Common Issues in Real Estate Transactions

By Carol Simpson, Of Counsel
Eichelbaum Wardell Hansen Powell and Muñoz, P.C.

SELLING REAL PROPERTY OTHER THAN MINERALS

Getting Started: Offer Property to Charter Schools

If the property the district wishes to sell contains a “facility” (undefined, but could mean any building), the district must first offer the property to any charter schools with boundaries that overlap the district boundaries. The district is not required to accept an offer from a charter school. Tex. Educ. Code § 11.1542.

Next: Passing a Resolution

Barring an offer to a charter school, the first step in selling real property is for the board of trustees to pass a resolution authorizing the sale. “The board of trustees of an independent school district may, by resolution, authorize the sale of any property, other than minerals, held in trust for public school purposes.” Tex. Educ. Code § 11.154(a). Mineral sales and leases fall under different statutes, so contact your school attorney for help with those transactions. The resolution to sell property typically includes:

1. Authorizing the sale of the surface estate (not including minerals);
2. Recognizing that the property is no longer necessary for operation of the district;
3. Authorizing the superintendent (or designee) to negotiate a contract for sale; and
4. Designating the board president as the individual to execute (sign) documents related to the sale.

The resolution authorizing the sale must be included in the deed. Tex. Educ. Code § 11.154(b).

Do We Have to Take Bids to Sell the Property?

Unless the sale meets an exception in the law, a school district is required to give notice of the sale or exchange of real property and accept bids. See Tex. Loc. Gov’t Code § 272.001. The notice of the sale of real property must be published in a newspaper of general circulation on two separate dates. Tex. Loc. Gov’t Code § 272.001(a). The notice must include a description of the property, its location, and the procedure for submitting bids.  Id. It is always a good idea to include a legal description of the property with reference to county property records in the notice.

Bids must be sealed and submitted according to the procedure in the notice of sale or exchange, and the winning bid should be selected by the board’s designee. If the school district does not receive any acceptable bids, it may reject all the bids. Tex. Loc. Gov’t Code § 272.001(d).

Exceptions to Bidding Requirements 

There are limited circumstances in which a school district is not required to go through the bidding process for selling real property. The exceptions applicable to school districts include the following:

1. narrow strips of land, or land that because of its shape, lack of access to public roads, or small area cannot be used independently under its current zoning or development rules;
2. streets or alleys, owned in fee simple or used by easement;
3. land originally acquired for streets, rights-of-way, or easements that the school district chooses to exchange for other land to be used for streets or another public purposes, including transactions partly for cash;
4. land to be developed by contract with an independent foundation; and
5. a real property interest conveyed to a governmental entity with power of eminent domain.

Tex. Loc. Gov’t Code § 272.001(b).

Even if a school district is excepted from the notice and bidding requirements, it must still get at least fair market value for the real property unless the conveyance is under numbers 1 and 2 above and sold to an abutting property owner who owns the abutting property in fee simple. Id. Fee simple means the property owner owns the surface rights and all mineral rights of the land. Fair market value is determined by an appraisal obtained by the school district.

Can We Just Donate the Property?

A school district can donate real property only in two situations. The first is when a school district donates real property and improvements formerly used as a school campus to a city, county, state agency, or non-profit organization. Tex. Educ. Code § 11.1541. To donate a former campus, the following requirements must be met:

1. a district must hold a public hearing concerning the donation prior to authorizing the donation by resolution;
2. the board of trustees must determine the improvements have historical significance, that the donation will further the preservation of the improvements, and that the district does not need the real property or improvements for educational purposes; and
3. the entity to which the donation is made must show to the board of trustees that it intends to continue to use the real property and improvements for public purpose.

Id. Because the statute references improvements, it does not appear that vacant land can be donated under this statute.

The second situation in which a school district is allowed to donate real property is when it donates real property to an institution of higher learning to promote a public purpose related to higher education. Tex. Loc. Gov’t Code § 272.001(j). The school district must determine the terms and conditions of the transaction so as to effectuate and maintain the public purpose.  

The last option permits a district to donate or sell property for less than fair market value when:

1. the land or interest will be used by the political subdivision to which it is donated or sold in carrying out a purpose that benefits the public interest of the school district;
2. the donation or sale of the land or interest is made under terms that effect and maintain the public purpose for which the donation or sale is made; and
3. the title and right to possession of the land or interest revert to the school district if the acquiring political subdivision ceases to use the land or interest in carrying out the public purpose.

Tex. Loc. Gov’t Code § 272.001(ℓ).

PURCHASING REAL PROPERTY

The Landowner’s Bill of Rights

Texas Property Code § 21.0112 states that seven days prior to making a final offer to a property owner, a school district must send the Landowner’s Bill of Rights to the property owner. Additionally, if the school district represents to the owner in any manner that the district has the power of eminent domain, the Landowner’s Bill of Rights must be sent concurrently or before such representation. The Landowner’s Bill of Rights is a document drafted by the Texas Attorney General that provides landowners with information about their rights in eminent domain proceedings. This requirement is a jurisdictional prerequisite for all eminent domain cases.  Thus, arguably, the requirement is only necessary when a school district is contemplating filing an eminent domain petition.

It is not clear exactly what a final offer means, but it is apparent that if negotiations are at an impasse or if the District is contemplating filing an eminent domain petition, the district must send to the property owner a copy of the Landowner’s Bill of Rights along with other documents required by the Property Code. The failure to provide the Landowner’s Bill of Rights and other documents will either prohibit or delay any attempt to acquire the land through the eminent domain process. You will want to involve your school attorney if you are considering exercising eminent domain.

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