Does Washington County's 99-year, $1-per-month lease of land for veterans housing violate the Arkansas county-sale statute?
Plain-English summary
Washington County issued an RFP in 2019 for Patriot Park, a $10 million veterans housing complex with 60 low-income apartments in Fayetteville. Strategic Realty, LLC won. The county had the property appraised at $1,150,000 in February 2020. It then entered into a 99-year lease with Washco Housing Partners for $1 per month (about $1,188 over the life of the lease). Representative Whitaker asked whether this violates A.C.A. § 14-16-105 (the county-sale statute that requires sealed bids and a price floor of three-quarters of appraised value).
The AG concluded: no, because § 14-16-105 expressly excludes leases. The text of the statute is clear. Subsection (f)(2)(D) excludes the case "[w]hen the county is leasing county property." A lease, even a long lease, is not a sale under the statute. The General Assembly even amended the statute in 2005 (Act 1240) to make the exclusion explicit. Other Arkansas statutes elsewhere (§§ 14-269-103(b)(3), 22-4-501(b)(3)) explicitly authorize 99-year leases as valid leases, confirming that the General Assembly treats long-term leases as leases, not sales.
The 1888 case Whitaker pointed to (State v. Baxter) is distinguishable. In Baxter, the Arkansas Supreme Court set aside a 99-year lease as essentially a sale, but two facts mattered: (1) the county judge and the lessees were found to have committed fraud against the county; (2) the property was being held in trust for a county courthouse site. Both are absent from the Patriot Park scenario. Baxter was also decided 117 years before the 2005 amendment that explicitly excluded leases from § 14-16-105.
Out-of-state cases treating 99-year leases as sales are limited. Most are property-tax-exemption cases (where the question is whether the lessee is the "owner" for tax purposes). Different jurisdictions have reached different conclusions. None bind Arkansas.
Constitutional limit (Article 12, § 5). Even though the sale rules do not apply, the lease still must satisfy the Arkansas Constitution's prohibition on cities, counties, towns, or other municipal corporations donating money or property to private individuals or entities. Adequate consideration is required. Consideration does not have to be money, though. The Arkansas Supreme Court has held that "public advantage" can constitute adequate consideration in some circumstances (City of Blytheville v. Parks, 1953; Little Rock Chamber of Commerce v. Pulaski County, 1914). Whether 60 low-income veterans housing units are adequate consideration for a 99-year lease at $1/month is a fact-intensive question the AG cannot resolve. In practice, courts have been forgiving of public-purpose justifications for nominal-rent long-term leases for affordable housing or veterans services.
Question 2 is moot. Because the lease is not a violation of § 14-16-105, the question of whether it is void does not arise.
The deeper takeaway: Arkansas counties have substantial flexibility to structure long-term leases of public property for public-purpose uses. The text of § 14-16-105 keeps lease structures separate from sale procedures. The constitutional adequate-consideration requirement is a separate, fact-intensive guardrail.
What this means for you
County judges and quorum courts considering long-term leases of county property
The county-sale procedures in § 14-16-105 (sealed bids, ¾-of-appraised-value floor) do not apply to leases. You have flexibility to negotiate lease terms directly. But you still need to demonstrate adequate consideration to satisfy Article 12, § 5.
Document the public purpose. For a low-income veterans housing project, the public benefits include:
- Housing for veterans (a recognized public-purpose category).
- Tax-base development (the project generates property taxes after construction).
- Removal of blight (if the property was unimproved or underutilized).
- Compliance with federal programs (LIHTC, Section 8, VA programs).
Memorialize the consideration analysis in the resolution authorizing the lease. A well-documented public-purpose justification reduces litigation risk.
County attorneys
When advising on a long-term lease structure, focus on three things:
1. The exclusion in § 14-16-105(f)(2)(D) protects the lease from the sale-procedure rules.
2. The constitutional adequate-consideration requirement under Article 12, § 5 still applies.
3. The "public advantage" doctrine from Parks and Pulaski County allows non-monetary consideration.
Run a sanity check: would a court reviewing this lease find that the public is getting a fair deal? If the answer is yes, the legal posture is defensible. If you find yourself stretching to identify public benefits, reconsider the deal structure or the rent.
Real estate developers working with Arkansas counties
The 99-year nominal-rent lease is a viable structure for public-private partnerships in Arkansas, especially for affordable housing, low-income veterans housing, and similar public-purpose developments. The state law framework is permissive.
Be ready to articulate the public benefits in your proposal. A clearly-stated public-purpose justification both helps the county defend the deal and creates a record for any future challenge.
Taxpayer advocates and watchdog groups
If you have concerns about a county giving away public property too cheaply, the legal lever is Article 12, § 5 (adequate consideration), not § 14-16-105 (sale procedures). To challenge, you'd argue:
- The "public advantage" claimed is overstated or illusory.
- The private entity is the primary beneficiary.
- The lease terms favor the private entity disproportionately.
The challenge is fact-intensive. Baxter shows that fraud + trust-property conditions can trigger judicial intervention. Routine public-purpose leases generally pass.
