The Federal Circuit Court of Appeals has affirmed the U.S. Court of Federal Claims’ award of $4 million to a Lake Tahoe property owner who sold a tract of land to the United States for $5 million when it was truly worth much more. The sales contract stated that “the purchase price shall be supported by an appraisal prepared in conformity with the Uniform Appraisal Standards for Federal Land Acquisition,” but the trial judge determined that the U.S. Forest Service’s $5 million appraisal fell short of those federal standards so the Government did not have to live up to the contract terms.

In its decision the Federal Circuit stated that the Uniform Standards (commonly called “the Yellow Book”) was prepared by the Government to provide guidelines and standards for how the fair market value of a property should be appraised. Under its own regulations, the Forest Service must adhere to the Yellow Book standards in making appraisals of land it acquires.

By failing to follow its own regulations (and federal law requiring payment of fair market value), the Forest Service did not satisfy the implied warranty it had determined the purchase price according to applicable legal standards. When the seller found out after the sale closed that the property was worth millions more than the Forest Service paid for it, he sued for the true value—which the trial court awarded, and the Federal Circuit has now affirmed.

The moral is that the Government must follow the law when it purchases property for public use and, if it does not, the seller is entitled to recover the true value of the property in a subsequent suit.