managing

principal at FIG Partners LLC, a bank research and investment firm.

Federal bank regulators tackled the issues in October with a 33-page set of guidelines. Bank

regulators have said they were concerned about commercial-property losses and debts coming

due on commercial property.

Another problem they sought to resolve was that banks and their examiners weren't always on

the same page. In some cases banks weren't recognizing loan problems, while in other cases,

tough bank examiners were forcing banks to downgrade loans the bankers believed were still


The guidance was intended "to promote both prudent commercial real-estate loan workouts by

banks and balanced and consistent reviews of these loans by the supervisory agencies," said

Elizabeth Duke, a Federal Reserve governor, in a March speech. The guidelines came from the

Federal Financial Institutions Examination Council, which includes the Fed, the Federal Deposit

Insurance Corp. and the Comptroller of the Currency.

Although one goal was greater consistency in the treatment of commercial real-estate loans, in

practice, the guidelines appear to have fed confusion in the markets about how banks are dealing

with commercial real-estate debt. "I just don't believe that the standard is being applied

Bank Fix for Unpaid Commercial Property Loans: 'Extend and Pretend' - WSJ.com Page 3 of 5

http://online.wsj.com/article/SB10001424052748704764404575286882690834088.html 7/16/2010

consistently across the industry," says Edward Wehmer, chief executive of Wintrust Financial

Corp. in Lake Forest, Ill.

In a May conference call with 1,400 bank executives, regulators sought to clear up confusion.

"We don't want banks to pretend and extend," Sabeth Siddique, Federal Reserve assistant

director of credit risk, said on the call. "We did hear from investors and some bankers

interpreting this guidance as a form of forbearance, and let me assure you it's not."

Restructurings increased at some banks, like BB&T Corp. of Winston-Salem, N.C. Its total of one

type of restructured commercial loan hit $969 million in recent months, the bank reported in

April. That was a huge jump from six months earlier, when the figure was just $68 million.

The increase was "basically a function of implementing the new regulatory guidance," the bank's

finance chief, Daryl Bible, told investors in May. "We are working with our customers trying to

keep them in the loans."

BB&T's report showed a significant number of cases where it was extending loan maturities and

allowing interest rates not widely available in the market for loans of similar risk.

Banks don't have to disclose how terms on their loans have changed, making it hard to know

whether they are setting aside enough cash for possible losses.

In a large proportion of cases, modifying the terms of loans ultimately isn't enough to save them.

At the end of the first quarter, 44.5% of debt restructurings were 30 days or more delinquent or

weren't accruing interest, up from 28% the first quarter of 2008.

A case in Portland, Ore., shows how banks can keep treating a commercial loan as current,

despite the difficulties of the underlying project.

A client called Touchmark Living Centers Inc. in 2007 borrowed $15.9 million, in two loans, to

buy land for a development. The borrower planned to retire the loans at the end of the year by

obtaining construction financing to build the Touchmark Heights community for empty-nesters.

Because the raw land produced no income, the lender, Umpqua Bank, had provided "interest

reserves" with which the developer could cover interest payments while obtaining permits and

preparing to build. The bank extended Touchmark a $350,000 interest reserve—in effect

increasing what Touchmark owed by that amount.

In December 2007, the U.S. economy slipped into recession. When the loans came due that

month, Touchmark didn't pay them off. Umpqua extended the maturity to May 31, 2008.

The bank also added $600,000 to the interest reserves. Though supplying interest reserves is

common at the outset of a loan, when an unbuilt project can't produce any income with which to

pay debt service, replenishing interest reserves is frowned on by regulators.

Asked to comment, a spokeswoman for the bank said, "Umpqua and Touchmark had determined

that the project was still viable but not yet ready for development." Touchmark said it didn't

pursue construction financing at that time because "it was not prudent to proceed with

developing the property until the economy improves," as a spokeswoman put it.

Bank Fix for Unpaid Commercial Property Loans: 'Extend and Pretend' - WSJ.com Page 4 of 5

http://online.wsj.com/article/SB10001424052748704764404575286882690834088.html 7/16/2010


Editors' Deep Dive: Home Loans Carry Risks


Crisis Weighs on Loan Performance


Banks Compete for a Home Loans


Mortgage Risk IT Leaves No Loan Unturned

Access thousands of business sources not

available on the free web. Learn More

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843-0008 or visit


In 2008 the bank extended the loans again, to April 2009. During this time, Touchmark began

paying interest on the loans out of its own pocket.

Then in May 2009, Umpqua restructured the loans, lumping what was owed into one $15 million

loan that required regular payments on both interest and principal. Touchmark paid down the

principal a little and Umpqua set a new maturity date—May 5, 2012.

Meanwhile, the value of the land Touchmark

had borrowed to purchase has been eroding.

The bank says it was worth $23.5 million by the

most recent independent appraisal, but that was

in 2008. The county assessment and taxation

department pegged the land's value at about

$20 million at the start of 2009. An appraiser

for the department estimates raw-land values in

the area fell by another 25% to 30% last year,

Touchmark executives declined to estimate the

land's value. They said the property has retained

"significant" value, partly because of its location,

with a view of 11,240-foot Mount Hood.

Umpqua Bank says the loan is accruing interest, and it expects the loan to be repaid.

Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com and Lingling Wei at


Bank Fix for Unpaid Commercial Property Loans: 'Extend and Pretend' - WSJ.com Page 5 of 5

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Private and Confidential Message to Appraisal Institute Members

The following information was added to the message board:



Name: Cochise
E-Mail: cochise@justice.com
Body of Message:
July 16, 2010

<a href="http://www.hwforums.com/2191/">Private and Confidential Message to Appraisal Institute Members</a>

Dear Fellow Members:

In my June 18 letter, I informed you that The Appraisal Foundation’s Board of Trustees and the Appraisal Institute’s Board of Directors met in Chicago last month to hear from each organization’s leadership concerning disagreements and miscommunication between the two organizations. The misunderstanding centers around discussions that our Government Relations Committee had with other sponsors’ Washington representatives, in response to a request from a Congressman’s office, on the financial workout legislation. As promised, I’m writing to update you on the situation.

The Appraisal Foundation’s Board of Trustees decided this week, largely because of our Washington-based discussions with other sponsors, to (a) suspend the Appraisal Institute as a sponsoring organization for seven months, beginning September 15, 2010, and (b) revoke the discounts on the purchase price of, and permission to reproduce, the Uniform Standards of Professional Appraisal Practice, for the period September 15, 2010, to July 1, 2012.

