By Andrew Wipke & Jennifer Fox
Assistant County Attorneys in Fort Bend County
Acquiring and owning property[1] is inherent in a county’s eminent domain powers and in its duties to perform governmental and public functions. These functions include the provision of necessary public buildings and facilities such as courthouses, jails, libraries, public offices, parks, and roads.
But what happens when a county no longer needs its property? If your county desires to sell a large tract of land or building that, for various reasons, is no longer needed for county purposes, what methods can you, as legal counsel, advise to sell or dispose of this property? This article provides a practical overview of the legal framework governing the sale of county property in Texas. While this article does not provide an exhaustive list of methods by which a county may sell (or otherwise dispose of) its property, it focuses on the applicable statutory provisions, procedural requirements, general exceptions, and common challenges.
Methods available to counties
The sale of county property in Texas is generally[2] governed by Chapters 263 and 272 of the Local Government Code. These chapters establish the general rule that county property should be sold by some type of competitive bid, ensuring transparency and fairness in the process. A key distinction between these two chapters is that Chapter 263 governs county property sales exclusively, whereas Chapter 272 applies to all political subdivisions, which includes counties, cities, and other local governmental entities.
Under Chapter 263, there are four methods a county can use to sell its property. The first method is by public auction.[3] Under the public auction method, the commissioners court, by an order entered into its minutes, must authorize the sale by public auction, establish the minimum bid,[4] and appoint a special commissioner to oversee the sale and conduct the public auction.[5] An appraisal is not required to determine fair market value[6] or establish the minimum bid amount. The county must also publish notice of the sale of the property in a local newspaper for three consecutive weeks beginning at least 21 days prior to the auction.[7] The sale of the property goes to the highest bidder for no less than the minimum bid established by the commissioners court,[8] and the county will subsequently issue the deed upon receipt of payment.[9] A county may choose public auction when it desires a simpler and quicker process to sell its property because an auction does not require an appraisal. Oftentimes, the entire transaction, from the initial authorization to issuing the deed to the highest bidder, can be completed within 30 days.
The second method is through the submission of sealed bids.[10] Under this method, the commissioners court must obtain an appraisal to determine the fair market value of the property. The fair market value of the property provides a benchmark for establishing an acceptable minimum bid amount and ensures that the county will not be forced to sell its property for less than its determined value,[11] unlike the previously mentioned public auction method.
Once the minimum bid amount is established, the county must publish a notice of its intent to sell the property in a local newspaper at least twice, with the second date of publication occurring at least 15 days prior to the award of the sale.[12] The notice must include a description of the property to be sold,[13] a description of the procedure to submit the sealed bids, and the minimum bid amount.[14] In situations where a county seeks more discretion over the sale of its property to better serve the public interest, §263.007 of the Local Government Code may be the preferred method, as this statute specifically authorizes the commissioners court to reject “any and all bids submitted.”[15]
The third method is a sale facilitated by a broker under §263.008 of the Local Government Code. The property must be listed in a multiple-listing service for at least 30 days. The county may pay the broker a fee only if the broker produces a “ready, willing, and able buyer.”[16] After the property has been listed for 30 days, the county may sell the property to the “ready, willing, and able buyer” who submits the highest cash offer. This statute specifically excludes the public auction requirements of §263.001.[17] This method may be preferable if the county desires professional assistance in selling its property. Brokers often possess specialized knowledge of the local real estate market, including current property values, potential buyers, and effective marketing strategies. This method also shifts the burden of administrative tasks—such as advertising, showing the property, and managing offers from potential buyers—from the county to the broker.
The fourth method under Chapter 263 is not really a method by which a county can “sell” its property. Rather, the county can “exchange” its property for other property owned by a private individual or entity if the exchange is made for a public purpose.[18] The commissioners court must first authorize the exchange through an order entered into its minutes. The county must also obtain an appraisal of both properties to determine the fair market value of each.[19] The appraisal is considered conclusive for determining each property’s fair market value. The total value received by the county in the exchange, including any cash and the value of the exchanged property, must be equal to or greater than the fair market value of the county’s property.[20] This method also requires the county to publish notice of its willingness to “consider offers for an exchange” of the county’s property in a local newspaper once a week for three consecutive weeks beginning at least 21 days prior to the exchange.[21] Similar to the sealed bid method, a county may exercise some discretion in the exchange of its property, as this statute also authorizes a commissioners court to “reject any and all offers” of exchange.[22] A county may choose to exchange its property under §263.006 because it can be an effective tool to promote economic development and growth in a county by acquiring land in strategic locations that are better suited for economic development projects. A property exchange can also be used to consolidate smaller, fragmented land parcels to create a larger, more useable space for development.
