Real Property Matters

Volume 6, Chapter 6

INTRODUCTION

OMP personnel are frequently involved in real property matters that require coordination with Real Estate Services Group (RESG), the Office of General Counsel (OGC) and/or other units of the Office of the President. This chapter addresses procedures to follow for real property matters involving OMP.

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6.1 DUE DILIGENCE FOR PROPERTY TRANSFERS

Prior to acquiring real property to be used for University purposes whether by purchase or ground lease (as lessee), substantial due diligence is required to determine the property’s suitability for the University’s intended use and the extent of any liability associated with taking title to or possession of the property. RESG assesses property title and value and, working with OGC, negotiates contractual terms to permit a thorough due diligence review of all other aspects of the property. All due diligence other than title and valuation is performed by or under the direction of the campus.

The nature and extent of due diligence performed is a function of the type of property and intended use. For example, vacant land for development requires analyses of such items as boundaries, terrain, soils, water table, access, and infrastructure availability; whereas an existing building to be acquired for use as-is requires analyses of such items as building structure and condition, fire life safety systems, ADA, mold, operating systems and existing leases and operating agreements. Checklists for due diligence that may be applicable to a real property acquisition and sale by the University are available at: FA - RESG - Leasing & Licensing Resources

Regardless of property type and intended use, however, an environmental due diligence site assessment is required to be conducted to determine the presence of hazardous materials or hazardous waste whenever the University plans to acquire or ground lease real property. Similar analysis may also be required prior to sale of real property. These assessments are necessary to determine and limit University liability.

6.1.1 Environmental Site Assessment Process and Requirements

Regardless of property type and intended use, an environmental site assessment must be conducted to determine the presence of hazardous materials or hazardous waste whenever the University acquires or ground leases real property. Such analysis may also be required prior to sales of real property. These assessments are necessary to determine and limit University liability.

Environmental site assessment is a three-phased process:

  • Phase 1: Preliminary Site Assessment
  • Phase 2: Site Characterization
  • Phase 3: Site Remediation (Cleanup)

(See 6.1.2 through 6.1.4 for an outline of this phased process. For more detailed information on the due diligence process for real property acquisitions, contact RESG.)

Environmental site assessment is conducted by Environmental Health and Safety personnel or qualified outside environmental consultants. The assessment determines the likelihood of on-site hazardous material contamination of existing buildings, soils, or ground water and identifies sources of the possible contamination. Actual sampling of building materials and residues, soils, or ground water may be required.

Hazardous materials may be found in a variety of forms on real properties. Building materials or components are sometimes considered hazardous: for example, asbestos, transformers and capacitors containing polychlorinated biphenyls (PCBs), lead paint, and ureaformaldehyde foam insulation. In addition, soils or ground water at the site may be contaminated by improper disposal of hazardous materials or by leaking underground storage tanks.

OMP personnel should assist environmental assessors in the due diligence site assessment process when the University purchases or ground leases facility-related real property, or sells University-owned real property.

Prior to sale of existing University facilities, OMP personnel can assist environmental site assessors by:

  • Providing site history and past and present uses and operations.
  • Indicating whether regulatory permits exist for the site.
  • Explaining the site layout and facilities.
  • Indicating locations of waste and waste water storage, disposal, or conveyance facilities.
  • Providing general information about existing buildings and building components.
  • Providing copies of inventory, inspection, and other records required by law during the
  • University's use of the property.

6.1.2 Phase 1: Preliminary Site Assessment (PSA)

Standard components of Phase 1 are to:

  • Identify past and present site use.
  • Assess off-site hazards posed by past and present uses of surrounding properties.
  • Determine site environmental characteristics and setting.
  • Assess hazardous material and hazardous waste generation, storage, handling, and disposal practices.
  • Inspect structures for asbestos, PCBs, or any other potential hazards.
  • Develop conclusions about potential problems, and develop recommendations for any further action. Available investigative tools for performing the assessment include the following:

Records Review. Review the records below for site history and use, hazardous materials and hazardous waste storage and disposal permits, reported releases or known contaminated sites, violations or other regulatory agency actions, and building permits:

  • Local (city/county) building records, assessor's records, permits, and regulatory records.
  • Local (city/county) historical property records. • Local utility district records (waste water).
  • State regulatory agency records (water, air, hazardous materials, and waste).
  • Federal Environmental Protection Agency records.
  • University records (if existing property).

OMP personnel must make available to environmental assessors all available records pertaining to hazardous materials and hazardous waste use, generation, storage, or disposal.