In accordance with the Foundation’s Bylaws, the Appraisal Institute has the opportunity to request a follow-up hearing before the Board of Trustees to present reasons why the discipline should not occur. Should our Board choose to request such a follow-up hearing, the Foundation has pre-scheduled it for September 1, 2010.

Regardless of the Trustees’ recent decision or the outcome of the upcoming hearing, the Appraisal Institute will continue to provide dedicated service not only to our members, but to the profession and, most importantly, to the public interest.

The Board of Directors, as the Appraisal Institute’s policy-making body, will determine what, if any, further action the Appraisal Institute will take in response to the Foundation Board of Trustees’ decision. We should all be proud of our officers and Board of Directors for how they have managed this situation. They have performed their roles with the highest degree of integrity and professionalism, and I am proud to serve alongside these outstanding colleagues. In addition, I could not be more pleased with how our national staff has performed under the very able leadership of our CEO, Fred Grubbe. Their professionalism and dedication serve the association and our members well.

Please remember that this message is directed only to you as members of the Appraisal Institute and should be maintained as a private and confidential communication. Please do not distribute to non-members. I will continue to keep you updated as we move forward.

Best regards,

Leslie P. Sellers, MAI, SRA


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<a href="http://www.hwforums.com/2191/messages/790.html">TAF REMOVES NOSE (ai) TO SPITE FACE</a>
[ Follow Ups ] [ Post Followup ] [ Appraisers Talk Back ]


Posted by Cochise on July 16, 2010 at 11:21:05:


"There have been rumors of this happening but I just received this information from a reliable source that it has been done:"

“On Monday, July 12, 2010 that Board of Trustees of the Appraisal Foundation voted to suspend the Appraisal Institute’s sponsor rights for a period beginning September 15, 2010 to April 15, 2011. There is an appeal process that the Appraisal Institute is entitled to. The Appraisal Foundation has formally noted the Appraisal Institute of its’ decision.”

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Assuring the Quality of an Appraisal is More Important than Ever
By Howard A. Lewis, Executive Director

  The United States Tax Court, in a memorandum decision (Scheidelman v. CIR, T.C. Memo. 2010-151, No. 15171-08), dated July 14, 2010, sustained deficiencies and penalties assessed against the taxpayer, disallowing deductions claimed for charitable contributions of an historic façade easement. Most tax valuation disputes center on the value of the property. The IRS rarely asserts deficiencies and even more rarely tries cases on the basis of the qualifications of the appraiser or the quality of the appraisal. I believe Scheidelman is an important signal, from the IRS and the Tax Court, and the appraisal community is well advised to take heed.

 Notwithstanding the memorandum nature of the decision, the IRS and its appraisers will understandably see this decision as further reason to inquire deeply and analyze critically both appraiser qualifications and appraisal quality. In this instance, the IRS argued that the taxpayer’s appraisal did not satisfy the requirements of Regulation Section 1.170A-13(c), which specifies the elements required to be contained in a qualified appraisal. The fact that this matter involves a charitable contribution deduction is less important than the understanding that comes from an analysis of the Service’s approach to appraiser qualifications and appraisal quality. Most of the evidence at trial dealt with the valuation of the property. The Court opined, “Because we conclude that the Drazner report is not a qualified appraisal, we do not discuss this evidence or reach a conclusion as to the value of the easement.” I admit that I argued for years that the IRS should pay more attention to the rules governing appraiser qualifications and appraisal quality and, I admit, I am glad they are doing so. It makes the value of our profession’s education and accreditations more important than ever, and IBA is uniquely positioned to address the specific issue of “what constitutes a qualified appraisal?”

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July 15, 2010

Attorney's Fees, Commercial Law, Consumer Protection Law, Government Law, Injury & Tort Law, Landlord Tenant Law

Attorney's Fees, Commercial Law, Consumer Protection Law, Government Law, Injury & Tort Law, Landlord Tenant Law
People ex rel. City of Santa Monica v. Gabriel
In the City of Santa Monica's civil action against a landlord, claiming that he sexually harassed a tenant, entered tenants' units without permission, and rented uninhabitable space as living quarters, trial court's judgment is affirmed in part and reversed in part where: 1) defendant's challenge to the admission of evidence of prior acts is rejected as waived; 2) sexual harassment can be a business practice as defendant's harassment of his tenant was made possible by the parties' commercial relationship and occurred only during business-related encounters; and 3) an award of attorney's fees was improper as plaintiff sued only under the UCL, which does not authorize an award of attorney fees. Read more...
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July 14, 2010

What is Affordable Housing?


TitleWhat is Affordable Housing?
Zoning, Land Development, Construction and Subdivision RegulationsXThe website states that current development practices in New York City do not encourage the construction of homes affordable to low and moderate-income households.
DescriptionThis interactive website, developed by the Center for Urban Pedagogy (CUP), contains tools to help users understand affordable housing policies, zoning codes, and land use review processes in New York City, New York. The website utilizes maps and charts that allow users to examine income demographics and affordability levels for neighborhoods within New York City. Visitors to the website also have access to a guidebook that defines the city’s various affordable housing policies and explains why CUP feels that current development practices hinder affordable home construction.
Publication Date2010
OrganizationCenter for Urban Pedagogy
Web Locationhttp://envisioningdevelopment.net/affordable-housing

Feedback: Please contact us if you have a similar experience.

Notice: The contents of this record reflect the views of the author and/or promulgating municipality, and should not be construed as representing the views or policies of the U.S. Department of Housing and Urban Development or U.S. HUD's Office of Policy Development and Research. No attempt has been made by U.S. HUD or its contractors to verify the accuracy, currency, or validity of the record contents presented herein.

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July 12, 2010

Victims of Corporate Fraud Compensation Fund

Victims of Corporate Fraud Compensation Fund


The Victims of Corporate Fraud Compensation Fund (VCFCF) provides restitution to victims of corporate fraud.

The statutes and regulations governing applications for payment from the VCFCF are set forth in California Corporations Code sections 1502, 1502.5, and 2117 and in Title 2, Division 7 of the California Code of Regulations, Chapter 12, sections 22500 et seq (pdf~107KB).


How the VCFCF Works
There are several important prerequisites to qualify for payment from the VCFCF. A claimant must have a final court judgment, arbitration award, or criminal restitution order dated January 1, 2003 or thereafter. The judgment, arbitration award, or order must be based on corporate fraud, misrepresentation, or deceit made with intent to defraud. For additional requirements, please refer to the Application Requirements page.

