Does an Arkansas school district have to declare land 'unused or underutilized' before donating or selling it?

Plain-English summary

Senator Joshua Bryant asked follow-up questions about land the Bentonville School District proposed donating for affordable housing and a community center. The Attorney General declined to give a complete list of transactional steps, explaining that his office could interpret state law but not act as the district's counsel. He did answer whether the land had to be designated “unused or underutilized” before transfer and whether a missed charter-school opportunity could cloud title.

For sale or lease, Arkansas law requires a district to determine that the property is either no longer needed for school purposes or unused or underutilized. The second category is sufficient but not required for every sale or lease. The opinion refers readers to an earlier opinion for the conditions governing a donation. It also says districts must report unused or underutilized facilities annually. If the district finds property in that category, it must notify the Division of Public School Academic Facilities and Transportation and make it available to a public charter school for lease or purchase.

The Attorney General said a charter school's right of first refusal, by itself, does not cloud title. But transferring qualifying unused or underutilized property without first making it available to a charter school could create a cloud. Footnote 13 discusses a separate right of first refusal for “academic facilities” under A.C.A. § 6-21-816(b)(1). It says, referring to Opinion 2023-106, that the particular undeveloped land likely does not qualify as an academic facility. The opinion does not announce a rule for every parcel of undeveloped land.

What this means for you

School district officials

First determine the property's status under the statutory definition and document why a sale or lease is authorized. If the property is unused or underutilized, the opinion describes a duty to notify the Division and make it available to an eligible charter school. If the district instead sells or leases because the property is no longer needed for school purposes, the opinion says those particular listing and offer duties do not follow from that basis. For a donation, consult the earlier opinion the Attorney General identifies.

Charter schools and purchasers

A sale of qualifying unused or underutilized property without the charter-school availability step could affect title. The Attorney General uses “could,” not a ruling that a particular Bentonville transfer was invalid. Review the property's actual status and the district's process before drawing that conclusion.

Common questions

Does every school district land transfer require an unused-property designation?

No. For sale or lease, the opinion recognizes a separate determination that property is no longer needed for school purposes. Donations have conditions discussed in Opinion 2023-065.

Can undeveloped land be unused or underutilized property?

Yes, potentially. The opinion notes that the statutory definition includes “other real property,” so land can qualify if it meets the remaining criteria.

Is undeveloped land automatically outside the academic-facility provision?

The opinion does not say that. Footnote 13 says the particular undeveloped land in this request likely did not qualify as an academic facility, referring to the earlier Opinion 2023-106.

Does a charter-school first-refusal right itself cloud title?

No. The opinion distinguishes the existence of the right from a transfer that bypasses the required chance to lease or purchase. The latter could create a cloud if the property qualifies.

Currency note

This August 26, 2024 opinion addresses a proposed Bentonville transfer and references earlier opinions for donation requirements. Check current statutes, Division rules, and the property's facts for any later transaction.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

TIM GRIFFIN
ATTORNEY GENERAL

Opinion No. 2024-030

August 26, 2024

The Honorable Joshua Bryant
State Senator
Post Office Box 718
Rogers, Arkansas 72757

Dear Senator Bryant:
I am writing in response to your request for a second follow-up opinion relating to Attorney General Opinion 2023-065. In that opinion, I was asked whether the Bentonville School District could lawfully donate real property to a not-for-profit corporation for the development of affordable housing—some of which would be designated for school employees—and a community center that would provide classes to the school district’s students and citizens. I opined that the described proposal would likely survive constitutional and statutory scrutiny.

You asked a series of follow-up questions about that opinion, which I answered in Attorney General Opinion 2023-106. You now ask a second set of follow-up questions relating to Attorney General Opinion 2023-065, which are set forth below:

1. In an effort to cast a wider net and elicit a comprehensive response, please clarify
   what steps the Bentonville School District must take before donating or otherwise
   transferring the Land. Please include the following sources in your consideration:
   • A.C.A. § 8-21-803;
   • A.C.A. § 6-21-815;
   • A.C.A. § 6-21-816;
   • The Commission for Arkansas Public School Academic Facilities and
   Transportation Rules Governing Right of Access to Unused or
   Underutilized Public School Facilities and the Sale or Lease of Public
   School Facilities; and
   • Any other relevant rules or laws not identified in this letter or my previous
   letter.

   Brief response: I must decline to opine on your first question because it falls
   outside the scope of an opinion from this office.

