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6.4 Gift Acceptance and Administration

Purpose #

To provide policies governing the acceptance, acquisition, and management of any interest in real property by The University of Tennessee Foundation, Inc. (UTFI).  Note: the disposition of real property is covered in 5.20 Real Estate Disposition.

Applicability #

This policy governs the acquisition of any interest in real property by UTFI in any capacity, including any real property owned by any single-member LLC of which UTFI is the single member, whether by gift, purchase, or otherwise on or after July 1, 2011.

Real Estate Gift Acceptance Committee #

The Chair of the UTFI Board of Directors appoints a Real Estate Committee that has the authority to exercise the powers outlined in this policy.  If, for any reason, no such committee has been appointed when a gift of real estate is offered, then the UTFI Chair, Vice Chair, Treasurer and President & CEO (President) shall exercise the powers outlined in this policy.

Due Diligence #

The UTFI President or his designee will conduct due diligence as outlined in this policy. UTFI may retain the services of one or more outside vendors to assist in the due diligence process. Due diligence will include, but is not limited to, a site visit to inspect the property and a review of the following:

  • Market conditions for resale or the ultimate disposability of the property
  • The condition of any improvements located on the property
  • Current and potential zoning, land use and concurrency issues
  • Any costs associated with holding the property for resale
  • Environmental assessment
  • Appraisal information, as provided by donor or otherwise available
  • Title review to determine any encumbrances or other restrictions on the property
  • Whether the property carries risks or potential liabilities of sufficient amount or likelihood that it should be isolated in a separate or new single-member LLC, and
  • Any other considerations specific to the property

When the appraised value of the donated property exceeds $1 million, when an offer to buy donated property exceeds $1 million, when property is being donated subject to a financial encumbrance or other lien besides current property taxes or association fees, or if the staff deems expertise is needed in additional circumstances, then an attorney specializing in real estate transactions shall be consulted.

Acceptance by the UTFI President #

After due diligence, the UTFI President may accept gifts of real property on behalf of UTFI without Real Estate Committee approval unless:

  1. Due diligence reveals environmental issues as noted in Phase I study,
  2. The real estate is offered as a gift to fund a charitable gift annuity,
  3. The annual financial obligations incurred by UTFI to as owner of the property are projected to exceed $10,000, or
  4. The President determines in his discretion that the Real Estate Committee should be consulted with respect to the decision to accept the gift.

The UTFI President will inform the Real Estate Committee immediately when such property is accepted.

Acceptance by the Real Estate Committee #

When one of the following conditions exist:

  1. Due diligence reveals environmental issues as noted in Phase I study,
  2. The real estate is offered as a gift to fund a charitable gift annuity,
  3. The annual financial obligations incurred by UTFI to as owner of the property are projected to exceed $10,000,
  4. Any unusual risks or potential liabilities, or
  5. For any other reason the UTFI President refers a potential gift to the Real Estate Committee then the Real Estate Committee may authorize the UTFI President to accept gifts of real estate after a review of the due diligence information as recited above and any of the following that are pertinent to the property in question:
    1. Deed to the property.
    2. Any condominium agreements, restrictive covenants, leases and/or management agreements.
    3. Current real estate appraisal information.
    4. Property tax statements and insurance policies.
    5. Any follow-up environmental reports, a completed questionnaire regarding environmental issues if the donor agrees to complete the document, and such additional environmental information as is indicated to assess any environmental risk.
    6. Estimated or actual carrying costs for the real estate. These costs include property taxes, insurance and maintenance, and, depending on the type of property, utilities, grounds care, snow removal, caretaker fees and condominium fees.

The Real Estate Committee shall report on its activities and decisions at each UTFI Board of Directors meeting.

Title and Use of Separate Legal Entities #

Except as provided below, real property will be titled in the name of “UTFI Real Estate LLC,” a Tennessee single-member LLC of which UTFI is the sole member. The Real Estate Committee in its discretion may authorize the UTFI President to create a new LLC for any property that carries a risk or potential liability that the Committee deems advisable to isolate in a separate LLC, or in the alternative to title the property in the name of any other single-member LLC created pursuant to this Policy 6.4.7. Any single-member LLC used for such purposes must qualify under the Tennessee Revised Nonprofit Limited Liability Act, Tenn. Code Ann. Section 48-101-801 et seq., or any successor statute thereto, and shall be member-managed in order to give UTFI immediate and absolute control. Except as otherwise provided by the Board of Directors of UTFI, the ex officio officers of UTFI who shall have authority to implement these Policies and any other decisions of the Board of Directors of UTFI by executing documents on behalf of UTFI as the single member of such an LLC and also on behalf of the LLC itself shall be the President of UTFI and/or the CFO of UTFI. Title will be transferred by general warranty deed unless transfer is by a trustee, personal representative, or other fiduciary. In those cases the trustee, personal representative or other fiduciary will provide a deed with warranties appropriate to the fiduciary’s capacity.  UTFI will seek legal review of all deeds prior to acceptance. Title shall not be accepted by any single-member LLC unless the liability insurance policies of UTFI extend to such LLC.