Applications are accepted throughout the year. The VCFCF may award up to $20,000 per transaction. In order to ensure restitution to all claimants who qualify, the Secretary of State may prorate the amount of an award if the aggregate valid claims exceed funds available for distribution.

Although the Secretary of State does not investigate or prosecute corporate fraud or any type of civil or criminal action against corporations, there are several agencies and resources available to assist in this area. A list of potential resources is located on our Fraud Resources page.

More detailed information on application procedures can be found on the Application Instructions and Forms page.

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July 10, 2010

HAWSCT Finds Zoning Statutes Are "Environmental" Laws - Court Creates A Private Right Of Action To Enforce Chapter 205

HAWSCT Finds Zoning Statutes Are "Environmental" Laws - Court Creates A Private Right Of Action To Enforce Chapter 205

Posted: 09 Jul 2010 06:27 PM PDT

The Hawaii Supreme Court today by a 4-1 margin issued an opinion that has fundamentally rewritten Hawaii land use law. In County of Hawaii v. Ala Loop Homeowners, No. 27707 (cert. granted Sep. 2, 2009), the four-Justice majority in an 81-page opinion authored by Justice Recktenwald held "[w]e further conclude that article XI, section 9 of the Hawai'i Constitution creates a private right of action to enforce chapter 205 in the circumstances of this case." Slip op. at 4.

In an equally lengthy concurring and dissenting opinion, Justice Acoba wrote: "I respectfully disagree, then, with the majority's holding that the court abused its discretion in denying Wai'ola's motion to set aside default. Thus, in my view, it is unnecessary to decided that Ala Loop had a private right of action to enforce HRS chapter 205 under article XI, section 9 of the Hawai'i State Constitution, but inasmuch as the majority does so hold, I believe it is wrong." Dissent at 1.

We have not yet had time to digest the 162 pages of opinion and will post more thoughts after we do, but in the meantime, here are the cert application and the State's opposition, and two amicus briefs supporting the applicant:

We live blogged the oral arguments here.

This case did not garner the broad public interest of the Superferry litigation, but the case could be more important. The core issue in the case was whether Hawaii's statewide zoning laws are "laws relating to environmental quality" which may be privately enforced, or whether they are classic Euclidean zoning laws which can't. The Hawaii Constitution (art. XI, § 9) provides that "any person may enforce" the "right to a clean and healthful environment, as defined by law relating to environmental quality, including control of pollution and conservation, protection and enhancement of natural resources."

The case involves a "new century charter school" located in the County of Hawaii (Big Island). The school sought to begin operations on land classified (zoned) as agriculture on the island of Hawaii. Such uses are not normally allowed in the Ag zone. The school's neighbors, the Ala Loop Homeowners, asserted the school needed a special permit pursuant to Haw. Rev. Stat. § 205-6, which allows a county planning commission to permit certain "unusual and reasonable uses" within an agricultural or rural district, despite the land not being zoned for such use. The County filed a declaratory action, seeking confirmation the school was exempt under state law from any special permit requirement. The trial court permanently enjoined the school.

The Intermediate Court of Appeals reversed:

In Pono v. Molokai Ranch, Ltd., 119 Hawai‘i 164, 194 P.3d 1126 (App. 2008), cert. rejected, 2008 WL 5392320 (Hawai‘i 12/29/08), this court held that private citizens do not have a private right of action to enforce the provisions of HRS Chapter 205 and, therefore, lack standing to invoke a circuit court's jurisdiction to determine their claims to enforce Chapter 205. The enforcement of HRS Chapter 205 is precisely the relief sought by the Association and granted by the Circuit Court in this case.

. . . .

We conclude that the Association did not have a private right of action to enforce their Chapter 205 claims and, therefore, the Circuit Court lacked subject matter jurisdiction over the Association's claims. See Pono, 119 Hawai‘i at 180-90, 194 P.3d at 1142-52; see also Lanai Co., Inc. v. Land Use Comm'n, 105 Hawai‘i 296, 97 P.3d 372 (2004) (HRS § 205-12 authorizes the counties, not the LUC to enforce Chapter 205); accord Rees v. Carlisle 113 Hawai‘i 446, 153 P.3d 1131 (2007) (circuit court lacked jurisdiction because the subject ordinance did not create a private right of action).

The ICA's summary disposition order is here.

The Supreme Court, as noted above, reversed. More to follow.

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July 09, 2010

K Partners will convert distressed asset to HGI, Hotel Appraiser

K Partners will convert distressed asset(Hotel Appraiser) to HGI

July 9, 2010

San Antonio--San Antonio, Texas-based K Partners Hospitality Group, LP purchased the Mission Inn Pismo Beach in San Luis Obispo County, Calif.

K Partners finalized the purchase of the distressed property in late May from a Gulfstream Capital Corporation entity based in Santa Barbara, Calif. Craig Stevenson, President & COO of Gulfstream negotiated the transaction and the deal was brokered by Harry Pflueger, principal of Maxim Hotel Brokerage based in Newport Beach, Calif.

The 120-room hotel is convenient to a variety of attractions located in both San Luis Obispo County and Pismo Beach, including numerous wineries, recreational facilities, as well as California Polytechnic State University and the National Guard. The property will be renovated to meet the Hilton Garden Inn Generation 7 prototype standards and is currently scheduled for conversion by November of 2010. The facilities will include 1,600 square feet of meeting space, renovation of the food and beverage facilities consistent with Hilton standards, a 24-hour Pavilion Pantry convenience market, an outdoor pool and spa, a fitness center and a business center. During renovations the property will remain open to the public.
K Partners will convert distressed asset to HGI, Hotel Appraiser

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Asset Forfeiture, Civil Procedure, Criminal Law & Procedure, Property Law & Real Estate

Asset Forfeiture, Civil Procedure, Criminal Law & Procedure, Property Law & Real Estate
Gomez v. Village of Pinecrest
In forfeiture proceeding against a property owner, claiming that the property was being used for criminal activity by the property owner's leaseholders, Third District's decision in Gomez is approved and the First and Fifth Districts' decisions in Forfeiture of 1993 Lexus and Baggett are disapproved as, based on the plain and unambiguous language of the Florida Contraband Forfeiture Act, the seizing agency is not required to establish the owner's actual or constructive knowledge at the seizure stage. Rather, at the seizure stage, the agency is required to establish only that there is probably cause to believe that the property was being employed or likely to be employed in criminal activity, and establishing the owner's actual or constructive knowledge is not required until the forfeiture stage. Read more...