Site Inspection. Site inspection is performed by environmental assessors to identify land uses, activities, and characteristics that could impair the environmental condition or value of the real property. Site-specific characteristics that could indicate potential for such impairment include:

  • Underground storage tanks.
  • Drums or other chemical storage and handling areas.
  • On-site waste water systems.
  • Sumps and storm drains.
  • Wells.
  • Surface water or waste water impoundments.
  • Soil or pavement stains or discoloration.
  • Noxious or chemical odors.
  • Maintenance or shop areas.
  • Electrical transformers.
  • Piles of waste or trash.
  • Dead, dying, or unhealthy vegetation.
  • Obvious signs of spillage or residues in buildings or on property.

OMP personnel must inform environmental assessors if any of the above characteristics are known to exist.

Interviews. For sales of University real property, environmental assessors will conduct interviews of OMP personnel to obtain information about the current and past uses of the site, regulatory agency permits or site violations, site layout information, waste and waste water information, building information, and other site-specific characteristics. OMP personnel must disclose any knowledge of these areas to the environmental assessor.

6.1.3 Phase 2: Site Characterization

During Phase 2 of the environmental due diligence site assessment process, consultants take actual samples of site soils, ground water, and building components, if necessary. Materials of concern include asbestos, PCBs, lead paint, and ureaformaldehyde foam insulation. Sampling is performed to ascertain the presence or absence of hazardous materials and to determine the need for further site assessment or remediation (cleanup).

6.1.4 Phase 3: Remediation (Cleanup)

During this phase, consultants perform detailed site sampling (characterization) and formulate remedial action alternatives or plans. Consultants may also need to perform a formal health risk assessment.

Another approach to describing the process to be followed in conducting an environmental site assessment for property to be acquired is found at:

http://www.ucop.edu/risk-services/loss-prevention-control/environmental-due-diligence-program/index.html

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6.2 UNDISTURBED USE OF SITE

References:

University Policy: "Construction of Buildings or Other Facilities" (see FM1:5).

On occasion, construction of University buildings or other facilities has been proposed without assurance that The Regents would enjoy undisturbed use of the site for the entire estimated life of the proposed improvement. The following University policy applies to such situations:

No building or other improvement shall be constructed, nor shall the preparation for such projects proceed beyond the completion of preliminary plans unless The Regents' interest in the proposed site, including any necessary access thereto, is such as to assure the University of the undisturbed use and enjoyment of the site for the entire estimated life of the improvement.

Generally, this requirement is satisfied if The Regents hold title to the proposed site in fee simple, but even then, consideration must be given to the existence of any conditions which, if not complied with, may cause The Regents to become divested of ownership. In addition, the impact of easements or licenses on the University's undisturbed enjoyment of the site must be evaluated [see 6.3]. [If no title insurance is held, a preliminary title report should be requested from RESG.]

Conversely, if the estimated life of a building or other improvement is comparatively short, the requirement of prospective undisturbed enjoyment may be satisfied even though The Regents do not hold title to the site in fee simple. For example, a permanent improvement to premises occupied by the University as lessee may be proper if the value to the University of the use of the improvement over the term of the lease will be equal to or in excess of its cost (in other words, the University is able to fully amortize its investment).

In any case, where there is any uncertainty as to whether The Regents' interest in a site is adequate to assure the University of undisturbed use and enjoyment for the estimated life of the building or other improvement, the matter should be referred to RESG, and as needed OGC, prior to proceeding beyond the completion of preliminary plans and pursuing the acquisition. As part of complying with this policy, an opportunities and constraints map of the proposed acquisition property reflecting all of the relevant due diligence findings that bear on developing the property should be prepared.

University Policy: "Construction of Buildings or Other Facilities."

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6.3 LICENSES, EASEMENTS, AND RIGHTS-OF-WAY

The authority to negotiate all campus space leases, licenses, easements, and rights-of-way has been delegated to the Chancellors by the President (see FM1:4) and the authority to approve and execute some of these transaction documents depending on value, scale and duration has also been delegated. The campus real estate office is responsible for such negotiations. A chart of delegated authority for various transactions is found at: http://www.ucop.edu/real-estate-services/_files/documents/authority_real_estate.pdf

6.3.1 Leases

Additional information on leasing practice is located at:

Facilities Administration - University of California Office of the President

and the specific campus delegation for leasing is found at: DA2140

6.3.2 Licenses

Additional information on licensing practice, distinguishing a license from leases and easements, is located at:

When to use a lease, license or easement

and the specific campus delegation for licensing is found at: DA 2118

6.3.3 Easements and Rights of Way

Additional information on and models for easements and rights of way practice is located at:

http://www.ucop.edu/real-estate-services/_files/documents/leasing/easementguidelines08_28_06.pdf

and the specific campus delegation for easements and rights of way is found at:

http://www.ucop.edu/ethics-compliance-audit-services/_files/da/da2234.pdf

http://www.ucop.edu/ethics-compliance-audit-services/_files/da/da2233.pdf

6.3.4 Rights-of-Way

[To be included in a future Facilities Manual revision.]

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June 2, 2008 (Change No. 08-095-P)

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