Topic:
This article will discuss the pertinent factors to consider in determining the number of businesses on a parcel that are eligible for a fixed payment.
Discussion:
When handling business relocations, one of the problems an agent may encounter is determining the number of businesses located on one parcel that are entitled to a fixed payment. Guidance for the determination of the number of businesses is provided in 49 CFR 24.305(b) Determining the number of businesses.
Let’s take a look at an example encountered on a highway project in a western State. A proposed acquisition of an office building will involve the displacement of an ongoing mental health counseling business. The lease for an office suite contains the names of three people as lessees; all of them are licensed counselors. All three of the counselors maintain an office and see patients. The office suite has a total of four individual furnished offices. The fourth office is leased to another counselor who in turn leases the space out to two other counselors. During the interview process all of the counselors maintain they are an individual business and are interested in claiming a fixed payment. How do we go about determining how many businesses are eligible for the fixed payment?
Let’s look at the rule again:
49CFR 24.305(b) Determining the number of businesses. In determining whether two or more displaced legal entities constitute a single business, which is entitled to only one fixed payment, all pertinent factors shall be considered, including the extent to which:
(1) The same premises and equipment are shared;
(2) Substantially identical or interrelated business functions are carried out and business affairs are commingled;
(3) The entities are held out to the public, and to those customarily dealing with them, as one business; and
(4) The same person or closely related persons own, control, or manage the affairs of the entities.
Our first step in this determination is to see if there is any guidance provided by the client. If our client is a Department of Transportation, they may have a legal opinion on the interpretation of the rule. If that is the case, we would follow the provided guidance. However, if our client is an airport or redevelopment authority, it is highly unlikely they have any guidance to offer. We might check with the State DOT where we are working if our client is an airport or agency other than a DOT. For example, in the State of Washington the Department of Transportation’s legal department has a current legal opinion that if both businesses on a parcel meet all the tests outlined above, then they would be considered a single business entitled to one fixed payment. If they do not meet all the tests then they would be considered separate businesses. The Agency is still considering all the pertinent criteria and applying them to the displaced businesses.
Not all Departments have issued such detailed guidance. Therefore, we have to take a look at each of the factors outlined above:
(1) The same premises are shared: Yes, the premises are shared and the furniture and office equipment is obviously shared.
(2) Substantially identical or interrelated business functions are carried out and business affairs are commingled: The business functions are the same and, with the current set up, it appears the affairs are also commingled.
(3) The entities are held out to the public, and to those customarily dealing with them, as one business: By all appearances this set up would look like one mental health office. Even though there are several counselors in the suite, the appearance to the public is one office that people go to for counseling.
(4) The same person or closely related persons own, control, or manage the affairs of the entity: This item is not as easily determined. Although the three people listed on the lease appear to be in control of the office space, they are not closely related to one another.
If we summarize the requirements it looks like for three of the four pertinent factors addressed in the regulations, this would be considered one business for determining eligibility for a fixed payment. Again, we would have to rely on the governing guidance if there is any type of legal decision already rendered, but in the event of no guidelines, we look at the pertinent factors and make a determination.
This is the type of decision that may be appealed if the displacees are not in agreement with our determination so it is very important to document the file and support your decision.
Since we have brought up the issue of treating all situations on a case by case basis, let’s take a look at the same situation we previously discussed but add some additional information. Let’s say that we have the same initial set up where a counseling office will be displaced and the lease for the office suite has three people named on the lease and all three of these counselors have individual offices that are furnished (office materials, bookcases, computers, etc.) by each individual counselor. The fourth office in the suite is leased to a counselor that has furnished the office, but leases the office space to two other counselors who just use the space to see patients. All three of the counselors listed on the lease maintain their own books and are responsible for paying the monthly rent to the landlord. The fourth office that is leased to a counselor who does not see patients but leases the space to two other counselors who are active with patients has the pro-rated rent paid by the counselor not seeing patients. The two counselors leasing the one office pay a percentage of their monthly income to the non-active counselor. The furniture in the waiting area and the associated expenses are paid for by the three counselors listed on the lease.
The sign on the office building out front identified the business as Behavioral Therapy. Further investigation revels that Behavioral Therapy lists the three counselors who are on the lease as the owner/operators of this business. The two counselors that lease the fourth office from the non-active counselor, who leases the space from the three counselors on the lease, are not listed as members of Behavioral Therapy and they actually are completely independent and maintain their own books and records. These two counselors get their business from referrals and do not advertise. They maintain a separate telephone number from Behavioral Therapy.
Now let’s take a look at the factors that will help us determine how many businesses are being displaced:
(1) The same premises and equipment are being shared: It appears the waiting room area furniture is being shared by everyone, but the three offices maintained by the counselors listed on the lease are all separate and the fourth office has furniture provided by a non-active counselor that is used by two other active counselors.
(2) Substantially identical or interrelated business functions are carried out and business affairs are commingled: All of the counselors at the site are carrying out substantially the same business functions, but not all of the business affairs are commingled. The three counselors who comprise Behavioral Therapy keep their financial affairs separate; however, they are all listed as owner/operators of that business. The two counselors who sub-lease the fourth office maintain their financial and business affairs separate from everyone else.
(3) The entities are held out to the public, and to those customarily dealing with them, as one business: A case could be made that the three counselors who lease the suite and are listed as owner/operators of Behavioral Therapy appear to be held out as one business to the public. However, the two active counselors in the fourth office space are not at all related in business matters with the Behavioral Therapy group and they get their business through referrals. They also maintain a separate telephone number. A question might be raised about the appearance of these two counselors being associated with the group because they are probably considered to be associated with the group by address and the sign out front.
(4) The same person or closely related persons own, control, or manage the affairs of the entity: Although the Behavioral Therapy group looks like one entity, the persons who own, manage or control the affairs of the business are not closely related to each other. The two independent counselors maintain their own books and are not dependent on the group for business or advertising.
Based on the information provided in this scenario, it is possible that the three counselors in the Behavioral Therapy group would be considered a business eligible for one fixed payment and the two counselors occupying the fourth office would be considered another business eligible for a separate fixed payment. Of course, some Agencies would look at the criteria numbered (2) and (3) and consider all five of the counselors engaged in substantially the same type of business function and holding themselves out to the public as one business and decide that they are all one business eligible for one fixed payment.
In this case, they have the right to appeal the Agency’s decision.
Making a decision as to the number of businesses eligible for a fixed payment can be difficult and may change with the amount of information you can find in each given situation. An Agency’s decision about how many businesses are operating at the site will have to be balanced among the factors outlined in the Federal Regulations, and all pertinent factors should be considered by the Agency. As you can see from this example, you will not always get a clear ‘yes’ or ‘no’ answer in every category.
Source:
 |
Ted Pluta |
| © O.R. Colan Associates |
|