Civil Rights, Constitutional Law, Government Law, Property Law & Real Estate, Public Utilities
Ruston v. Town Bd.
In a "class of one" equal protection action by property owners, who were denied sewer hookups for their proposed subdivision, against a village, the Town Board, and the Town Planning Board (and individual members of the Boards), dismissal of the action is affirmed where plaintiffs failed to allege specific examples of the Town's proceedings, let alone applications that were made by persons similarly situated, and thus failed to make out an Equal Protection claim. Read more...

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Market Conditions May 2010



SummaryHousing market conditions continued to show signs of stabilizing during the first quarter of 2010, after a downward trend that began in the first quarter of 2006 and just started to reverse itself in the second quarter of 2009. In the production sector, single-family housing permits and starts increased in the first quarter of 2010, although the number of single-family housing completions fell. The marketing sector performed less well in the first quarter. Sales of new and existing homes both fell. The Case-Shiller® national repeat-sales house-price index recorded a 1.1-percent decrease in the value of homes in the fourth quarter of 2009, following a 3.3-percent increase in the third quarter. The less volatile Federal Housing Finance Agency (FHFA) purchase-only repeat-sales index estimated a 0.1-percent seasonally adjusted (SA) price decline in the fourth quarter of 2009, following a 0.1-percent increase from the second to the third quarter (the data for both series are reported with a lag). Excessive inventories of available homes at the current sales rate increased in the first quarter of 2010, reaching an average rate of 7.8 months’ supply of new homes and 8.1 months’ supply of existing homes compared with rates of 7.7 and 7.0 months’ supply, respectively, in the fourth quarter. The multifamily sector showed improvement in the first quarter.

The national homeownership rate fell 10 basis points to 67.1 percent in the first quarter of 2010. The percentage of delinquencies and newly initiated foreclosures for all mortgage loans fell in the fourth quarter of 2009 (the data are reported with a lag). The percentage of foreclosure starts on subprime loans continued to decline, and the percentage of foreclosure starts on prime loans also dropped. The advance estimate of overall growth in the national economy in the first quarter was an increase of 3.2 percent at a seasonally adjusted annual rate (SAAR), following a 5.6-percent expansion in the fourth quarter, according to the Bureau of Economic Analysis. The housing component of Gross Domestic Product (GDP) decreased 10.9 percent in the first quarter of 2010 compared with an increase of 3.8 percent in the previous quarter.



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HUD Sabbatical-in-Residence program.

The Office of Policy Development and Research (PD&R) within the U.S. Department of Housing and Urban Development (HUD) invites scholars and academics to apply for its Sabbatical-in-Residence program. Through this program, researchers on sabbatical have the opportunity to work within PD&R to advance current HUD policy and assist the agency in the transfer and use of new technologies and approaches to solving governmental problems.

Assignments will be made under the Intergovernmental Personnel Act (IPA) Mobility Program, an effective avenue for involving the academic community in the development and implementation of federal policy and programs. Placement of employees of institutions of higher education and other nonprofits within HUD provides a unique opportunity to partner with the agency in expanding its capacity to fulfill its mission. IPA assignees benefit from program and developmental experience that enhances their regular work.




This assignment is temporary and designed to be encumbered in a full-time capacity for a time period ranging from three to twelve months. This assignment is nonreimbursable and applicants are responsible for all salary, travel, housing, and other related provisions.

To receive full consideration for this opportunity, interested applicants must prepare and submit a brief statement outlining their specific skill and knowledge related to the current challenges facing the Department and to the applicable area of focus identified above, and explain how their experience would be beneficial. Applicants must also detail their college/university sabbatical rules and regulations. PD&R will determine, at its discretion, the selection of program participants. Once selected, the participant, in concert with the college/university, will sign the Assignment Agreement (OF-69) which constitutes the written record of the obligations and responsibilities of the parties to the assignment.


Any questions about the program and/or completed applications should be submitted by October 29, 2010 via e-mail to sabbatical@huduser.org

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Curb Appeal In South Dakota: No Special Benefit To Property Means That Special Assessment Is A Taking

Posted: 09 Jul 2010 02:40 AM PDT


A rule of law set out over 100 years ago and which remains (as we say) good law qualifies as "well-established" by any standard. Village of Norwood v. Baker, 172 U.S. 269 (1898) set forth the rule that a special assessment for municipal improvements is only constitutional if the improvements result in the property being assessed enjoying special benefits, and then only to the extent of the benefit. If the benefits are merely those which inure to the public at large, or if the assessment exceeds the benefit conferred, the assessment is invalid.

Think of it as an "anti-givings" requirement: the cost of public benefits get absorbed by the public as a whole, but if property gets some benefit over and beyond those public benefits, it is fair to ask the property owner to pay. Otherwise, it's a no-go.

In Hubbard v. City of Pierre, No. 25312-a-JKM (June 30, 2010), the South Dakota Supreme Court applied the well-established rule of Village of Norwood to invalidate a special assessment as a taking under the U.S. and S.D. constitutions.

The city replaced water mains, resurfaced streets, and replaced portions of curbs, gutters, and driveways. The city proposed levying a special assessment to cover the cost of the curb, gutter, and driveway work. Owners whose properties were on the streets objected, arguing that the assessment was a taking since the assessment exceeded the benefits received.

After the city completed the project and assessed the property owners for "the per linear foot cost for curb and gutter replacement and per square foot for driveway replacement," slip op. at 2, the property owners sought a declaratory and injunctive relief in state court. The court prohibited the city from collecting the assessment, and the city appealed.

The South Dakota Supreme Court noted that municipalities have the authority to assess property owners for local improvements pursuant to two state statutes. One statute allows a "front footage" method, and another based on "accrued benefits." The front footage statue does not require a showing of benefits, while the accrued benefits statute does. The city "primarily used the front foot method of apportionment." Slip op. at 5. The court rejected the city's claim that the statute's silence regarding special benefits meant that no showing of benefit was required because the benefit requirement is based in the constitution.

The court held that the property owners met their burden of showing by "strong, clear and positive" evidence, slip op. at 10, that their properties were not benefited by the curb work. Even though the city's findings were presumed correct, the court concluded that the property owners overcame the presumption of validity. One owner testified that the curb work added no value to his property because his existing curbs and gutters were in good condition and would last another 3 years. Slip op. at 13. The county assessor testified that replacing the existing curbs and gutters did not increase the assessed value of the properties. Id. A real estate agent and an appraiser similarly testified.