                       323 CENTER STREET, SU ITE 200
                       LITTLE ROCK, ARKANSAS 72201
   

The Honorable Joshua Bryant
State Senator
Opinion No. 2024-030
Page 2

2. To the extent not already addressed by Question 1, assuming the Bentonville School District intends to donate or otherwise transfer ownership of the Land, is the School District first obligated to:
• Declare the property is unused or underutilized; and/or • Notify the Arkansas Division of Public School Academic Facilities and Transportation (the “Division”) that the Land is unused or underutilized by the school district before its donation or transfer?

3. To the extent not already addressed by Question 1, assuming the Bentonville School District intends to donate or otherwise transfer ownership of the Land, must the Division designate the Land as unused or underutilized and place the Land on the unused or underutilized property list maintained by the Division before its donation or transfer?
Brief response: Not necessarily. If the land meets the definition of an “unused or underutilized public school facility,” the school district should notify the Division, and the land should be placed on the unused or underutilized property list. But it is possible for a school district to sell, lease, or donate land that does not qualify as an “unused or underutilized public school facility.”

4. If there is uncertainty regarding whether the Land should be listed on the unused or underutilized school property list maintained by the Division, could that uncertainty cloud the Land’s Title if the Land is donated or otherwise transferred without the Division listing the property as unused or underutilized?
Brief response: Possibly. If there is a failure to properly make unused or underutilized public-school facilities available to eligible public charter schools for lease or purchase, there could be a cloud on the property’s title.

DISCUSSION

Question 1: In an effort to cast a wider net and elicit a comprehensive response, please clarify what steps the Bentonville School District must take before donating or otherwise transferring the Land. Please include the following sources in your consideration:

• A.C.A. § 8-21-803;
• A.C.A. § 6-21-815;
• A.C.A. § 6-21-816;
• The Commission for Arkansas Public School Academic Facilities and Transportation Rules Governing Right of Access to Unused or Underutilized Public School Facilities and the Sale or Lease of Public School Facilities; and • Any other relevant rules or laws not identified in this letter or my previous letter.

I must respectfully decline to answer your first question because it falls outside the scope of an opinion from this office. While this office is charged to render legal opinions on the

The Honorable Joshua Bryant
State Senator
Opinion No. 2024-030
Page 3

proper interpretation of state law, I cannot, in the context of an official opinion, advise entities on what steps they should take to accomplish a particular goal. Not only would answering your question require me to make factual determinations that I cannot make in the scope of an official opinion,1 but I also do not serve as legal counsel for the Bentonville School District, so I am not the proper official to provide guidance.2 I will, however, respond to your other questions below.

Question 2: To the extent not already addressed by Question 1, assuming the Bentonville School District intends to donate or otherwise transfer ownership of the Land, is the School District first obligated to:

• Declare the property is unused or underutilized; and/or
• Notify the Arkansas Division of Public School Academic Facilities and Transportation (the “Division”) that the Land is unused or underutilized by the school district before its donation or transfer?

Question 3: To the extent not already addressed by Question 1, assuming the Bentonville School District intends to donate or otherwise transfer ownership of the Land, must the Division designate the Land as unused or underutilized and place the Land on the unused or underutilized property list maintained by the Division before its donation or transfer? Because your second and third questions overlap, I will answer them together. While school districts must submit an annual report identifying all unused or underutilized public- school facilities in the district,3 Arkansas law does not necessarily require that land be deemed an “unused or underutilized public school facility”4 before it can be donated, sold,

1
See, e.g., Ark. Att’y Gen. Ops. 2015-072, 2008-098, 2007-188, 2006-089, 2005-044, 98-255.
2
Ark. Att’y Gen. Op. 2007-188.
3
By February 1 of each year, school districts must submit a report to the Division identifying (1) all unused or underutilized public-school facilities in the district and (2) any such facilities that are designated in the district’s facilities master plan to be reused, renovated, or demolished as part of a specific project. Commission for Arkansas Public School Academic Facilities and Transportation Rules Governing Right of Access to Unused or Underutilized Public School Facilities and the Sale or Lease of Public School Facilities (“Commission Rules”), Rule 3.01. 4 An “unused or underutilized public school facility” is defined in A.C.A. § 6-21-803(17) as a public-school facility or other real property that meets the following criteria:
1. The whole facility or a significant portion of it is not being used for a public educational, academic, extracurricular, or administrative purpose;
2. The nonuse or underutilization of the facility threatens its integrity or purpose as a public-education facility; and
3. The facility is not, as of August 1, 2017, subject to a third-party lease or executed offer to purchase by a third party.

Note that because the definition of an “unused or underutilized public school facility” includes “other real property,” land can fall within the definition of an “unused or underutilized public school facility,” assuming that it meets all the other necessary criteria.

