[Title 32 CFR 644.86]
[Code of Federal Regulations (annual edition) - July 1, 2002 Edition]
[Title 32 - NATIONAL DEFENSE]
[Subtitle A - Department of Defense (Continued)]
[Chapter V - DEPARTMENT OF THE ARMY (CONTINUED)]
[Subchapter J - REAL PROPERTY]
[Part 644 - REAL ESTATE HANDBOOK]
[Subpart C - Acquisition]
[Sec. 644.86 - Exceptions and reservations.]
[From the U.S. Government Printing Office]


32NATIONAL DEFENSE42002-07-012002-07-01false644.86Sec. 644.86NATIONAL DEFENSEDepartment of Defense (Continued)DEPARTMENT OF THE ARMY (CONTINUED)REAL PROPERTYREAL ESTATE HANDBOOKAcquisition
Sec. 644.86  Exceptions and reservations.

    (a) General. Prior to the enactment of Pub. L. 91-646, the Corps 
encompassed a very generous policy of priority leasing with respect to 
former owners and tenants, in order to ease the burden of people who had 
to relocate because of the Corps' projects. Recognizing the inadequacies 
of the well-intentioned attempts by acquiring agencies to make whole the 
former landowner or tenant, the Congress enacted Pub. L. 91-646 which 
was approved on January 2, 1971.

[[Page 169]]

It would appear that the Congress intended that such law provide for the 
fair and equitable treatment of persons who are displaced, without 
having to rely on interim measures, such as priority leasing, to ease 
the inevitable relocation. In House Report 91-1656, the Committee on 
Public Works of the House of Representatives noted the likelihood that 
adequate housing may not be available readily and indicated this as its 
reason for including the provision in the law that satisfactory 
replacement housing must be available before displacement. In view of 
this, it is incumbent on the District Engineer to be opportune in 
seeking out replacement housing and to be judicious in the early 
relocation of owners and tenants before market changes eliminate any 
available supply of replacement homes. It is also essential that the 
District Engineer be diligent in providing the required relocation 
assistance advisory services and benefits authorized by the law.
    (b) Possession by Government. It will be the objective of the 
District Engineer to have the premises vacated and to cause unneeded 
improvements to be removed at the earliest practicable date and conform 
to the Congressional intention expressed above. In addition to the 
above, reasons for this objective are:
    (1) To provide for the expeditious payment of benefits to former 
owners and tenants;
    (2) To complete administration of the actual relocation of owners 
and tenants in a timely manner;
    (3) To avoid maintenance and security problems with respect to 
acquired improvements;
    (4) To prevent vandalism, trespassing and poaching with respect to 
acquired improvements;
    (5) To avoid any implication that former owners or tenants may be 
permitted to remain indefinitely on the federally acquired property;
    (6) To cause land to be leased on the basis of the most practicable 
size and configuration rather than on the basis of the size of the units 
acquired;
    (7) To permit the general public to bid for the lease of federally 
owned land rather than restricting the privilege of leasing to the 
former owner or tenant; and
    (8) To avoid a backlog of incomplete actions when construction or 
flooding is imminent or the land is otherwise required.
    (c) Possession Reserved to Former Owners and Tenants. It is 
considered that the policy of granting priority leases to former owners 
and tenants has been overridden by the enactment of Pub. L. 91-646. 
Accordingly, this policy is being phased out, and where applicable, the 
acquisition agreement will set forth the dates agreed upon for the 
vacation of the premises by the owner and tenant without commitments, 
express or implied, as to the leasing of the premises after such dates. 
Procedure for providing for vendor's continued possession after the 
Government's acquisition is covered in paragraph (l) of this section.
    (d) Outstanding Rights. (1) When the United States is acquiring 
title subject to outstanding rights, the offer will differentiate 
between:
    (i) Property which the vendor is excepting or rights which he is 
reserving and which are created for the first time; and
    (ii) Rights which third parties have acquired in the past, generally 
referred to as outstanding rights in third parties.
    (2) Exceptions or reservations of rights which the vendor may 
retain, without interfering with the construction or operation of the 
project, will be set forth in the offer and deed by a clause following 
the description, beginning with the words: ``Excepting * * *'' or 
``Reserving * * *.'' Any other outstanding rights, subject to which the 
United States is acquiring title, held by third parties will be set 
forth in the offer and deed by a clause, following the description, 
beginning with words, ``Said premises are conveyed subject to * * *.'' 
Negotiations with the surface owner will include the owner's interest in 
the subsurface, unless acquisition of a lesser interest has been 
authorized by directive or specific approvals. These negotiations will 
not include interest severed and outstanding in third parties by 
purchase or lease, unless the surface owner agrees to remove the 
outstanding interest or