The remainder of the opinion is devoted to an evaluation of the other evidence of benefit and value, with the court affirming the trial court's conclusion "that, based on the evidence, the Petitioners had shown that replacement curb and gutter did not provide a measurable benefit to abutting property." Slip op. at 17. The court refused to reweigh the trial court's factual determinations on appeal:

The City claims the circuit court incorrectly weighed the evidence and should have given more weight to the City’s testimony and evidence. It is not our role on appeal to retry this case or substitute our judgment as to credibility and weight of the evidence. This Court defers to the circuit court because of its ability to observe the witnesses. The circuit court was persuaded by the credibility and weight of the Petitioners’ evidence. The circuit court was unable to conclude from the evidence that the replaced curb, gutter, and driveways provided “actual, physical, material and quantifiable special benefits” to the property assessed. The most that could be determined from the City’s evidence was that replacing the curb and gutter extended its useful life by varying estimates and in some cases may have improved the flow of water away from the property. The City’s quantification of the benefits, however, was ambiguous and conclusory in that the City assumed the benefits equaled the cost. The circuit court determined that the Petitioners’ evidence demonstrated that the replaced curb, gutter, and driveway did not provide a benefit above and beyond or differing from the benefit enjoyed by the rest of the community. Because the circuit court’s findings of fact are based on the evidence and not clearly erroneous, we decline to substitute our judgment as to the weight and credibility of the evidence, as urged by the City. The circuit court applied the correct law regarding the question whether the special assessments were constitutional.

Slip op. at 19.



Background on the case in Supreme Court rules for homeowners in curb and gutter case from the Pierre Capital Journal.



This posting includes an audio/video/photo media file: Download Now

Updated Opinion: Impact Fee Not Reasonably Related To Burden Created By Development

Posted: 08 Jul 2010 05:55 PM PDT

Last month, we summarized Homebuilders Ass'n Tulare/Kings Counties, Inc. v. City of Lemoore, No. F057671 (Cal. Ct. App. June 9, 2010), a case about the propriety of impact fees under California's Mitigation Fee Act (Cal. Gov't Code § 66000, et seq.). The court upheld most of the impact fees as reasonably related, but invalidated fire mitigation fees imposed on development in one part of town where fire facilities were adequate would be used to offset the cost of already-built fire facilities in another part of town. The standards for impact fees under the Act are similar to the constitutional Nollan/Dolan standards, and the court concluded the impact fee violated the statute because it was not reasonably related to the burden created by a development. Read our complete summary here.

Today, the court revised the opinion (but did not change the judgment). In this order, the court deleted "the entire discussion under part 2, 'The standard of review and burden of proof'" (page 4), and replaced it with a new section. It looks like some technical tweaks to the court's recitation of the burden of proof.

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July 08, 2010



The Appraisal Foundation, in recognition of its responsibility to its Appraisal,

Affiliate and Corporate Sponsors, the professional appraisal community and the publicat-

large to advance and promote appraisal standards and qualifications, endorses the

following Code of Conduct to be abided by the Sponsors of the Foundation in all of

their communications and activities. Nothing in this Code of Conduct is intended to

restrict the reference by Sponsors of their relationship to the Foundation for the purpose

of declaring their support of the goals, objectives, work and core values of the



The following guidelines are offered to assist Sponsors in complying with the

Code of Conduct. Specific questions about past or contemplated conduct, if not

answered by the Code itself or these guidelines, should be directed to the Chairman of

the Ethics, Policies and Procedures Committee. Each "bullet point" of the Code is

followed by its respective Guideline.

• Written or oral references to sponsorship in the Foundation by a Sponsor

shall not express or suggest the appearance by the Sponsor that it has

special powers or influence over the policies and work of the Foundation,

Appraisal Standards Board, Appraiser Qualifications Board, the Board of

Trustees or any council, committee, subcommittee, board, task force or

person related to or affiliated with the Foundation.

- Due to the sensitive position of the Foundation as the

autonomous standard setting body for the appraisal

profession, sponsoring organizations shall be particularly

diligent to not engage in any activity that could jeopardize

the Foundation's position.

- A Sponsor of the Foundation shall not represent that it has a

special relationship with the Foundation in any written or

oral communication that is not approved in these guidelines.

This shall include, but not be limited to language such

Approved 09/30/95

REVISED 02-21-03


as:..special advisor, financial supporter, contributing

member, original member, etc.

- A Sponsor may identify its association with the Foundation

by including the following statements or like representations

on its official stationary or incorporated in the organization's

official logo, provided that the statement or representation is

not pronounced over other printed material: "Sponsor of

The Appraisal Foundation" or "Proud Sponsor of The

Appraisal Foundation."

- Spokespersons for a Sponsor of the Foundation may be

acknowledged in public speaking engagements, court

testimony, or in casual conversation the nature and history

of the Sponsor's relationship with the Foundation, provided

that a clarifying statement is made that the Sponsor has no

special influence with the Foundation because it is a

Sponsor. The Spokesperson should note that the Foundation

has many councils and committees that afford access and

input to the Foundation, and that anyone is able to avail

themselves of the avenues to make known their views.

Furthermore, it is important that the Sponsor's spokesperson

not promote the Sponsor's relationship except to indicate

what the relationship is as a matter of fact.

- A Sponsor of The Appraisal Foundation shall not suggest it

has a special relationship with the Foundation by publicizing

the Sponsor's relationship in any manner not stated in these


• Written or oral references to sponsorship in the Foundation by a Sponsor

shall not directly or indirectly create the appearance, impression or

otherwise that, through sponsorship, the Sponsor has access to or

possesses special information about the activities of the Foundation or its

policies or issues under consideration which are unavailable for comment

by the public or non-sponsors.

- A Sponsor of the Foundation may on occasion by benefit of

its Sponsor relationship obtain information that is not

available to the general public or non-sponsors. Any

premature release of information obtained by benefit of a

Approved 09/30/95

REVISED 02-21-03


Sponsor relationship with the Foundation gives the

appearance of an insider relationship and is a violation of

this Code of Conduct. Any acknowledgment of having

information of this type is considered a premature release.

- A Sponsor of the Foundation is important to achieving the

goals and objectives of the Foundation and is invited to

publicize this relationship within these guidelines.

However, any claim such as "first to know" or "looking out

for your interest" gives the appearance of insider

information and is in violation of this Code of Conduct.

- Spokespersons for a Sponsor of the Foundation may

acknowledge in public speaking engagements, court

testimony, or in casual conversation the nature and history

of the Sponsor's relationship with the Foundation, provided

that a clarifying statement is made to the extent that the

Sponsor has no access to information from the Foundation

that is not available to anyone else.

