3.5 Determine Terms and Conditions

Consult Regulatory Agencies

Consulting with regulatory agencies is a significant step. Project proponents must know whether regulatory permits will needed, if the permits can be obtained within needed timeframes, and what conditions may be imposed on the project as part of the permits. These permit conditions will often become points of negotiation with the land and resource owners as well.

Ocean and Coastal-specific Issues: If in-water work (such as oyster restoration, eelgrass planting, or shoreline softening) is planned as part of the project, then several regulatory permits may be needed (such as shoreline development permits, 401 permits, dredge and fill permits). Early contact with regulatory agencies will expedite project approval in the later stages. The appropriate regulatory agency can be difficult to determine. This toolkit provides Country Summaries and U.S. State Summaries that may help determine agency contacts.

Lease-specific Issues: When the prospective leased area is publicly-owned, it is common for the leasing agency and regulatory agency (or agencies) to be different. As such, multiple agencies will likely be involved in the leasing and regulatory permitting process.

Negotiate Terms

Terms and conditions of the lease, easement, or fee-title sale, as well as plans for restoration and management of the site or resources, should be negotiated and agreed upon by the conservation organization, land and resource owner, and authorizing regulatory agencies (when appropriate). This includes reaching agreement on needed pre-and post acquisition biological and physical conditions for assessing performance (e.g., how will the owner determine if you are meeting your conservation objectives). Outstanding issues related to the site, lease or purchase terms and conditions, or process should be resolved.

Determine Cost

Determining the appropriate cost of the acquisition is yet another part of performing due diligence. In most cases, certified property appraisers should determine the site's or resource's Fair Market Value (FMV). The Internal Revenue Service requires as part of charitable status of NGOs that they do not pay more than FMV except to other charitable organizations. If you’ve sent a URA notice to the seller and the appraisal shows a value that is materially higher than what you used in the URA notice, you may need to send an amended URA notice. Closing costs should also be determined at this point.

Ocean and Coastal-specific Issues: Appraisals of lands and resources lying within ocean and coastal waters are not common. As such, appraisers with expertise in ocean and coastal land and resource appraisal should be sought, but can be difficult to find.

Essentially, there are two standards for appraisal practice in the United States. The most common is the Uniform Standards of Professional Appraisal Practice (USPAP), under a quasi-governmental organization known as the “Appraisal Institute.” This widely accepted standard applies mostly to traditional real estate practice (residential, commercial, and agricultural). While the instructions under USPAP do very little to guide an appraiser in estimating the true value of lands lying below the high tide line, financial institutions and public agencies may insist on its application. Most any licensed appraiser should be familiar with these standards.

The less commonly known standard is the Uniform Appraisal Standards for Federal Land Acquisitions (USFLA, also known as Yellow Book). Far fewer licensed appraisers are proficient with this standard, as it encompasses only a fraction of the work of the appraisal industry. However, this standard goes into much more applicable detail for determining the value of lands lying below the high tide line. Moreover, it is not uncommon that it may be required for land acquisitions involving federal funding sources.

One of the key problems with obtaining reliable appraisal services for lands lying below the high tide line is the lack of directly-applicable market data (the primary source of data for determining FMV). Because of this, the need for a well thought-out and comprehensive scope of work and instructions to the appraiser becomes critical. Among the elements of this are:

Determination of “Highest and Best Use”
Restrictions on title and property rights (explicit in the deed or implicit to the land type)
Hypothetical conditions
Extraordinary assumptions
Suitable valuation surrogates
Stand-alone property value or assemblage value
Type of Appraisal: Summary, self-contained, appraisal update
Identification of authorized users and client/co-clients

Careful attention to the scope of work and instructions to the appraiser is critical for ensuring that you get what you pay for. In addition, one should be careful to ensure that the contracted appraiser can demonstrate that they have prior experience with appraising lands lying below the high tide line. Even then, you may need to educate the appraiser on various aspects of such lands, such as boundary principles, legally allowable uses, public trust doctrine considerations, and tribal rights

Lease-specific Issues: Rental rates for leases may require appraisals or documentation of value as well. However, each agency with leasing authority will likely have different lease rental rate determination procedures based on laws, rules, policies, and historical practices. Common procedures include standardized fee structures, percent of market/project value, upland extension, across-the-fence, comparable sales/leases, and negotiation. In some cases, conservation organizations may be able to make the case for minimum or zero lease fees for non-profit conservation projects that benefit public resources at-large.