[[Page 170]]

agrees to obtain a subordination from the holder of the outstanding 
interest if that is consistent with the acquisition plan. If 
negotiations with the surface owner are successful, an Offer to Sell 
will be obtained, reciting the outstanding interest in the ``Subject 
to'' paragraph of the form, unless the surface owner has agreed to 
remove the outstanding interest (or obtain a subordination, if 
appropriate), in which case the Offer to Sell must recite specifically 
that the surface owner is assuming this obligation. In order to carry 
out the requirements of this paragraph, the title evidence must be 
examined prior to negotiations or, in any event, prior to acceptance of 
the Offer to Sell.
    (e) Right to Repurchase Prohibited. In no case will an offer be 
obtained in which the vendor reserves the right to repurchase the 
property. Such a reservation would be contrary to the Federal Property 
and Administrative Services Act of June 30, 1949, 63 Stat. 377, 40 
U.S.C. 471, et seq.
    (f) General Reservation Guidelines. (1) Reservations of the right to 
remove crops, timber, buildings, and improvements during a specified 
period will not be permitted without express approval of the Division or 
District Engineer on civil works projects, the Army or Air Force using 
service on military projects, or the Federal agency, if other than the 
Army or Air Force, for which the land is being acquired.
    (2) At the time of the approval of the acquisition by the Chief of 
Engineers, a determination will generally have been made as to whether 
subsurface rights and/or water rights will be acquired or left 
outstanding. Acquisition will be on the basis of such determination and 
as outlined below. Lands will be acquired subject to minerals, oil and 
gas rights or other similar interests severed and outstanding in third 
parties by purchase or lease and as approved by the Chief of Engineers.
    (3) Where it is not possible to acquire or subordinate an 
outstanding interest by negotiation and the interest will not interfere 
with the operation of the project, consideration may be given to 
obtaining a waiver from the Office of the Chief of Engineers on the 
basis of taking a calculated risk rather than resorting to condemnation 
(paragraph (k) of this section). Waivers will be considered on a tract-
by-tract basis or on a project segment basis. Since such waivers involve 
several elements of the Office of the Chief of Engineers (Civil Works or 
Military Construction as well as Real Estate), the basis for the 
calculated risk must be fully explained.
    (4) Concurrently with the negotiations to acquire from the surface 
owner, negotiations should be opened with the owner of the subsurface 
rights or other interests severed and outstanding in third parties by 
purchase or lease and required for the project, unless these interests 
are held in ``block ownership.'' Block ownership exists where a person, 
corporation, or other entity owns subsurface or other interests in 
connection with more than one surface tract and in sufficient amount for 
the entire interest holding to have added value, for operational or 
other reasons, because it is in a block ownership. In other words, block 
ownership exists when the acquisition of a part of the block would 
require the assessment of severance damage, even if the value of the 
interest or the amount of the severance damage would be in a nominal 
amount. On this basis, subsurface or other interests need not be 
contiguous to constitute a block ownership. Block ownership interests 
will not be acquired (or subordinated) piecemeal.
    (5) Acquisition of the required interests, including subordination, 
held in block ownership should be started as soon as the extent of an 
operational unit is determined. As stated in paragraph (f)(4) of this 
section, all interests in a tract of land should be acquired at one time 
or as close in time as possible. Dual acquisitions of entire areas, one 
for surface rights and then for subsurface interests, should be avoided 
and acquisition of separate interests should be scheduled to coincide.
    (g) Reservation of Buildings and Improvements. The reservation by 
vendors of the right to remove buildings and improvements will be 
permitted under the following conditions:
    (1) Where the Division or District Engineer, in civil works 
projects, the using service in Army and Air Force projects, or the 
Federal agency, if

[[Page 171]]

other than the Army or Air Force, for which the land is being acquired, 
has determined that they will not be needed for the purpose of the 
project;
    (2) The consideration to the Government for the reservation will be 
an amount negotiated at not less than the appraised salvage value of the 
building and improvements which are reserved, and such amount will be 
deducted from the negotiated price at the time of negotiation prior to 
execution of the offer;
    (3) Where a reservation is permitted, the following clause will be 
inserted in the offer, following the description of the land:

    Excepting and reserving to the Vendor the right to remove (enter 
description of buildings) on or before ------ 19 --, which the Vendor 
agrees not to relocate on other land to be acquired for the project; 
provided, however, that, in the event that the said buildings and 
improvements are not completely removed on or before said date, the 
right of removal shall terminate automatically, and the United States 
shall have a good and indefeasible title to said buildings and 
improvements which remain without notice to the Vendor; and provided 
further that, in the event said buildings and improvements are relocated 
on other land to be acquired for the project, the United States shall 
have good and indefeasible title to said buildings and improvements 
without notice or further compensation to the Vendor.


The date on which the buildings or improvements must be removed must be 
fixed so that there is no interference with contruction or carrying out 
the mission of the project. The date for the removal should allow a 
reasonable time for removal of the improvements, usually not more than 
90 days, except that for valid reasons the Division or District Engineer 
may grant an extension of time for removal. The right to remove such 
buildings cannot be prolonged indefinitely and certainly such right 
cannot survive the limited right of possession reserved to former owners 
and tenants as provided in paragraph (c) of this section.
    (h) Reservation of Growing Crops. (1) The reservation by the owners 
of the right to harvest and remove growing crops should be encouraged in 
order to conserve land acquisition funds and to avoid the costs incident 
to disposal of crops by the Government, whenever there is a probability 
that possession of the land will not be required prior to the harvest 
season.
    (2) Where a reservation is permitted, the following clause will be 
inserted in the offer, following the description of the land:

    Reserving to the vendor the right to harvest all of the growing 
crops located on the above described land on or before ------ 19--. In 
the event the crops are not harvested on or before said date, the right 
of removal shall terminate automatically, and the United States shall 
have a good and indefeasible title to said crops, without notice to the 
vendor.


The date on which the crops must be removed must be fixed so that there 
is no interference with construction or carrying out the mission of the 
project.
    (3) The consideration to the Government for the reservation will be 
an amount not less than the appraised value of the crops as of the date 
of surrender of possession as disclosed by an approved appraisal report, 
and such amount will be deducted from the purchase price at the time of 
preparation and execution of the offer.
    (4) Where a tenant has an interest in growing crops, the value of 
his interest must be fixed by use of ENG Form 1564, Consent to Offer to 
Sell Real Property, which provides that the value of the tenant's 
interest, as agreed upon by the landowner and tenant, will be paid from 
the purchase price for the land. The use of this form not only protects 
the tenant but, in addition, provides a simple method for extinguishing 
rights which the United States is legally bound to recognize. Where a 
tenant wishes to reserve the right to remove crops, it must be done in 
the name of the landowner, and in like manner. To accomplish the 
foregoing, any other form is satisfactory, in lieu of ENG Form 1564, as 
long as closing requirements are satisfied.
    (i) Reservation of Timber. (1) The reservation of the right to 
remove timber by vendors will be permitted only with the express 
approval of the Division or District Engineer, with the concurrence of 
the using service in cases other than civil works projects of the Corps 
of Engineers.

[[Page 172]]

    (2) Reservation of the right to remove timber will be handled in 
substantially the same manner as that described for the reservation of 
buildings and improvements. If owned by a third party, ENG Form 1564 
will be used in the same manner as for crops unless the timber interests 
are held in block ownerships. The consideration to the Government for 
the reservation will be an amount not less than the appraised value of 
the timber, giving full weight to any unusual difficulty in harvesting 
and transporting which are caused by the size, shape and location of the 
stand reserved, time limitations for removal, clearing requirements over 
the above those normally involved in prudent harvesting, and similar 
factors. If necessary, the stand reserved will be re-appraised on this 
basis. An amount not less than this appraised value will be deducted 
from the purchase price at the time of preparation and execution of the 
offer.
    (3) Where a reservation is permitted, the following clause will be 
inserted in the offer following the description of the land:

    Reserving to the vendor the right to cut and remove on or before --
---- 19 --, all trees in excess of ------ inches in diameter at breast 
height (DBH) located on the above-described land. In the event the 
timber is not removed on or before said date, the right of removal shall 
terminate automatically, and the United States shall have a good and 
indefeasible title to said timber, without notice to the vendor.