• Sponsors shall not use their sponsorship in the Foundation in a manner

which tends to promote membership in a sponsoring organization or

educational courses, publications or similar products or services for sale to

the public.

- A Sponsor of the Foundation shall not identify their

relationship with the Foundation within printed materials in

any manner other than stationary and logos as is permitted

in these guidelines. For example, an education provider

may not make any statement of being a Sponsor of the

Foundation in course brochures and other promotional

material other than "Sponsor of The Appraisal Foundation"

or "Proud Sponsor of The Appraisal Foundation" in standard

type in the organization's stationary or logos.

• Sponsors shall not engage in conduct prejudicial to the purposes, interests

and work of the Foundation, and shall not conduct themselves in a

manner which brings disrepute to the Foundation.

Approved 09/30/95

REVISED 02-21-03


- While Sponsors are independent of the Foundation, care

must be taken to not engage in activities which bring

disgrace or prejudice to the Foundation or which are

antiethical to the interests, purpose or mission of the


• Sponsors shall maintain a high standard of ethical and professional

conduct for themselves and their members, observe all federal, state and

local laws and promote the mission of the Foundation.

- Compliance with the foregoing is self-evident.

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Leslie P. Sellers, MAI, SRA , AI (SOB)

Name: Cochise
E-Mail: cochise@justice.com
Subject: Leslie P. Sellers, MAI, SRA, AI, SOB
Body of Message:
"June 23, 2010
Mr. Leslie Sellers, President (SOB)
Appraisal Institute
c/o Sellers Realty Company
119 S. Charles Severs Blvd
Clinton, TN 37716
VIA EMAIL: lessell@bellsouth.net
Dear Mr. Sellers:
I received your open letter to the members of the Appraisal Institute of June 18, a copy of which is enclosed. I
previously advised you, and you acknowledged your understanding, that the Board of Trustees of The
Appraisal Foundation has recessed in executive session (and remains in recess) following its Special Meeting
of June 15 to consider the information presented concerning the Institute’s conduct and the possibility of
sanctions. As such, I believe it was inappropriate to engage in a propaganda effort concerning the matter
under review.
Nonetheless, your letter contains errors in the facts it recites, and I trust that you will share the following
information with your membership to ensure that such misinformation is not permitted to remain uncorrected.
1. Your letter indicates that the June 15 meeting of The Appraisal Foundation was a joint meeting of our
respective organizations “concerning disagreements and miscommunication between the two
Rather, on June 15, the Foundation’s Board of Trustees held a Special Meeting to consider evidence concerning
conduct by the Appraisal Institute that might be viewed as materially and seriously prejudicial to the
Foundation and that could result in the possible suspension, expulsion or other sanctioning of the Appraisal
Institute. The Appraisal Institute’s Board of Directors and leadership attended the Special Meeting at the
invitation of The Appraisal Foundation as observers and to present information responsive to the Foundation’s
concern that its Code of Conduct had been violated.
2. Your letter states that the Institute is being “prosecuted simply for discussing ideas”, and that the
discussions concerning proposed federal legislation that would limit The Appraisal Foundation’s activities
were conducted “in the course of routine committee work” and “in response to a Congressman’s request.”
As the Foundation has repeatedly emphasized, dissent and disagreement are welcomed and encouraged, and
the Institute is of course free to discuss ideas as it sees fit. However, the conduct that is in issue involved an
item of federal legislation crafted by the Appraisal Institute on its own volition that would directly limit the
Foundation’s activities and was never provided to the Foundation for consideration. Rather, the
Mr. Leslie Sellers, President, Appraisal Institute
June 23, 2010
Page Two
uncontroverted information provided on June 15 indicates that the legislation was disseminated to other
Sponsors and individuals outside of the Institute without the knowledge or consent of the Foundation; there
was no Congressional request to draft an amendment to restrict possible future educational endeavors of the
Foundation. Moreover, this can hardly be characterized as an item of “routine committee work.”
3. Your letter states that the “[Institute’s] Board of Directors did not approve the language recommended by
the committee, but unanimously rejected it.”
While that is no doubt true, your letter omits a significant fact: by the time the proposed legislation – which
was apparently created by the Institute -- came to the Board of Directors for consideration, it is undisputed
that the proposed legislation had been actively promoted by the Institute to other Sponsors of the Foundation
for quite some time, and it was only following the rejection of the Institute’s proposed legislation by those
Sponsors, and an apparent unanimous lack of support, that the Institute’s Board decided not to move the
proposal forward. Your statement, without providing the necessary context, is misleading to say the least.
4. Your letter once again states that the Institute’s actions concerning the proposed legislation were merely
responsive to a request from Congress.
It is undisputed at this time that the proposed legislation was neither requested by Congress nor addressed a
concern expressed by any member of Congress. To the contrary, as noted above, the proposed legislation was
the apparent brainchild of the Institute and actively promoted as a means of limiting the activities of the
organization it chooses to sponsor, namely, The Appraisal Foundation.
5. Lastly, your letter states that the Institute “will not agree to seek the Foundation leadership’s permission
before discussing ideas with Congress…” and that such a requirement “is simply unreasonable and
To be clear, the Foundation has never requested that any Sponsor seek permission before discussing ideas with
anyone else, including members of Congress and other Sponsors. The issue presented to the Foundation’s
Board of Trustees at its June 15 meeting relates solely to issues directly impacting the Foundation.
It is my hope that the foregoing will clarify and correct any misunderstandings or misinformation that may
have been generated by your letter. I believe that public statements and arguments concerning a matter now
under review are counterproductive to the best interests of our respective organizations.
Very truly yours,
David C. Wilkes
David C. Wilkes, Chairman
Board of Trustees


