|Tips on researching a sale of property|
|✔ Be sure you own it. Perform a title search prior to listing the property for sale to ensure there are no restrictive covenants on the property – some school districts were granted land only for as long as it was used as a school.|
|✔ Know your zoning. Check local government records for zoning and use restrictions that may exist for potential purchasers of the property.|
|✔ Have patience. These transactions take longer than a “house” closing because the sale may involve a change of use for the property, and perhaps a change of the underlying zoning.|
|✔ Beware contingencies. The buyer may want contingencies built into the contract of sale, such as town approvals for change of use or the town’s issuance of a variance. If this is unavoidable the school board should try to limit the amount of time given to a buyer, and provide for forfeiture of portions of the down-payment after certain specified periods after contract signing and prior to the stipulated closing date.|
|✔ Keep your valuation current. If the property has sat on the market for an extended period of time, an updated appraisal is appropriate.|
|Gary L. Steffanetta, Guercio & Guercio|
A survey by the New York State Council of School Superintendents released in November found that 29 percent of districts with at least 5,000 students reported having closed a school in the last three years. This has prompted many districts to consider selling school buildings. While such transactions can benefit taxpayers and the community, individuals opposed to a sale may challenge whether it was accomplished in accordance with the law. Boards that understand the law and follow an exemplary process will be in a much better position to defend their actions and keep their attention on student achievement and school improvement.
The statutory framework for selling school property in New York varies between the various district designations; free, central, and other types of districts. This article will focus on the two most common school district types: free and central.
Who is authorized to make the decision?
In free school districts, the school board decides whether to sell the property, but the terms of the sale are subject to voter approval (Education Law section 402). Regarding the terms of the sale, Education Law section 1709(11) gives the board the authority to sell the property“at such price and upon such terms as [the] voters shall prescribe.” Although the district has a legal duty to provide certain information to voters prior to a referendum, this does not include appraisal price information. The New York Court of Appeals has held that an appraisal price is not subject to the Freedom of Information Act because such disclosure could negatively affect offers on the property (Murray v. Troy Urban Renewal Agency, 1982). The referendum put before the voters should speak in general terms, such as, “the Board of Education is authorized to sell the [referenced] property at or above its fair market value, as determined by an appraisal of the property.”
Does the sale have to be isolated from the school district budget in a unique referendum item? Not necessarily. In Appeal of Zeller, the commissioner of education ruled that the school district had complied with the law by taking three steps: (1) passing a resolution that authorized the superintendent to accept offers to purchase four abandoned school buildings, (2) providing that the offers would be reviewed by the board, and (3) including the transaction in the budget voted on by the district residents or approved at a special election. The commissioner held that the Education Law “clearly authorized” the board to conduct the sale in this manner.
In contrast, school boards in central school districts are authorized pursuant to section 1804 of the Education Law to make the decision to sell school property without first obtaining approval by the district voters, as long as the district has existed for seven years. The court in Botwin v. Board of Education held that a central school board was not subject to Education Law section 402, because the express language of Education Law section 1804 indicates it was the intention of the Legislature to not require a voter referendum for approval of the sale of real property.
The statute does, however, give the voters in a central school district the opportunity to intervene in the board’s decision to sell the property if a petition is filed with the district clerk, and signed by at least 10 percent of the qualified voters of the district.
The school board’s fiduciary duty
True or false: a school board has a legal duty to only sell property at fair market value? Answer: False. Nothing in Education Law sections 402, 1709 (11) or 1804 states that the sale price shall be at “fair market value.” The standard, as articulated by the commissioner of education, is that a school board has a fiduciary duty to secure the best price obtainable – in the board’s judgment – for any lawful use of the premises.
In Appeal of White, the commissioner set aside the sale of a school building, finding that the board abused its discretion by hastily approving a sale of a school building that was most likely worth much more than the sale price that the board had approved. But the commissioner noted, however, “A board of education has broad discretion to determine the best price for which a property can be sold, to condition the sale on such terms, as in the board’s judgment, will yield the maximum financial benefit for the district, and to determine the best method of sale to be utilized in a particular case.” Of course, obtaining the highest price is not the only consideration. In New City Jewish Center v. Flass, the Court of Appeals upheld the decision by a school board to sell vacant school property to a developer whose bid was $2,000 less than that of a religious organization, who would be exempt from real property tax. The court found that the school board properly considered future tax consequences which would accrue to the school district if the property were developed as proposed by the successful bidder.
The Education Law also authorizes a school board to convey, with the approval of the voters, unneeded property at a reduced price, or even for no consideration, to another municipal entity, if that entity will be using the property for a “public purpose.”
This article is only a brief overview of some of the issues a school board would need to consider when selling unneeded school property. Any undertaking to sell property should be discussed with your school attorney.
Members of the New York State Association of School Attorneys represent school districts and BOCES. This article was written by Gary L. Steffanetta and Nancy Hark of Guercio & Guercio, LLP.