Appraisal and IRS Form 8283 #

The Internal Revenue Service requires the donor to obtain an appraisal from a qualified appraiser, if the value of the real property is over $5,000 and the donor wishes to claim a charitable contribution income tax deduction.  This appraisal (“Qualified Appraisal”) is used by the donor to prepare IRS Form 8283, which the donor is required to file with his/her tax return for the year in which the deduction is claimed.  The UTFI President or Chief Financial Officer (CFO) are authorized to sign Form 8283 on behalf of UTFI. For proper accounting, marketing, and donor recognition purposes, UTFI shall obtain and retain from the donor a copy of the Qualified Appraisal as used by the donor to prepare IRS Form 8283.  In the absence of an appraisal, the real property will initially be recorded on the UTFI books at $1.00.  That value may then be adjusted based on the ad valorem tax assessed value annually or other market indicator satisfactory to the UTFI CFO.

Title Search and Insurance #

UTFI shall require a title search and title insurance for gifts of mortgaged property and for all non-gift acquisitions. UTFI may require a title search for any real property transaction.

Survey #

UTFI shall require a survey for gifts of mortgaged property and for all non-gift acquisitions, unless the Real Estate Committee determines that existing surveys or drawings are adequate.

Real Propery Taxes and Other Carrying Costs #

The donor of real property must provide satisfactory evidence that all real property taxes and other carrying costs are paid and current. Donors will be encouraged to pay all or prorate the taxes and other carrying costs for the year of the donation.

Mortgaged Property #

UTFI rarely accepts mortgaged property. UTFI may accept real property subject to a mortgage if the mortgage is current and assumable, the Real Estate Committee approves, and the UTFI Board approves. Before acceptance:

  • A clearly established method for the payment of the debt must be determined
  • An MAI appraisal is required, and
  • The loan-to-value ratio must be not more than 50%.

Leases #

When real property is acquired subject to a lease, leases must not be in default and must be assignable by the landlord. Commercial property acquired subject to a lease will only be accepted following Real Estate Committee and UTFI Board approval. Following approval, and upon transfer of the property, the leases must be assigned to UTFI and all deposits, advance rents, and other monies transferred to UTFI or otherwise accounted for to UTFI.

University Approval Required #

UTFI will not accept any real estate gift or enter into any transaction that creates any financial liability to The University of Tennessee without the advance written approval of the UT President and the Vice Chair of the UT Board of Trustees.

Environmental Requirements #

No interest in non-residential real property, whether outright, in trust, by bequest, as a secured interest, or otherwise, will be accepted by or on behalf of UTFI unless an ASTM Phase I environmental audit has been performed and reveals no significant areas of concern. If the audit indicates areas of significant concern, then additional investigation, including Phase II and Phase III audits, as recommended, will be performed by an approved consultant before acceptance of the real property. Donors should be encouraged to pay for any environmental audit or review. If these audit(s) disclose a liability risk, then the real property may not be accepted unless approved by the UTFI Board of Directors.

Unsolicited Deeds #

Unsolicited deeds will not be accepted. Upon the receipt of an unsolicited deed, the UTFI President or COO will immediately notify the grantor in writing that the real property has not been accepted and will not be accepted until the requirements of this policy are met. The deed will be returned to the grantor, along with a quitclaim deed from UTFI if necessary.

Restricted Special Acquisitions #

  1. Charitable Gift Annuities: The Real Estate Committee shall decide, on a case by case basis, whether or not to accept a gift of real property to fund a charitable gift annuity. Gifts of real property to fund charitable gift annuities must also comply in full with 6.5 Resolution Establishing a Gift Annuity Program and 6.2 Gift Annuity Program Parameters.
  2. Timeshare units: UTFI shall not accept timeshare units.

Management of Real Property #

All real property held by UTFI in any capacity shall be managed in a manner designed to comply with all federal and state laws and regulations and to minimize or eliminate any liability resulting from hazardous materials. In recognition of limited UTFI’s personnel resources, UTFI may retain the services of an outside vendor to assist in managing any interest in real property held by UTFI.

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