    (j) Coal, Oil, Gas or Other Minerals. Acquisition of land or 
interests therein for project purposes will usually include the 
subsurface as well as the surface, except in areas where minerals have 
more than a nominal value. When the mineral, oil and gas rights have an 
identifiable value or are the subject of separate estates in the land, 
such mineral, oil and gas rights will not be acquired except where the 
development thereof would interfere with project purposes, but mineral 
rights not acquired will be subordinated to the Government's right to 
regulate their development in a manner that will not interfere with the 
primary purposes of the project, including public access, and not be 
inimicable to the environment. This is covered in more detail in subpart 
A. It is essential, however, in many acquisitions that the subsurface 
rights be acquired. In others, where these rights need not be 
extinguished, provision must be made in the offer the deed to 
subordinate such rights to project requirements, by excluding the owners 
of such rights from the area, or limiting exercise of such rights so 
that they will not interfere with the primary purposes of the project, 
including public access. The following guidelines are applicable in 
these cases:
    (1) Where it has been determined that subsurface rights in the 
vendor, or outstanding in third parties, must be acquired, extinguished 
or subordinated, such arrangements will be made in the course of 
obtaining an offer for the surface or subsurface interests. Where the 
negotiations for acquisition, extinguishment or subordination of 
subsurface rights will be delayed, and it is considered advisable to 
proceed with surface acquisition to keep pace with project requirements, 
appropriate recommendations and justification will be submitted to HQDA 
(DAEN-REA) WASH DC 20314 for approval.
    (2) If the owners of the surface and subsurface rights are 
agreeable, the separate interests can be acquired in a single 
transaction by use of ENG Form 1564, Consent to Offer to Sell Real 
Property. This method is the most desirable one, and, if used, the 
purchase price in the offer will cover both the surface and subsurface 
interests and the offer will not be taken ``subject to'' the subsurface 
rights.
    (3) Subordination of the subsurface interest based upon the value of 
the minerals in place and which will allow continued production by the 
mineral owner or lessee must be pursuant to such terms as will safeguard 
the Government's interest and preclude a windfall to the mineral owner 
or lessee. Value of the minerals in place will not exceed the 
recoverable portion of said minerals using agreed upon production 
methods. See Subpart A for detailed treatment in the section pertaining 
primarily to Real Estate Design Memoranda.
    (4) When the third-party owner of subsurface rights refuses to enter 
into an agreement as contemplated in paragraph (j)(2) of this section, 
the title to

[[Page 173]]

the surface estate may be acquired separately, and the subsurface rights 
outstanding in third parties acquired as a separate transaction. The 
offer for the acquisition of the surface estate will provide for the 
conveyance of all interests of the surface owner in and to the 
subsurface estate, as well as all surface rights, and provide for taking 
``subject to'' the subsurface rights outstanding in third parties. In 
such cases, the negotiations described in Sec. 644.83 will be conducted 
on the basis of the approved appraisal, less the appraised value of the 
outstanding subsurface rights.
    (5) Where it has been determined that the subsurface rights and 
interests therein need not be acquired, but the owners of such rights 
must be excluded from the area, and the owner of the surface is the 
owner of the subsurface estate, the offer will contain a clause 
providing that he relinquish, for the period that title to the tract is 
vested in the Government, all rights to enter upon the lands covered by 
the offer or that he will limit entry and exploration in a named manner 
so as not to interfere with the operation of the project. If third 
parties own subsurface rights or interests, a similar waiver of the 
exercise of such rights must be procured from all third parties having 
any interest in the subsurface estate, whether as lessees or assignees. 
The waiver by third parties must be obtained at the time the offer is 
procured for the surface estate, unless these subsurface interests are 
held in block ownership.
    (k) Title Exceptions--Administrative Waivers. (1) A distinction 
should be made between those title defects, objections, liens or 
encumbrances which, if not eliminated, might possibly defeat or 
adversely affect the Government's title, and those interests in the 
property owned by parties other than the grantor. All encumbrances, 
defects, and outstanding interests which cannot be waived under 
paragraphs (k) (2), (3), and (4) of this section must be eliminated or a 
waiver of the defect secured from the Attorney General.
    (2) Title may be taken subject to an outstanding third party 
interest which has been administratively waived. Requests for 
administrative waivers shall be submitted to HQDA (DAEN-REA) WASH DC 
20314 for consideration, together with recommendations from Division and 
District Engineers. The recommendation for waiver should be coordinated 
with the using agency, if other than Department of the Army land 
(military or civil works), and should be accompanied by a certificate 
signed by the Chief, Real Estate Division or the Chief Appraiser, 
certifying that the outstanding interest has no contributory value to 
the estate being acquired and will not interfere with the purpose for 
which the property is being acquired.
    (3) It has previously been administratively determined that all 
lands for Department of the Army (military or civil works) or Air Force 
projects may be acquired ``subject to existing easements for public 
roads, public highways, public utilities, railroads and pipelines,'' and 
``to the reservations, exceptions and any other outstanding rights 
contained in or referred to in patents issued by the United States,'' 
and also ``to water rights, claims or title to water, if any, or other 
similar title exceptions.'' A decision as to whether any of these 
exceptions should be eliminated is the responsibility of the Division or 
District Engineer, after coordination with the using service if other 
than the Department of the Army. If such interests are to be left 
outstanding, they should be included in the ``subject to'' clause of the 
Offer to Sell.
    (4) Offers to Sell may be accepted subject to subsurface mineral 
interests owned by third parties in accordance with Sec. 644.86(d). In 
such case, the ``subject to'' clause of the Offer to Sell should recite 
the specific interest which is being left outstanding. Where it is not 
possible to acquire or subordinate an outstanding subsurface interest by 
negotiations and the outstanding interest will not interfere with 
construction, operation or maintenance of the project, consideration may 
be given to obtaining a waiver from HQDA (DAEN-REA) WASH DC 20314 on the 
basis of taking a calculated risk rather than resorting to condemnation. 
Such waivers may be considered on a tract-by-tract, segment-by-segment, 
or project basis.