State legislators considering reform
If you want to change the rules, the path is to amend § 14-16-105 explicitly to cover long-term leases (or to set procedural requirements specifically for leases over X years). The current statute is clear in excluding leases; legislative clarification would be the cleanest way to add procedural requirements.
If you want to constrain the "public advantage" doctrine, that requires either statutory limits or constitutional amendment.
Housing advocates and veterans' services organizations
The opinion confirms that Arkansas counties can structure long-term, low-rent leases to support affordable housing, veterans housing, and similar public-benefit developments. Counties looking to support these uses have a legal pathway.
Common questions
My county is offering a 99-year lease to a non-profit for free. Is that legal?
Probably yes if the non-profit is providing services that constitute a public benefit. The "public advantage" doctrine allows non-monetary consideration. Document the public benefits.
What if the lessee is a for-profit corporation?
For-profit status does not automatically disqualify the lease from public-purpose treatment. What matters is whether the public is getting an adequate benefit. Low-income housing developed by a for-profit partnership (using LIHTC tax credits, for example) is a recognized public-purpose model. Document the actual public benefits.
Can the county sell the property instead of leasing?
Yes, but then § 14-16-105's procedures apply: county judge order describing the property, appraisal, sale by sealed bids or internet sale, no sale below three-quarters of appraised value (with limited exceptions). The lease structure is more flexible procedurally.
What if the lease is only 50 years instead of 99?
The same analysis applies. The exclusion of "leases" from § 14-16-105 is not limited by length. A 50-year lease is just as much a lease as a 99-year lease for purposes of the statute.
My city or county already entered into a 99-year lease without proper documentation. What now?
Get a current legal review of the lease terms and the public-benefit case. If documentation is thin, consider a quorum court resolution that retroactively documents the public-purpose justification. This won't fix actual deficiencies, but it can strengthen the record for any challenge.
Can I challenge an existing lease as inadequate consideration?
Maybe, depending on standing and the specific facts. Taxpayer standing in Arkansas allows challenges to certain unlawful expenditures. Talk to a lawyer about whether your specific lease and your specific situation supports a claim.
Background and statutory framework
Arkansas county property transactions are governed by A.C.A. ch. 14, subch. 16. Section 14-16-105 contains the general sale procedures: county judge order, appraisal, sealed-bid or internet sale, and a price floor of three-quarters of appraised value. Subsection (f)(2)(D) excludes leases.
Other county-property statutes cover specific situations: § 14-16-106 (surplus property), § 14-16-107 (sale to certain organizations), § 14-16-108 (sale or lease of county hospital to municipality), § 14-16-109 (lease to municipality), § 14-16-110 (lease to educational institutions). None applied here.
The 2005 amendment (Act 1240) made the lease exclusion explicit. Before that, the rule was less clear, which produced the older Baxter (1888) case where a 99-year lease was treated as a sale. Baxter is distinguishable on its facts (fraud, trust property) and predates the explicit statutory exclusion.
Article 12, § 5 of the Arkansas Constitution prohibits cities, counties, and other municipal corporations from donating or appropriating money or property to private individuals or entities. Cases like Venhaus (1990) and Halbert (1956) enforce this rule. The "public advantage" doctrine (from Parks (1953) and Pulaski County (1914)) allows non-monetary consideration: a public benefit can be adequate consideration.
99-year leases have explicit statutory authority elsewhere in the Arkansas Code (§§ 14-269-103(b)(3), 22-4-501(b)(3)), confirming that the General Assembly recognizes long-term leases as legitimate.
Citations
- A.C.A. § 14-16-105 (county property sale procedures)
- A.C.A. § 14-16-105(f)(2)(D) (exclusion for leases)
- A.C.A. §§ 14-16-106 to -110 (specific situations)
- A.C.A. §§ 14-269-103(b)(3), 22-4-501(b)(3) (other 99-year lease authorities)
- Ark. Const. art. 12, § 5 (no donation to private entities)
- 2005 Ark. Acts No. 1240, § 1 (amendment making lease exclusion explicit)
- State v. Baxter, 50 Ark. 447, 8 S.W. 188 (1888)
- City of Jacksonville v. Venhaus, 302 Ark. 204, 788 S.W.2d 478 (1990)
- Halbert v. Helena-West Helena Indus. Dev. Corp., 226 Ark. 620, 291 S.W.2d 802 (1956)
- City of Blytheville v. Parks, 221 Ark. 734, 255 S.W.2d 962 (1953)
- Little Rock Chamber of Commerce v. Pulaski County, 113 Ark. 439, 168 S.W. 848 (1914)
- Commander Oil Corp. v. Barlo Equip. Corp., 215 F.3d 321 (2d Cir. 2000) (cited by Whitaker, distinguished)
Source
Original opinion text
Opinion No. 2023-036
June 21, 2023
The Honorable David Whitaker
State Representative
717 North Lewis Avenue
Fayetteville, Arkansas 72701
Dear Representative Whitaker:
I am writing in response to your request for an opinion regarding a matter in your district. You state that Washington County issued a request for proposals in August 2019 for the development of Patriot Park, a veterans housing complex and service center that will be located in the city of Fayetteville. Strategic Realty, LLC submitted the winning bid and was awarded the $10 million project in September 2019. In February 2020, the county obtained an appraisal for the property, which valued it at $1,150,000. The county then entered into a 99-year lease with Washco Housing Partners Limited Partnership for $1 per month. The lease will begin once the project has been completed and certificates of occupancy have been issued for the 60 low-income apartments. You note that Washco Housing Partners Limited Partnership will pay $1,188 over the life of the lease, at most. You also cite case law from other jurisdictions in which courts have found that, in some circumstances, 99-year leases are more akin to a sale of real estate, rather than a standard lease.