Paula Douglas Seidel
Subject: FW: Appraisal Institute President's Message - June 18, 2010
From: Leslie P. Sellers, MAI, SRA, 2010 Appraisal Institute President [mailto:info@appraisalinstitute.mmsend.com] On
Behalf Of Leslie P. Sellers, MAI, SRA, 2010 Appraisal Institute President
Sent: Friday, June 18, 2010 9:07 PM
To: Joe Traynor
Subject: Appraisal Institute President's Message - June 18, 2010
June 18, 2010
Dear Colleagues:
I’d like to take this opportunity to update you on an important development regarding our organization.
On June 15, The Appraisal Foundation’s Board of Trustees and the Appraisal Institute’s Board of Directors
met in Chicago to hear from each organization’s leadership concerning disagreements and miscommunication
between the two organizations. At issue is a vital precedent: the Appraisal Institute’s dedicated service not
only to our members, but to the profession and, most importantly, to the public interest.
The Foundation leadership has made accusations that are centered on the AI Government Relations
Committee’s and Washington Office’s discussions of possible legislative language that would have an effect
on the Foundation’s ability to provide education. The Appraisal Institute’s position is that we are being
prosecuted simply for discussing ideas. These committee discussions were conducted in the course of routine
committee work – in this case, discussing draft legislative language in response to a Congressman’s request
for recommendations. The Board of Directors did not approve the language recommended by the committee,
but unanimously rejected it. It never became or was promoted as the Appraisal Institute’s position.
As a leader in the profession, the Appraisal Institute routinely works with allied organizations and regularly
receives requests from Congress regarding real estate valuation as part of our efforts to represent our
members, the profession and the public interest. As the nation’s largest organization of real estate appraisers,
we embrace our responsibility to protect the public interest; that includes discussing potential legislative
language with other organizations and members of Congress.
As we told the Board of Trustees, we will not agree to seek the Foundation leadership’s permission before
discussing ideas with Congress and with other appraisal organizations. This type of requirement is simply
unreasonable and unfair. However, we have agreed to inform the Foundation leadership at the outset
whenever issues arise that may impact the Foundation.
Our two independent organizations share common ground: we both want what is best for the appraisal
profession. We want the Foundation and the Appraisal Institute to continue working together on behalf of the
profession and in protecting the public interest.
We don’t want to sever ties with the Foundation. We believe it is best if the Appraisal Institute remains a
sponsor and works with the Foundation toward our common goals. It is our hope that the Foundation Board of
Trustees will agree with this position.
Rest assured that I will update you further as this issue develops.
Best regards,
Leslie P. Sellers, MAI, SRA (SOB)

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July 07, 2010

FIRMette – Desktop 3.1 Upgrade

FIRMette – Desktop 3.1 Upgrade

FIRMette – Desktop 3.1 Upgrade
Update. The Map Service Center now has version 3.1 of the FIRMette – Desktop viewer available for download. This new version includes additional features that allow users to search for map panels by address or coordinates, search for and download Letter of Map Changes (LOMCs) for a panel, and print full-size Flood Insurance Rate Maps. You can download it here.
(learn more)


MapViewer – Desktop 2.0

FEMA has updated its MapViewer Desktop tool for viewing GIS flood data. Significant improvements to v. 1.0 had been made, including support for internet based data and improved geocoding. The release candidate can be downloaded here.

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Book Review: Federal Land Use Law and Litigation, 2010 edition

Book Review: Federal Land Use Law and Litigation, 2010 edition

Posted: 07 Jul 2010 01:39 AM PDT

P13513986-160025L I've just received my copy of the 2010 revision of Federal Land Use Law & Litigation by Brian W. Blaesser and Alan C. Weinstein (West, $225).

Here's the description of the book from West's site:

Examines all federal, constitutional, and statutory limitations on local land use controls, discussing cases, regulations, liability, defense strategies, doctrines, and antitrust restrictions. Comprehensively reviews Supreme Court and lower federal court decisions that consider the constitutionality of land use regulations. Discusses complicated free speech issues affected by federal land use law, and municipalities exercising home rule powers. Examines issues such as: constitutional and statutory limits, First Amendment limitations on land use controls, federal remedies and attorney's fees, liability and immunity issues, litigation guidelines, zoning, subdivision controls, growth management, model complaints, and selected constitutional and statutory decisions.



Federal Land Use Law & Litigation is an eminently useful single-volume research and reference guide. It's well-organized, and although it is a specialty book and it is helpful to have a base understanding of the topics, it covers the most frequently-occurring issues in land use litigation in an understandable and easy-to-follow fashion. Chapter 3 on Regulatory Takings contains a particularly good summary of the current state of doctrine, and a concise chronological overview of the critical cases, beginning with the foundation cases in the early 20th century (Hadacheck, Mahon, Euclid) and continuing to the present.

This is one that will continue to have a place on my back bookshelf, along with other such must-haves as Steven Eagle's Regulatory Takings, the latest "green book" (Patricia Salkin's yearly Zoning and Planning Law Handbook), and Norman Matteoni's Condemnation Practice in California.

Federal Land Use Law & Litigation is available for purchase via West here.



Final Brief In Torrens Title And Public Trust Appeal

Posted: 06 Jul 2010 11:04 PM PDT

The State of Hawaii has filed a brief responding to the amicus brief we filed in June in In re Trustees Under the Will of the Estate of James Campbell, No. 30006, an appeal now under review by the Hawaii Intermediate Court of Appeals. The issues in the case include the nature of "Torrens" title and the scope of the "public trust" in water resources.

Hawaii is one of the few remaining states retaining its Torrens system of title registration (two others are Massachusetts and Minnesota). We call it "Land Court," a system in which the State guarantees indefeasible title to the rights and interests reflected in the title register. In Campbell, the State of Hawaii claims that title to property on Oahu's north shore which was registered and confirmed to the Campbell Estate by the Land Court in 1938, is subject to the State's ownership of "all mineral and metallic mines of every kind or description on the property, including geothermal rights," and is subject to a flowage easement in favor of the State by virtue of the State's duties as trustee of the public trust in water resources.

The case arose when the Campbell Estate submitted a petition to the Land Court in 2009 to consolidate and subdivide its land, and the State appeared and asserted its claims. The State argued that despite the 1938 Land Court registration of the land, Campbell's title never included mineral and mining rights the State reserved to itself, even though the State's predecessor (the Territory of Hawaii) appeared in the 1938 proceedings and asserted other claims, and Campbell's title was confirmed to be free of all unregistered interests, including the Territory's. The Land Court disagreed, and held that the State's claim of mineral rights was extinguished by the court's 1938 judgment (decree), and that Campbell's title was free of a flowage easement. The State appealed to the Intermediate Court of Appeals. 

The other briefs in the case (ours included) are here:

The ICA has not set a date for oral argument or a decision.