The Honorable Joshua Bryant
State Senator
Opinion No. 2024-030
Page 4

or leased. Rather, Arkansas law sets specific conditions that must be met before certain property can be donated, sold, or leased. For the school district to donate real property, the conditions I listed and discussed in detail in Attorney General Opinion 2023-065 must be met.5 Please see that opinion for the discussion and analysis regarding a donation of real property. But for a school district to sell or lease a public-school facility or other real property, the school must first determine that the facility or other real property is (1) no longer needed for school purposes or (2) is unused or underutilized.6 In other words, a facility or other real property being unused or underutilized is a sufficient—but not a necessary—condition for the school district to sell or lease the property.

If the school district determines that the property is an unused or underutilized public- school facility, the district must notify the Division of its determination so that the Division may add the property to its online list of “unused or underutilized” public-school facilities.7 The school district must also make the unused or underutilized public-school facility available to a public charter school for lease or purchase.8 Yet if the school district decides to sell the facility or other real property because it is no longer needed by the district, rather than because it qualifies as an unused or underutilized public-school facility, there is no obligation for the district to notify the Division, for the Division to add the property to its online list of unused or underutilized facilities, or for the property to be offered to a charter school for lease or purchase.9 Question 4: If there is uncertainty regarding whether the Land should be listed on the unused or underutilized school property list maintained by the Division, could that uncertainty cloud the Land’s Title if the Land is donated or otherwise transferred without the Division listing the property as unused or underutilized?

A “cloud on title” is defined as a “defect or potential defect in the owner’s title to a piece of land arising from some claim or encumbrance, such as a lien, an easement, or a court order.”10 The existence of another party’s right to lease or purchase property upon the occurrence of some triggering event generally does not, by itself, create a property interest

5
These conditions include the statutory requirements set forth in A.C.A. § 6-21-108(b) and the constitutional requirement that any donation of a school district’s real property benefit the district’s students. 6 See A.C.A. § 6-21-816(a)(1).
7
By March 1 of each year, the Division publishes an online list of public-school facilities or other real property that it has identified as “unused or underutilized.” Commission Rules, Rule 3.02. 8 See A.C.A. § 6-21-815(c)(1).
9
While a school district is required to submit an annual report to the Division that identifies any unused or underutilized facilities in the district, a public charter school may also notify the Division if it believes a particular public-school facility is unused or underutilized. A school district that disagrees with the Division’s designation of a facility as “unused or underutilized” may appeal the designation to the Commission for Arkansas Public School Academic Facilities and Transportation. Commission Rules, Rules 3.01–3.03. 10 Cloud on Title, BLACK’S LAW DICTIONARY (12th ed. 2024).

The Honorable Joshua Bryant
State Senator
Opinion No. 2024-030
Page 5

that clouds title.11 But a title can become clouded when one transfers ownership of property without first providing a third party with the opportunity to exercise its right to lease or purchase.12 Therefore, the answer to your question is “possibly.” If a school district transfers ownership of property that qualifies as an “unused or underutilized public school facility” without first making it available for lease or purchase to an eligible public charter school as required by A.C.A. § 6-21-815, it could create a cloud on the property’s title.13

Senior Assistant Attorney General Kelly Summerside prepared this opinion, which I hereby approve.

Sincerely,

TIM GRIFFIN
Attorney General

11
See, e.g., Minnesota ex rel. Alexander v. Block, 660 F.2d 1240, 1255–56 (8th Cir. 1981) (rejecting appellants’ argument that statute granting federal government right of first refusal was a “taking” in violation of the Fifth Amendment that created “a cloud on the title of any property affected”); Bortolotti v. Hayden, 866 N.E.2d 882, 889 (2007) (explaining that because the holder of the right could only choose to purchase property on the same terms as a bona fide offer, if and when the owner decided to sell, and could not compel a sale or encumber the owner’s ability to sell, the right did not cast “a cloud of uncertainty on the title to the property”). 12 See, e.g., Smith v. Hevro Realty Corp., 507 A.2d 980 (1986) (third-party purchaser of property brought an action to quiet title against seller and holder of first refusal rights); Buxton v. Glennon, 448 A.2d 420, 421 (1982) (“When a title is burdened by an option to purchase, the buyer may reject the title as unmarketable.”). 13 When a school district decides to sell, lease, or otherwise transfer ownership of an “academic facility,” A.C.A. § 6-21-816(b)(1) also grants eligible public charter schools “a right of first refusal to purchase or lease the facility for fair market value.” But as explained in Attorney General Opinion 2023-106, the undeveloped land at issue likely does not qualify as an “academic facility,” so that provision would not apply here.