Chapter 272
Another option available to counties is found in Chapter 272 of the Texas Local Government Code. Specifically, §272.001(a) provides an “alternative, parallel procedure” to the sealed bid method under §263.007 of the same code.[23] It also broadens the scope of property sales to include other political subdivisions, not just counties. “Section 272.001 constitutes the ‘default,’ minimally sufficient procedure with which all units of state government, including counties, must comply in order to conduct a valid sale.”[24] Subject to certain exceptions,[25] §272.001 provides that a political subdivision (including a county) may sell or exchange its property only through a sealed bid process, for no less than fair market value established by an appraisal[26] after publication of notice in a local newspaper.[27] Although §§263.007 and 272.001(a) both appear to empower a county to sell or exchange its property by sealed bid, the plain language of §263.007(a) indicates that the legislature intended “to provide county governments with a mechanism to draft and adopt more specific, extensive requirements relating to the sale of real property, while ensuring that any such rules adopted by a county would contain the minimum requirements for a public sale.”[28] In other words, at minimum, a county must adhere to the requirements of §272.001 of the Local Government Code for the valid sale of its property to the general public—unless the county adopts procedures created specifically for counties under §263.007.
Exceptions to the rules
It is a common adage, and in this case true, that for every rule, an exception will eventually present itself. The Local Government Code lists specific exceptions to the competitive bidding and public notice requirements for the sale of county property.[29] These exceptions provide some flexibility for counties under certain circumstances, such as when the property in question is not capable of being developed, the sale is for public right-of-way purposes or as part of a public interest initiative, or the sale involves specific buyers.[30]
Properties that are not capable of being developed may include streets; alleys; or small, irregular, or landlocked parcels (that lack access to public roads) that cannot be used independently under current zoning, subdivision, or other development regulations.[31] Counties may sell these properties to abutting property owners without meeting the public notice and competitive bidding requirements, and they can do so for less than fair market value.[32] The rationale behind this exception comes from the practical difficulties in selling these parcels of land at public auction and also the need to consolidate ownership of the parcels with abutting landowners to enhance the land’s utilization.
Another exception may apply when a county desires to exchange its property for public right-of-way purposes or sell its property as part of a public interest initiative.[33] A county may exchange property it originally acquired for public right-of-way purposes for other land to be used for public right-of-way purposes.[34] This may occur when a county desires to contract with a local developer (for economic development purposes) and exchange parcels to realign an existing right-of-way to accommodate the safe flow of increased traffic. As part of a public interest initiative, a county can sell its property to contract with an independent foundation to develop the property.[35] These foundations are usually nonprofit organizations with specific missions, such as community development or affordable housing. A county may also sell its property to another entity to develop low- or moderate-income housing.[36] These sales allow the county to utilize the expertise and resources of the foundation or entity to develop the property and achieve the county’s public purpose.
Further, an exception to the public notice, competitive bidding, and fair market value requirements applies when a county desires to sell, exchange, or donate its property to an institute of higher education (such as a public junior college, public university, medical or dental unit, or a public state college) to promote a public purpose related to higher education.[37] This exception may be used when a county wants to expand or develop educational facilities to benefit the community.
Another exception to the public notice, competitive bidding, and fair market value requirements applies to sales or conveyances of county property to another political subdivision.[38] Under this exception, the county may either sell for less than fair market value or donate its property to another political subdivision, provided that the sale or donation is made for a public purpose, such as a public park, community center, or public roads or easements. However, if the political subdivision that acquires the land from the county ceases to use the property in carrying out the public purpose, the property reverts back to the county.
How do we decide?
A county has a variety of options to sell its property. But how do we know which statute or process to use, and what, if any, exceptions apply? Determining the precise scope of the statutory requirements for selling county property and the exceptions can be challenging, and the options may seem overwhelming. But the process for determining the proper method to use for selling county property and identifying any exceptions is simplified by asking questions using the investigative skills we learned as children: “who, what, when, where, why, and how?”
Who? Who are the potential buyers? This answer will usually determine whether the property must be competitively bid or if an exception applies. For example, if the potential buyer is an abutting property owner or another governmental entity, then an exception to the competitive bidding, public notice, and fair market value requirements would apply.[39] If the sale is to be made to the general public, then a county should determine which method to use for the sale of its property.[40]
What? What is the nature of the property we are trying to sell? The answer will determine whether additional legal requirements must be met. For example, if the property is an irregular shaped parcel of land that the county is unable to develop, then an exception under §272.001(b)(1) would apply and the county could sell the property to an abutting landowner.
