A Primer on How a City in Texas May Conduct a Real Property Sale
For what must be centuries now, law professors, practitioners, and courts have analogized property rights as a bundle of sticks, with each stick representing a specific right which may be separated from the others, sometimes willingly and sometimes not. One such stick in particular is the right to alienate the property—that is, the right to sell it to someone else. This right is so revered that most attempts to reduce or eliminate it are void. However, when property is held by a public entity, rather than a private individual, the right to alienate the property is substantially limited. In other words, the alienation stick in the bundle held by public entities is somewhat withered. Specifically, there are limitations on who the public entity can sell the property to, and for how much.
For example, a city must generally sell its real property either by sealed bidding or public auction. This means that the city cannot choose who the property is sold to, or for how much, except that nothing requires the city to actually follow through with the sale. However, there are certain peculiar types of property that a city can sell without conducting sealed bidding or a public auction. These include narrow strips of land and abandoned streets or alleys, but the sale may not be for less than the appraised value of the property unless the property is sold to certain adjacent landowners.
Also, cities may sell property directly to a nonprofit organization, religious organization, or economic development corporation so long as the property is to be used for either a general or specific public purpose, which depends on the nature of the organization. An example of a specific public purpose is the development of housing for low-income individuals and families. For sales requiring the property to be used for a general public purpose, the deed must state that the ownership of the property reverts back to the city if the property ever ceases to be used for the public purpose required. In other words, the bundle of sticks sold to these organization has a string attached. How’s that for mixed metaphors?
Due to the rigmarole that cities must go through to sell their property, in 2013, the Texas Legislature authorized home-rule cities to sell property by contracting with a broker, much like a private seller would do. If a contract is made with a broker to list the property for at least 30 days with a multiple-listing service, the city may sell the property to the person who submits the highest cash offer on or after the 30th day that the property is listed.
Additionally, cites generally cannot donate or gift property as a private property owner could. However, certain cities may donate real property of negligible or negative value to an adjacent property owner.
Therefore, a person interested in purchasing real property from a city is generally not able to simply make an offer. Instead, depending on the nature of the city, the property, or both, the buyer must submit the highest sealed bid, be the highest bidder at a public auction, submit the highest cash offer on a 30 day old listing, or be an adjacent landowner.