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The unified rule of valuation is important in eminent domain situations in most states. This is especially true when outdoor advertising billboards are part of the larger parcel. The two elements of the unified rule are commonly referred to as; 1) the “unit rule” relating to the different elements or components of a tract of land and 2) the “undivided fee rule” relating to the various interests or rights into which the whole property may have been divided, such as lessor and lessee, etc.

According to Uniform Appraisal Standards for Federal Land Acquisitions pps 53-54, the unified rule requires that property be valued as a whole rather than by the sum of the values of the various elements, components, interests or rights. This reflects the principle that it is the property, not the various interests, that is being acquired. Therefore, the property should be valued as a whole, including the contributory value of all the components or interests of all owners that may have a claim, and as if in one ownership. The fair market value of the whole property is later apportioned among those who hold various interests in the property, but this apportionment generally falls outside the scope of the government appraiser’s assignment.

Failure to adhere to the unified rule is one main reason for the problems of litigation of properties that involve billboards. The separation of partial interests or components from the whole property for valuation purposes is usually an advantage for these subordinate partial interest-holders. However, this advantage generally translates into overlapping compensation by allowing consideration of elements or rights that do not contribute value to the real property being acquired (e.g. intangible business assets and profits).

For appraisers, the unified rule does not necessarily mean that the independent contributory values of the various interests or components are not admissible in a condemnation trial if they are admitted for the sole purpose of aiding the trier of fact in fixing the value of the property as a whole. In the appraisal reporting process it is very important that the appraiser clearly explains that the value of a component (e.g. billboard structure) is the value it contributes to the whole property. Two questions need to be answered: 1) How much would a billboard operator pay for rental of the structure on the location? And 2) Would the purchaser pay $X more for the whole property if the property included the sign structure?

These are good reasons for condemnors to strictly adhere to the unified rule starting with the first acquisition negotiations with the fee landowner. It should be made clear that the offer to purchase the whole property (based on the unified rule with a value of the fee simple interest including the contributory values of all partial interests and/or components, as if in one ownership) will be made to the fee owner. Apportionment of the award to the various partial owners is a matter among the various owners.

There are several interesting recent court cases involving the unified rule and billboards. These may be discussed on later posts.