[[Page 174]]

Where a number of small mineral interests in a project are to be 
recommended for waiver, it is preferable that the recommendation be 
submitted on an entire project or group of segments at one time. Such a 
recommendation should specifically identify the subsurface mineral 
interests which are to be left outstanding, together with the estimated 
value of each interest, and should be accompanied by a map(s) on which 
the areas affected by the outstanding interests have been outlined. The 
basis for the calculated risk should be explained fully.
    (l) Possession Reserved to Vendor. (1) The objective in acquisition 
is to obtain possession for project purposes at the earliest practicable 
time. It is recognized, however, that there are occasions when 
possession by the Government may be delayed and provision must be made 
for continued possession by the former owner in order to meet the 
requirements of the Government's acquisition policy and to further 
soften the impact of the Government's acquisition. The retention of 
possession will enable the owner-occupant of farm land, or residential 
property, to receive his purchase money and remove improvements reserved 
by him, and permit occupants who may be former owners or tenants the 
privilege of harvesting growing crops and sufficient time to relocate to 
other locations. Accordingly, the Division or District Engineer may make 
provision for the former owner, occupant, and/or his tenant(s) to remain 
in possession of the land under the terms and conditions as follows:
    (i) If the tract is to be acquired by direct purchase, the provision 
for retention will be written into the offer (ENG Form 42, ENG Form 
2970, or ENG Form 1564) and will read substantially as follows:

    Notwithstanding the provisions of paragraph ---- of this offer, 
(and/or consent to option) the occupant (vendor and/or his tenant) now 
in possession of the property, in consideration of the protection and 
maintenance of the land, buildings, and structures, and protection of 
the property against loss by fire, waste, or other causes, to which the 
occupant hereby agrees, reserves the right to occupy the property until 
----------. Such occupancy is subject to revocation by the (Division) 
(District) Engineer at any time by giving ---- days notice in writing to 
the occupant if possession of the property is required by the United 
States; and provided further that the vendor-occupant or his tenant will 
remove no improvements or timber unless otherwise provided herein.

