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City Real Estate Sales 101

How do you sell city-owned real estate? Is it hard? Can it take a long time? The answer to all these questions is yes, as I told the Mayor.

The first question you have to ask is: what type of property is it? The second question is: what type of city is selling its land. If it is a city park, the Texas Local Government Code (LGC) requires an election.  Otherwise, real property can be sold by:

  1. Public auction (LGC Chapter 253)
  2. Notice and bidding procedures (LGC 272)
  3. Broker, if the city is a home rule city. (LGC 253)

With a public auction, the city must publish notice of the auction “before the 20th day before the date the auction is held.” In plain English: publish the notice 21 days before the auction. Publishing means once a week for 3 consecutive weeks in a newspaper of general circulation in the county where the city is located or where the land is located. Note this newspaper doesn’t necessarily mean the official newspaper of the city, as we have previously covered. The notice must include a description of the property, and the location, date, and time of the auction.

For notice and bidding, the requirements are similar. Where the notice is to be published is the same, but there is no 21-day lead time. Notice has to be published only twice on two separate dates, but title cannot change “until after the 14th day after the date of the second publication.” In plain English: 15 days after the second publication, close title. The notice is the same as for an auction, but it must also contain the procedures by which sealed bids to purchase the land or offers to exchange the land may be submitted.

If the city is a “Home Rule” city, then those cities can sell property in almost the same way as a private owner. No competitive procedures required. The city has to list the property with a real estate broker [defined by the Occupations Code, for 30 days, on the local multiple listing service (MLS)]. The winning price is the highest cash offer and the city must pay a commission or fee.

Any exceptions? Of course. Section 253.010 of the Local Government Code allows sales without notice, bidding or auctions when the buyers are nonprofits that develop housing for low income residents as a primary activity to promote community-based revitalization. A religious organization that owns tax-exempt property may qualify for this exception. In either case, a contract must be entered into regarding the revitalization of the land.

General nonprofits may be excepted so long as the city receives consideration in the form of an agreement to use the property for a public purpose of the city. A “Reversion Clause” must be in the deed.

Finally, a city with a population under 20,000 may sell to an economic development corporation so long as the city receives consideration to develop the property for the public purpose of the city. The same reversion provision must be in the deed.

There are many more exceptions, but generally to sell property a city must publish notice and then conduct an auction or open sealed bids.

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