Against this background, you ask the following questions:
- Does the 99-year lease to a private for-profit entity amount to a sale of real property by the County for less than ¾ of the appraised value of the property in violation of A.C.A. § 14-16-105?
Brief answer: No, because A.C.A. § 14-16-105 expressly excludes leases from its provisions.
- If the 99-year lease constitutes a sale of property in violation of A.C.A. § 14-16-105, is the entire lease null and void?
Brief answer: Given my response to your first question, this one is moot.
DISCUSSION
Question 1: Does the 99-year lease to a private for-profit entity amount to a sale of real property by the County for less than ¾ the appraised value of the property in violation of A.C.A. § 14-16-105?
General provisions governing the sale of county property are set forth in the statute you inquired about, A.C.A. § 14-16-105. Whenever a county judge has determined that it is in the county's best interest to sell and convey county property, the statute requires the entry of an order in county court describing the property to be sold, stating the reason for the sale, and directing the county assessor to have the property appraised. For property with an appraised value less than $5,000, the county judge may sell the property "either at public or private sale, by sealed bids or internet sale." For property with an appraised value exceeding $5,000, the county judge may sell the property to the highest bidder, "upon sealed bids received by the judge or by internet sale." In either case, the statute prohibits property from being sold for a price less than three-quarters of its appraised value. But these procedures only apply to the sale and conveyance of county property. The statute does not apply "[w]hen the county is leasing county property."
The language of A.C.A. § 14-16-105 is clear. Its provisions only apply to the sale of county property and do not apply to leases. We cannot read a qualification into the statute that would exclude long-term leases from the meaning of the word "lease" when nothing in the statute supports such an inference. This is particularly true when the General Assembly has enacted other statutes governing the lease of public property that explicitly allow those leases to run for a period of 99 years.
You have cited a few cases from other jurisdictions in which courts have treated the lessees of 99-year leases as fee simple owners. But courts have not ubiquitously held that 99-year leases are equivalent to a sale of real property. Rather, they analyze the facts of each case under the applicable statutes. Most of the case law on this topic has been issued in the context of determining whether long-term lessees should be considered "owners" for property tax-exemption purposes, which does not apply here. And even within that body of case law, courts in different jurisdictions have reached different conclusions. Therefore, these cases do not resolve your question.
In sum, A.C.A. § 14-16-105 clearly states that its provisions do not apply to the lease of county property, and the General Assembly has acknowledged elsewhere in the Arkansas Code that 99-year leases are genuine leases. Thus, I cannot conclude, based on nonbinding, out-of-state case law issued in the context of materially different facts, that the provisions of A.C.A. § 14-16-105 should extend to long-term leases, despite the statute clearly stipulating that it does not apply to leases. (There is one older case in which the Arkansas Supreme Court set aside a 99-year lease that had been approved by a county court. See State v. Baxter, 50 Ark. 447, 8 S.W. 188 (1888). The Court held that the 99-year lease was essentially a sale, but the county judge failed to comply with the procedures for selling county property. The facts of that case are distinguishable in significant ways: (1) the county judge and the lessees were found to have perpetrated a fraud upon the county and (2) the county had been holding the land at issue in trust for a county courthouse site. Most importantly though, the Baxter decision was issued long before the General Assembly amended A.C.A. § 14-16-105 in 2005 to explicitly exempt leases from its terms.)
While there is no requirement that county property be leased for at least three-quarters of its fair market value, such a lease must still meet constitutional requirements. Article 12, § 5 of the Arkansas Constitution prohibits a county, city, town, or other municipal corporation from donating or appropriating money or property to a private individual or entity. Consequently, any lease of county property must be supported by adequate consideration. What constitutes adequate consideration under any given contract is a fact-intensive question that cannot be resolved in an opinion from this office. But I will note that consideration does not necessarily have to take the form of money or other property. The Arkansas Supreme Court has held that in certain circumstances, "public advantage" can constitute adequate consideration.
Question 2: If the 99-year lease constitutes a sale of property in violation of A.C.A. § 14-16-105, is the entire lease null and void?
In light of my response to Question 1, this question is moot.
Senior Assistant Attorney General Kelly Summerside prepared this opinion, which I hereby approve.
Sincerely,
TIM GRIFFIN
Attorney General