    (ii) When the tract is to be acquired by condemnation, the 
circumstances of the right to remain in possession, which has been 
established as hereinafter set forth, will be fully described in the 
correspondence forwarding the condemnation assembly to HQDA (DAEN-REA-C) 
WASH DC 20314. The retention of possession without payment of rent is 
directed to the benefit of the occupant of the property with some 
property maintenance consideration to the Government. This procedure 
will not be used to permit non-occupant owners a means of retaining 
possession without payment of rent and at the same time collect cash 
rents or unreserved crop rents from tenants.
    (iii) When the land being acquired is utilized by the owner and/or 
tenant for agricultural or related purposes, a period of possession may 
be allowed, if consistent with project requirements, to permit the crop 
owner to harvest growing crops, and to avoid abrupt dislocations. The 
period of possession reserved in the offer, or for which request for the 
order of the court is deferred in declaration of taking cases, should 
generally be co-extensive with the crop season or the date that, by 
custom in the community, leases of such properties ordinarily expire: 
Provided, however, That such period does not exceed 12 months from the 
date title vests in the Government. Reservation of possession or delay 
in entry of order of possession that will interfere with the 
Government's requirements for use of the land will not be allowed.
    (iv) In the case of owner-occupied residential property other than 
farm residences, possession may be permitted for a sufficient time to 
allow orderly relocation, but no longer than 12 months after title vests 
in the Government.
    (v) In connection with the acquisition of commercial, industrial, 
tenant-occupied residential property other

[[Page 175]]

than residences occupied by farm tenants, and special use properties, 
ordinarily the procedures of reserving possession to the vendor by a 
clause in the offer, or deferring the right to possession under a 
declaration of taking proceeding, should not be utilized. In such cases, 
after title vests in the United States, the continued possession of the 
property by vendor or tenant should be formalized by an outlease from 
the Government. However, if in the opinion of the Division and District 
Engineer a reservation for possession in the offer or deferral of order 
of possession is desirable in certain instances from a public relations 
standpoint or for other compelling reasons, such cases will be forwarded 
to HQDA (DAEN-REA) WASH DC 20314 for consideration.
    (vi) The reservation of use and occupancy in the vendor and/or 
tenant under the terms of the offer or deferment of possession must be 
based on adequate consideration to the Government. It is anticipated, 
however, that items such as the vendor's maintenance of the land, 
buildings, and structures, his protection of the property against loss 
by fire, waste, or other causes, and the fact that his possession can be 
revoked within a short period of time, will, in most instances, offset 
any rental for the period of the reserved occupancy or deferred 
possession which might otherwise be due. However, if possession is 
reserved by the vendor in the acquisition of commercial, industrial, and 
special use properties, or other type of property having a potentially 
high income factor, the fair rental value for the period of reserved use 
or deferred possession must be deducted from the agreed purchase price.
    (vii) Special provisions for protection of the Government, such as 
those appearing in ENG Form 1366, Department of the Army Lease--River 
and Harbor or Flood Control Property, will be added to the reservation 
clause in the offer in cases where, in the opinion of the Division or 
District Engineer, they are necessary or desirable. If the case is not 
to be closed by direct purchase, the letter to the vendor notifying him 
of the Goverment's intention to file a declaration of taking will set 
forth the fact that possession is to be deferred and for what period, 
and will contain a statement as to the Government's expectation that the 
vendor will properly maintain and protect the premises, and perform such 
other acts (or refrain from such acts) as deemed advisable by the 
Division or District Engineer. Both the letter of notice and the 
reservation clause in the offer will provide that the right to 
possession may be revoked on 30 days notice to the vendor.
    (2) It is recognized that farmers may experience difficulty in 
finding substitute farms needed for their livelihood within one year, 
and other owners and tenants may encounter difficulty in relocating 
within one year. Therefore, the District Engineer, as an exception to 
the procedure in paragraph (l)(1) of this section may lease properties 
to former owners or tenants at the fair market rental value for up to 
one additional year where the circumstances justify such action, and, in 
such event, the record will contain the reasons justifying the action. 
Any occupancy by the former owner or tenant beyond 12 months from the 
date the property was acquired by the Government will be covered by a 
lease and will provide payment of the fair market rental value of the 
property leased.
    (3) The District Engineer, through channels, may request the Chief 
of Engineers to grant exceptions to this policy where unusual 
circumstances warrant such consideration. In keeping with the intent of 
this action, it is hoped that such cases will be minimal in number.
    (4) The following will apply with respect to advance land 
acquisition projects. Former owners and tenants whose properties were 
acquired prior to August 1, 1972 will be allowed to remain on the 
property by lease on a year-to-year basis until the establishment of a 
land management use plan and thereafter, if the property is available 
for leasing, for a single five-year term. Former owners and tenants 
whose properties are acquired after August 1, 1972 will be allowed to 
remain on the property by lease on a year-to-year basis until 
construction commences: Provided, The property is available for leasing. 
After construction commences, if the property is not immediately 
required for project purposes, such former owners