When? How fast does the county want to complete the sale? Each method for selling county property has different requirements and timeframes by which these requirements can be met. For example, if a county desires to sell a property fairly quickly and none of the exceptions under §272.001 of the Local Government Code apply, then a county may elect to use the public auction method, as this is often the fastest method to sell property.[41]
Where? Where is the property located? The location may determine whether the county requires assistance in marketing the property correctly. For example, if a county desires to sell an old building in a desirable commercial area that is experiencing significant redevelopment, the property’s location may add complexities to the sale due to current demands, specialized infrastructure, and the potential for multiple uses. In that scenario, a county may want to use a broker to proactively market the property to targeted groups and significantly increase the property’s visibility beyond what a county could achieve with public notices alone. Property location may also determine if any exceptions to competitive bidding requirements apply. For example, if the property abuts a parcel owned by an individual soliciting the county for the purchase of that property, then the exception for sales to abutting property owners may apply, depending on the circumstances.
Why? Why does the county want to sell the property? Any sale or disposition of county property must always serve a public purpose.[42] If the county cannot identify a clear public purpose, the property cannot be sold no matter the other circumstances.
How? How does the county want to proceed with selling this property? The answer to this question will be based on the answers to the questions above. Once we have a clear idea of who, what, when, where, and why, we should be able to determine how the county may proceed with selling the property and whether any exceptions apply. By systematically addressing all of these questions, county practitioners can effectively pinpoint the relevant statutes and identify any applicable exceptions.
Common challenges
Many Texas counties are experiencing unprecedented growth, driven by population shifts and economic development. This growth creates both opportunities and challenges for counties in managing and developing their property. The increased demand for development can lead to our client (i.e., the county) desiring the sale or exchange of county property to occur at a faster pace than the law allows. However, ensuring strict compliance and conformity with the statutory requirements for the sale of county property is crucial to ensuring a valid sale or conveyance. Any sale or conveyance that does not comply with the requirements of the statute may be void or invalid.[43]
Strict compliance with the statutes for the sale of county property is also vital to preserving the public interest, fairness, and transparency of the sale. Every transaction involving county assets is subject to public scrutiny, and county practitioners can face the challenge of navigating differing public and political opinions with respect to if and how a county-owned property should be sold. The public’s right to be informed of and participate in the disposition of public assets necessitates careful adherence to legal notice requirements, competitive bidding processes outlined in the statutes, and clear documentation of all proceedings.[44] Any impropriety in the process can lead to legal challenges.
Ensuring that the sale of county property serves a public purpose is another challenge that may arise. Such a challenge generally occurs when private individuals or entities solicit the sale of county-owned property for private benefit. For example, a private owner with property abutting a narrow strip of undeveloped, unutilized land owned by the county may want to purchase that strip of land to add to his own tract of land. Even though this scenario clearly falls under the exception to competitive bid and public notice provided by §272.001(b)(1), when selling property to abutting landowners, counties must ensure that the sale still serves a public purpose.[45] This requirement prevents the use of county assets for private gain.
Conclusion
Selling county property in Texas involves specific requirements designed to ensure transparency, fairness, and validity. These requirements are generally outlined in Chapters 263 and 272 of the Local Government Code. Key considerations of these chapters include proper notice to the public, appraisals to determine fair market value, and adherence to statutory requirements regarding sales procedures. Exceptions may exist for certain types of property or specific circumstances, such as sales to abutting landowners or other governmental entities or for economic development purposes. By understanding the applicable statutory provisions, procedural requirements, and general exceptions to selling county property, we can advise our client, the county, on the correct process to enable a smooth and valid property sale transaction.
[1] For the purposes of this article, the term “property” means “real property,” which is defined as “land and whatever is erected or growing upon or affixed to land.” See San Antonio Area Foundation v. Lang, 35 S.W.3d 636, 640 (Tex. 2000). This is different from “personal property,” which is defined as “interests in goods, money, choses in action, evidence of debts, and chattels real.” Id.
[2] Although Chapter 263 of the Texas Local Government Code specifically applies to the sale (or lease) of county-owned property, the Texas Attorney General determined that when a county sells property by other means authorized by the constitution or statutes, the general competitive bidding provisions of Chapter 263 do not apply. See Tex. Att’y Gen. Op. KP-0391 (2021) at 2.
[3] Tex. Loc. Gov’t Code §263.001(a).