This posting includes an audio/video/photo media file: Download Now

New Jersey Monday

Posted: 06 Jul 2010 07:48 PM PDT

Two unreported opinions arising out of cases from New Jersey. We won't be reviewing them  (they are not precedential after all), but you may want to check them out if you are interested in public use and redevelopment (case #1), or inverse condemnation by permit denial (case #2):

  • RLR Investments, LLC v. Town of Kearny, No 09-3100 (3d Cir., July 2, 2010) ("This appeal is centered on the “public use” requirement for the governmental taking of private property. The appeal presents a number of overlapping and interrelated claims set out in a ten count complaint. We conclude that the District Court’s judgment in favor of the governmental entry should be affirmed.").
  • NJ Capital Partners, LLC v. Oakland Planning Board, No. A-2354-08T1 (N.J. Super. App. Div., July 2, 2010) ("Plaintiff NJ Capital Partners, LLC, appeals from a series of orders entered by the Law Division that limited its recovery of attorneys' fees and costs in this inverse condemnation action against defendant Borough of Oakland (Oakland) to $50,000. We have considered the arguments raised on appeal in light of the record and applicable legal standards. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.").

This posting includes an audio/video/photo media file: Download Now

11th Circuit: Ixnay On The Vacay Rental Lawsuit

Posted: 06 Jul 2010 12:08 PM PDT

Not much new in Numont v. State of Florida, No. 04-13610 (11th Cir., July 2, 2010) (per curiam). There, property owners sued to enjoin a Monroe County (aka the Florida Keys) ordinance that prevents "vacation rentals." The opinion makes short work of two issues.

First, the court disposed of the claim that the ordinance was not properly adopted because it underwent "substantial or material" changes during the adoption process. The federal court certified the question to the Florida Supreme Court, which answered that the changes made conformed to the public notice, the ordinance was properly adopted.

Second, the property owners' takings claim was not ripe since they conceded they had not sought relief in state court. The court rejected the property owners' claim that doing so would be futile because the ordinance was "part of a larger regulatory effort to ban vacation rentals, an effort that they had challenged twice in Florida state courts." Slip op. at 6. Still gotta try, held the court.

Speaking of vacation rentals, according to "Paris Aims to Curb Apartment Rentals to Tourists" (NY Times), the crackdown isn't just in Florida.

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July 03, 2010

Overview · Project Summaries · Case Study Digests

Case Study Digests provide executive summaries of select CRE assignments. Each digest includes a link to the Member Profile of the CRE responsible for the assignment. Each digest may also include a link to an extended case study of that assignment.


Search the Case Study Digests by subject, title, CRE, or key word:


CREs interested in submitting material can do so through the Members Only section of the site.


Real Estate Asset Utilization Plan for Power Company - Loren Kennedy, CRE
Valuation of the Grand Canyon - Blaine Chase, CRE, Maurice Robinson, CRE
El Toro Marine Corps Air Station / Heritage Fields Study - Steven Norris, CRE
Wetlands Valuation: Everglades and Big Cypress Assignment for the U.S. Department of Justice - Henry Wise
Public Sector Counseling: The Pepsi Center, Denver, Colorado - Peter Bowes, CRE
Wells Fargo Home Mortgage Chooses West Des Moines, Iowa for New Campus - Douglas Siedenburg, CRE
A River Land Sale - Sidney Gable, CRE
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Appraisers Call for Boycott of Appraisal Institute

Re: Appraisers Call for Boycott of Appraisal Institute


Posted by Cochise on April 30, 2008 at 13:23:33:

In Reply to: http://www.hwforums.com/2191/messages/424.html Call for Boycott of Appraisal Institute </a>posted by Cochise on June 05, 2007 at 12:49:41:

May 21, 2001
Dear Real Estate Appraisal Professional,

If you are like many appraisers you are enjoying the benefits of another
refinance market boom. However, one cannot ignore the trends occurring
in the appraisal industry. The market is shrinking and lenders are looking for
cost/productivity savings by eliminating the appraiser. The magnitude of this
trend is expressed in the press release (below) as Freddie Mac is no longer
requiring an appraisal on large segments of their business. By responding
to this letter today you can take a proactive approach now to secure your future
in this industry.

I am writing to you in hope of gaining your interest in an income generating
opportunity, which will utilize your skills as an appraiser in your metro area.
Our company is the developer of an automated valuation program for appraisers
and we are currently recruiting operators in your area. This is a great opportunity
for you to take an offensive strategy and diversify your business at no cost to you.
ValueNet has been doing business in the Chicago area for almost 3 years and
is rapidly expanding into other metropolitan markets. Our operators earn easily
as much and probably more income than with traditional appraisals without the
time or expenses of traveling to inspect homes. Most of the work is done from
their home or office using only a phone, fax, computer, and e-mail. ValueNet
operators are completing between 2 and 3 ValueNet reports per hour.

ValueNet requires a Pentium or higher (Celerons work well also) stand alone
computer running Windows 95 or higher and the ability to access the internet. We
are looking for a limited number of operators who will be committed to completing
these valuations in less than 24 hours. Limiting the number of operators in a specific
market assures those participating of a major piece of the business and the best
opportunity for maximizing income.

If you would like to be among the first to leverage this opportunity and wish to be
considered as a ValueNet operator, please fax back the attached information sheet.
We will e-mail or call soon to set up a time for further discussions. Please be patient
as we have hundreds of people to contact over the next 60 days. I look forward to
hearing from you and thank you for your interest.

Thomas Beath

Vice President


What we faxed back to VNET is below:

Appraiser Central


Woburn, Massachusetts

Dear ValueNet:

This fax is to inform you that you have been added to the nationwide Boycott by appraisers against companies
dealing with AVM’s because of a letter of solicitation/complaint we received from a licensed real estate appraiser.

See referenced letter here: http://www.appraisercentral.com/vnet.htm

Companies presently on our boycott list are:


- Washington Mutual, Inc.

- Charter One Bank, FSB

Appraisal Institute


Day One Software

ACI/Polaroid Software

WCA, Inc. (Real Easy Appraisal Office)

FNC, Inc.

ValueNet (Northbrook, IL)



Steve Keohane


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What we're reading today - not all of it property or land use law related:

  • Alvarez v. Royal Atlantic Developers, Inc., No. 08-15358 (11th Cir., July 2, 2010) - a Title VII employment discrimination case, notable for its opening: "Some people are impossible to please. No one can meet their standards and no matter how hard anyone tries, they find fault, criticize, and are unhappy with the result. They demand continuous perfection, which is more than any human being can deliver. The evidence in this Title VII case indicates that Heidi Verdezoto is one of those people. She is the Chief Financial Officer of two closely related, family-owned companies in Miami. As CFO, she supervises the controller of the companies and passes judgment on the performance of the person in that position. And it seems that the judgment she passes is always unfavorable." Slip op. at 2 Ouch.
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