[[Page 176]]

or tenants will be allowed to remain on the property by lease for an 
additional two years. Continued possession of properties acquired after 
the date construction commences will be governed by the procedure 
outlined in paragraph (l)(1) of this section.
    (m) Schools, Cemeteries, and Facilities of State and Local 
Governments. ER 1180-1-1, Section 73, provides for the discretionary 
relocation by the Chief of Engineers of schools and other local 
governmental facilities, and acquisition of the sites under section 111 
of Pub. L. 85-500. Section 73 will be followed in the acquisition and 
relocation of cemeteries. Where the school was formerly a part of an 
abutting tract, offers for the abutting tracts will contain a clause 
whereby the vendor or vendors agree to quitclaim all right, title, and 
interest whether vested or reversionary, in and to the school site in 
executing the deed to the United States.
    (n) Reservations Prior to Completion of Offer. Where immediate 
possession of areas is necessary and is obtained by right-of-entry or 
the filing of condemnation proceedings, owners often wish to move, 
taking with them buildings and improvements, or wish to harvest timber 
or crops, prior to any offer by the Government for the sale of their 
land. This action is authorized only under the following conditions:
    (1) Appraisals of all the land, buildings, improvements, timber, and 
crops of the particular tract are completed and approved.
    (2) A determination is made by the Division or District Engineer 
that the buildings, improvements, and timber will not be needed, and the 
harvesting of timber or crops will not interfere with construction or 
operation of the project.
    (3) ENG Form 1565, Agreement for Removal of Property, will be 
obtained from all persons having an interest in the property to be 
removed. This agreement will recite the amount which the owner is 
willing to have deducted from the value of the tract as a whole for the 
right of removal, which may not be less than the appraised salvage value 
of the buildings, improvements and timber, and the appraised value of 
the crops, as set out in paragraphs (g), (h), and (i) of this section.
    (4) ENG Form 1565 will be obtained and accepted by the Division or 
District Engineer, or the Chief of the Real Estate Division.
    (5) If an offer is obtained later, an appropriate reservation must 
be inserted in the Offer to Sell to reflect the prior agreement relative 
to reservations and removals of property and the agreed value of same.
    (6) If it is necessary later to file a declaration of taking on the 
particular tract, a copy of the agreement (ENG Form 1565) will be 
forwarded with the correspondence transmitting the declaration of taking 
assembly for use of the Department of Justice in the court action. The 
agreement by its own terms will serve as a stipulation as to the amount 
to be deducted from the ultimate award for the right of removing 
buildings, improvements, timber or crops.
    (o) Loss or Damages to Improvements, Timber, or Crops--(1) Insurance 
Protection Against Risks. The Government does not carry property 
insurance of any nature. Vendors, however, may be advised as to their 
liability for certain losses, and that insurance protection against such 
risks is optional. When buildings, improvements, timber, or crops on 
land being acquired by the United States are protected by insurance in 
effect when acquisition activities are initiated, the time and method of 
cancellation and negotiation for refund on premiums paid will be the 
responsibilities of the vendor. In order to avoid double payments to 
vendors, any amounts actually collected by vendors under the terms of 
the insurance policies for damage or loss occurring after acceptance of 
the offer by the Government will be deducted from the purchase price, 
regardless of when title is vested in the United States or the right to 
possession is exercised.
    (2) Fixing Liability--(i) Prior to Vesting Title in Government. 
Buildings, improvements, timber, or crops on land acquired by the United 
States by purchase or condemnation remain the property of the vendor 
until title has been vested in the United States by delivery of a deed 
of conveyance or filing of a declaration of taking, and loss or damage 
thereto caused by fire, acts of God, theft or vandalism, before such

