Current through Register Vol. 35, No. 18, September 24, 2024
A. IV, when calculated. Improvement value
(IV) must be calculated when a planning and development lease terminates, upon
a disposition or partial disposition, or at lessor's discretion including but
not limited to at the time of a sublease or assignment. IV is generally
determined through appraisal by comparing the subsequent value of the leased
premises to the base value of the leased premises with an adjustment for
natural appreciation pursuant to the following and as described in Paragraph
(1) of Subsection C of 19.2.22.17 NMAC below:
(1) Base appraisal. Prior to the effective
date of the planning and development lease, the applicant, at the applicant's
expense, shall cause an appraisal of the trust land to be performed by a
qualified appraiser conforming to the uniform standards of professional
appraisal practice (USPAP) to establish the base value (BV). The commissioner
may require specific appraisal instructions and require that the appraiser be
approved in advance. The state land office staff appraiser shall review the
base appraisal pursuant to the USPAP Standard 3, and make a recommendation to
the commissioner that the base appraisal be accepted, rejected, or accepted
with adjustments. The commissioner may approve a BV consistent with the staff
appraiser's recommendation or make deviations therefrom if appropriate based on
the commissioner's exercise of reasonable judgment, documented in writing. The
commissioner reserves the right to reject any base appraisal.
(2) Subsequent appraisal. A subsequent
appraisal is required in order to update the current value of the leased
premises for purposes of identifying IV, if any. At least 60 but not more than
90 days prior to the expiration of a lease, disposition or partial disposition,
or at lessor's discretion including but not limited to at the time of a
sublease or assignment, lessee at lessee's expense shall cause an appraisal of
the trust land to be performed by a qualified appraiser and conforming to USPAP
to establish the subsequent value of the leased premises (SV). The commissioner
may require specific appraisal instructions, including but not limited to those
described in Subparagraph (a) of Paragraph (3) below, and require that the
appraiser be approved in advance. The state land office staff appraiser shall
review the subsequent appraisal pursuant to USPAP Standard 3, and make a
recommendation to the commissioner that the subsequent appraisal be accepted,
rejected, or accepted with adjustments. The commissioner may set the SV
consistent with the staff appraiser's recommendation or make deviations
therefrom if appropriate based on the commissioner's exercise of reasonable
judgment, documented in writing. The commissioner reserves the right to reject
any subsequent appraisal.
(3)
Adjustment for NA. Only the beneficiaries of the land trust are entitled to
increased value resulting from NA. Accordingly, every planning and development
lease must provide for one of the following methodologies designed to adjust
for NA when determining IV:
(a) Appraisal
instructions method. In addition to any other specific appraisal instructions
required by the commissioner, each subsequent appraisal must be performed
pursuant to the following specific instructions requiring two iterations of the
appraisal:
(i) first iteration - the
appraiser shall first appraise the disposition parcel for its present value
considering only those improvements, if any, that were in place at the time
that the base appraisal was performed; if the value that results from this
first iteration exceeds BV as established by the base appraisal, this first
iteration value becomes the BV of the disposition parcel for purposes of
calculating IV; and
(ii) second
iteration - the appraiser shall next appraise the disposition parcel at its
full present value considering all present improvements; the value that results
from this second iteration becomes the SV of the disposition parcel for
purposes of calculating IV.
(b) Predetermined adjustment factor or other
alternative method. Any methodology determined by the commissioner to protect
the trust's interest in the value created by NA as opposed to the value created
by lessee's improvements may be used, including but not limited to a
pre-negotiated periodic adjustment factor included in the lease to be applied
to the BV to account for the anticipated NA at the time of
disposition.
B. IVC accrual; when payable. IVC accrues
only upon completion of base infrastructure at least up to the boundary of the
leased premises, or in the case of a partial disposition, sublease or partial
assignment, at least to the present boundary of the disposition parcel,
sublease or partial assignment. Alternatively, pursuant to the terms of a
lease, IVC may accrue when the lessee has contractually obligated itself to
construct such base infrastructure and where the contractual obligation is
adequately secured by a transferable bond or letter of credit or other
acceptable security. The commissioner may require that base infrastructure be
extended or guaranteed through a given parcel prior to allowing a disposition,
partial disposition, sublease or assignment. Upon disposition to any person or
entity other than the holder of the IVC, the purchaser or new lessee shall
satisfy payment for the IVC pursuant to the following:
(1) in the case of a sale or exchange, the
commissioner shall convey payment of the IVC, if any, to the holder thereof
from the sale or exchange proceeds; or
(2) in the case of a lease, the commissioner
shall convey payment of the IVC, if any, to the holder thereof from the deposit
described in Paragraph (3) of Subsection A of 19.2.22.11 NMAC above less any
rent, costs, or damages owed to the commissioner; however, no payment of the
IVC will be made if a bill of sale or waiver of payment signed by the holder of
the IVC is filed with the commissioner.
C. IVC, how calculated. Subject to the
conditions and restrictions set forth in this provision, a lessee may be
entitled to IVC as determined by the following procedures and calculations and
pursuant to the terms of the lease:
(1) Step
1: The base value is subtracted from the subsequent value, as adjusted for NA
through one of the methodologies described in Paragraph (3) of Subsection A of
19.2.22.17 NMAC above, to determine the improvement value [SV - BV =
IV].
(2) Step 2: The improvement
value is multiplied by the lessee percentage to determine improvement value
credit [IV x LP = IVC].
EXAMPLE WHERE: SV (adjusted for NA) = 200, BV = 100, and LP =
60%
200 - 100 = 100: IV = 100
100 x .60 = 60: IVC = 60
(3) A lessee will not be liable for any
negative IVC.
(4) Any bonus offered
at a lease auction, or any value bid at a sale or exchange auction in excess of
SV as set by Paragraph (2) of Subsection A of 19.2.22.17 NMAC above, will be
payable solely to the commissioner and will not be considered for purposes of
IVC.
D. Depreciation of
IVC. A planning and development lease may provide that IVC may be lost or
depreciated over a stated time if, after termination of the planning and
development lease, there is no successor in interest other than the
commissioner.
E. Commissioner not
liable for IVC. Except for the transfer of funds for IVC deposited by a lessee
or to be paid from the proceeds of a sale, the commissioner is not liable for
the payment of any IVC. The commissioner may require a release or indemnity
from the party receiving payment of the IVC.
F. IVC holder must be identifiable. The
holder of the IVC must be identified in the records of the state land office.
Unless otherwise provided in a lease, leasehold mortgage or collateral
assignment of IVC or infrastructure approved by the commissioner and filed with
the state land office, the commissioner shall treat the lessee, not the
collateral assignee or mortgagee, as the holder of the IVC and the party
entitled to payment