[4] Although §263.001 of the Local Government Code does not expressly require that a commissioners court establish a minimum bid amount, it is best to ensure that the court establishes a minimum bid amount to meet the requirements of Art. III, §52(a) of the Texas Constitution, which prohibits a county from making a gratuitous grant of a “thing of value” (e.g., county property) for private purposes. Tex. Const. Art. III, §52(a).
[5] Tex. Loc. Gov’t Code §263.001(a).
[6] Fair market value is the amount a willing buyer, who desires but is under no obligation to buy, would pay a willing seller who desires to sell but is under no obligation to sell. Tex. Att’y Gen. Op. GA-0634 at 4 (2008).
[7] Tex. Loc. Gov’t Code §263.001(b).
[8] See Tex. Const. Art. III, §52(a) (prohibiting a county from making a gratuitous grant of property).
[9] Tex. Loc. Gov’t Code §263.001(c).
[10] Id. at §263.007(a).
[11] Id. at §263.007(c).
[12] Id. at §263.007(b).
[13] For a notice of sale to be valid, counties must strictly comply with the property description requirements, as this will provide “all bidders with an equal opportunity to compete.” Killam Ranch Props, Ltd. v. Webb Cty., 376 S.W.3d 146, 155 (Tex. App.—San Antonio 2012, pet. denied). A property description is sufficient if the property can be identified with “reasonable certainty” and described with such particularity that one is able to “locate the specific land being identified.” AIC Mgmt. v. Crews, 246 S.W.3d 640, 645 (Tex. 2008).
[14] Tex. Loc. Gov’t Code §263.007(b).
[15] Id. at §263.007(d).
[16] Id. at §263.008(d).
[17] Id. at §263.008(e).
[18] Id. at §263.006(a).
[19] Id. at §263.006(c).
[20] Id. at §272.001.
[21] Id. at §263.006(b).
[22] Id. at §263.006(c).
[23] See id. at §263.007(f) (stating that “the procedure authorized by [§263.007] is an alternative procedure authorized by §272.001”); see id. at §272.001 (establishing the requirements for a valid sale of real property by political subdivisions to the general public through sealed bid or exchange); Collins v. County of El Paso, 954 S.W.2d 137, 149 (Tex. App.—El Paso 1997, pet. denied) (holding that the requirements of §272.001(a) forms an “alternative, parallel procedure to the procedure created specifically for counties in §263.007”).
[24] Collins, 954 S.W.2d at 149.
[25] These exceptions are discussed in the next section of this article.
[26] Although §272.001(a) does not explicitly require that a political subdivision obtain an appraisal to determine fair market value, the El Paso Court of Appeals determined that “an appraisal to determine fair market value constitutes an implicit requirement of §272.001(a).” Collins, 954 S.W.2d at 148.
[27] Tex. Loc. Gov’t Code §272.001(a).
[28] Collins, 954 S.W.2d at 149.
[29] Tex. Loc. Gov’t Code §272.001(a).
[30] The exceptions discussed in this section do not include the sale of county property by other means authorized by the constitution or statutes (e.g., the sale of school lands under Tex. Loc. Gov’t Code §263.003 or the sale of land to the United States for a public building under Tex. Loc. Gov’t Code §263.202). See footnote 3.
[31] Id. at §272.001(b)(1)–(2).
[32] Id.
[33] See id. at §272.001(b)(4), (g), and (i).
[34] Id. at §272.001(b)(3). Section 263.002 of the Texas Local Government Code also provides an exception to competitive bidding for “abandoned seawall or highway right-of-way property.” However, the Texas Attorney General concluded that “a right-of-way that serves the public purposes of transporting persons and property, communication, and travel must be disposed of in accordance with §251.058(b) [of the Texas Transportation Code], and not §263.002” of the Local Government Code or §272.001 of the Texas Local Government Code. Tex. Att’y Gen. Op. GA-0471 (2006) at 9.
[35] Id. at §272.001(b)(3)–(4).
[36] Id. at §272.001(g).
[37] Tex. Loc. Gov’t Code §272.001(j).
[38] Id. at §272.001(l).
[39] Id. at §272.001(b).
[40] Id. at §§263.001, .006–.008; 272.001.
[41] Id. at §263.001.
[42] Tex. Const. Art. III, §52(a).
[43] See Collins, 954 S.W.2d 146 (holding that “non-compliance with the bidding statutes is statutorily void”).
[44] This includes obtaining the authorizations of commissioners court outlined in this article.
[45] Tex. Const. Art. III, §52(a).