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vesting of title, will be borne by the vendor, except as provided below.
    (ii) Possession by Government. When the right to possession has been 
exercised by the United States under an accepted Offer to Sell, 
condemnation proceeding, or possession has otherwise been surrendered to 
and accepted by the United States, losses arising from damage to 
buildings, improvements, timber, or crops by fire, acts of God, theft, 
or vandalism will be borne by the United States. If, however, prior to 
vesting of title, the right to possession has been exercised, or 
surrender has been made and accepted only to part of the property, and 
the vendor continues to use buildings and/or to cultivate or harvest 
crops or timber, such loss will be borne by the vendor as to buildings, 
timber or crops retained.
    (iii) Title in Government. After title has vested, losses to 
buildings, timber or crops not caused by the willful act or gross 
negligence of vendor will be borne by the United States; provided, 
however, that if the vendor continues in possession of buildings, timber 
or crops, after title has vested, and the deed, stipulation or order of 
court has reserved to the vendor the right to remove such buildings, 
timber or crops, loss or damage thereto, both before and after removal, 
caused by fire, act of God, theft, or vandalism will be borne by the 
vendor, only to the extent of the amount deducted from the purchase 
price, as provided in the deed, stipulation or order of court, for the 
right to remove.
    (p) Other Reservations. The following rights may be reserved to the 
owner wherever such reservation will be to the financial advantage of 
the Government and it has been determined by the Division or District 
Engineer that the reservation of the rights will not interfere with the 
operation of the project. These rights may be reserved in the Offer to 
Sell and in the condemnation estate but only whenever mutual agreement 
between the owner and the Government concerning all phases of the 
acquisition except just compensation has been reached, or by stipulation 
for settlement of condemnation cases, subject to approval of revestment, 
if any, by DAEN-REA.
    (1) Rights-of-Way for Stock to Water. Reservations of rights-of-way 
will be permitted for watering stock, in the case of bona fide livestock 
operations, such as dairymen and ranchers. Such rights-of-way will be 
limited to a reasonable width and will not be permitted in public access 
and use areas. The reservations will be so worded as not to require the 
owners to fence the rights-of-way, but to provide that if they elect to 
do so, they must provide gates at satisfactory intervals to permit 
crossing of the rights-of-way.
    (2) Rights-of-Way for Water Pipeline for Domestic Use. Reservations 
of rights-of-way for water pipelines for domestic use (household, stock 
watering, garden, farm yard, but excluding irrigation) may be permitted 
by providing for the reservation of a temporary or permanent easement.
    (3) Rights-of-Way for Water Pipline for Irrigation Use. (i) In areas 
where irrigation is commonly practiced, or is of paramount importance, 
owners of remainder or contiguous lands will be permitted to reserve a 
sufficient real estate interest to place water pipelines across 
Government-owned lands, in order to obtain financing for irrigation 
development and/or in order to be assured of being able to carry on 
irrigation operations. In ``water rights'' States (prior appropriation 
of water rights), the reservation of such interests will be permitted 
only to those owners who have established water rights from the State, 
or who may in the future obtain such rights. When irrigation is a 
project purpose, such reservation must be coordinated with the Bureau of 
Reclamation.
    (ii) Under these circumstances, a landowner may be permitted to 
reserve an easement and right-of-way for a water pipeline and pumping 
unit across the land he conveys, by appropriate provisions in the offer 
to sell and in the deed to the United States. In ``water rights'' 
States, this reservation will be ``for the exercise of established water 
rights, although no right to use water is created hereby.'' (This 
phraseology is to be incorporated in the reservation.) The reservation 
will also include any pertinent provisions considered essential by the 
Division or District Engineer, such as requirement to install

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the pipeline underground and at a specified depth.
    (iii) Reservations of this nature will also be permitted in those 
cases where acquisition is by condemnation. In these acquisitions, the 
reservation may be recited in the complaint and declaration of taking, 
whenever full agreement except as to just compensation has been reached, 
or it may permitted later by stipulation.
    (iv) When the project is located in an area in which the Bureau of 
Reclamation is developing, or planning to develop, irrigation districts 
or systems, prior coordination with the Bureau will provide that copies 
of all deeds and final condemnation judgments which recite reservations 
under this paragraph will be furnished to the local office of the 
Bureau. Thereafter, the Bureau of Reclamation will be responsible for 
supervising the exercise of the easements to insure compliance with 
Reclamation laws.
    (v) Plans to provide for irrigation will be fully covered in the 
Real Estate Design Memorandum.
    (4) Acquisitions in which these rights are to be reserved must, of 
course, be based on an appraisal of the fair market value of the estate 
to be acquired. Since the appraisal would probably be made originally on 
the basis that there would be no reservation, revision must be prepared 
whenever the reservation appears to be appropriate, to reflect the 
reduction in severance damages or other financial advantage accruing to 
the Government. Consideration of counteroffers which include proposals 
for these reservations by the landowner will be based on and compared 
with the appraised fair market value of the estate proposed to be 
acquired. Deposits with a declaration of taking will be based on the 
appraised fair market value of the estate to be acquired by the 
condemnation action.