Does an Arkansas school district have to declare land 'unused or underutilized' before donating or selling it?
Plain-English summary
Senator Joshua Bryant asked a follow-up question to two earlier opinions about the Bentonville School District's plan to donate land to a nonprofit for affordable housing and a community center. Specifically: must the district designate the land "unused or underutilized" before donating or transferring it?
Attorney General Tim Griffin's answer breaks into four pieces:
Question 1: What concrete steps must Bentonville take? Declined. The AG cannot give step-by-step transactional advice in an official opinion. He can interpret state law but not serve as transactional counsel for a school district.
Question 2 & 3: Must the district declare the property unused or underutilized before donating, selling, or leasing? Not necessarily. If the land qualifies as an "unused or underutilized public school facility" under A.C.A. § 6-21-803(17), the district has reporting obligations to the state Division and must offer the property to charter schools first. But the underutilization status is a sufficient, not a necessary, condition for sale or lease. A district can sell or lease land that is "no longer needed for school purposes" without the unused-or-underutilized designation. For donations, the conditions in A.C.A. § 6-21-108(b) plus constitutional benefit-to-students requirements (set out in Opinion 2023-065) apply.
Question 4: Could uncertainty about the unused-or-underutilized status cloud title? Possibly. If the land qualifies and the district fails to make it available to eligible charter schools first, the resulting transfer could carry a cloud on title. The transferred property could be subject to a quiet-title action by a charter school whose right of first refusal was bypassed.
What this means for you
If you are a school board member or superintendent considering selling, leasing, or donating district property
Two key tests under this opinion:
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Is the property an "unused or underutilized public school facility"? That is a statutory definition with three elements:
- The whole facility, or a significant portion of it, is not being used for a public educational, academic, extracurricular, or administrative purpose.
- The nonuse or underutilization threatens the property's integrity or purpose as a public-education facility.
- The facility was not, as of August 1, 2017, subject to a third-party lease or executed offer to purchase. -
What kind of transfer are you doing?
- Donation: look at A.C.A. § 6-21-108(b) plus the constitutional rule that any donation must benefit district students. Read Opinion 2023-065 carefully.
- Sale or lease: the district must determine the property is either no longer needed for school purposes or unused or underutilized.
If the property meets the unused-or-underutilized definition, do not skip the Division reporting step. Notify by February 1; the Division publishes the list by March 1. Offer the property to eligible public charter schools for lease or purchase before transferring to anyone else. Otherwise the transfer can be challenged.
If you are a charter school operator in Arkansas
This opinion is a useful reminder of your right of first refusal under A.C.A. § 6-21-815(c)(1) and § 6-21-816(b)(1). If a school district transfers land that qualifies as unused or underutilized without offering it to you first, you may have grounds for a quiet-title action against the transferee. Watch for transactions in your area; they may not always show up on the Division's published list.
You can also notify the Division if you believe a public-school facility is unused or underutilized. The school district can appeal that designation, but the process at least surfaces the issue.
If you are a title insurance company or real-estate attorney closing a transaction with an Arkansas school district
Add an underutilization-status check to your due-diligence checklist. If the property is or could be considered unused or underutilized, confirm the district has either:
- Listed the property on the Division's published list and offered it to eligible charter schools first; or
- Documented that the property does not qualify (e.g., still in active educational use, or under a pre-2017 third-party lease).
A failure to follow the charter-school first-refusal procedure could surface as a future title defect.
If you are a state legislator or policy advocate
The opinion reads § 6-21-815 and § 6-21-816 as creating a charter-school priority that has teeth, with enforcement via potential title clouds on transfers that bypass the procedure. If you want to expand or contract that priority, this is the policy lever.
Common questions
Q: Does our district have to mark every piece of vacant land as unused or underutilized?
A: No. Only properties meeting the three-part statutory definition (not in educational use, that nonuse threatens its educational purpose, and not subject to a pre-2017 third-party lease or executed offer). A vacant gym closet does not automatically trigger the rule.
Q: We want to sell some unused playground equipment along with land. Same rule?
A: For real property, yes. For personal property (equipment, supplies), separate rules apply and are outside this opinion's scope.
Q: We classified the property as "no longer needed for school purposes" rather than "unused or underutilized." Are we safe?
A: Maybe. The two categories have different consequences. "No longer needed" allows sale or lease without Division notification or charter-school first refusal. "Unused or underutilized" triggers both. The difference matters and is fact-specific. If the property in fact meets the unused-or-underutilized definition, calling it something else does not change the legal conclusion. Document your reasoning carefully.
Q: We donated land to a nonprofit a year ago without notifying the Division. Are we exposed?
A: Possibly, if the property qualified as unused or underutilized at the time. The opinion says title can be clouded if the charter-school first-refusal step was skipped. Talk to counsel and consider a curative step if needed.
Q: Does this apply to academic facilities?
A: There is an additional statute, A.C.A. § 6-21-816(b)(1), that gives eligible public charter schools a right of first refusal to purchase or lease "academic facilities" at fair market value. The AG noted that undeveloped land typically does not qualify as an "academic facility," so that provision was not triggered in the Bentonville scenario.
Q: What if a charter school disagrees with our determination that property is or is not unused or underutilized?
A: Charter schools can notify the Division, and the Division has a designation process. The school district can appeal a Division designation to the Commission for Arkansas Public School Academic Facilities and Transportation under Commission Rules 3.01 to 3.03.
Background and statutory framework
A.C.A. § 6-21-803(17) defines "unused or underutilized public school facility" with three elements:
- The whole facility, or a significant portion of it, is not being used for a public educational, academic, extracurricular, or administrative purpose.
- The nonuse or underutilization of the facility threatens its integrity or purpose as a public-education facility.
- The facility was not, as of August 1, 2017, subject to a third-party lease or executed offer to purchase.
The definition includes "other real property," which means undeveloped land can fall within the scope.
Annual reporting is required under Commission Rule 3.01: by February 1 each year, school districts submit a report identifying all unused or underutilized public-school facilities and any such facilities designated for reuse, renovation, or demolition. The Division publishes a master list by March 1.
A.C.A. § 6-21-815(c)(1) gives eligible public charter schools the right to lease or purchase listed unused or underutilized properties. If a district sells, leases, or donates a property that should have been on the list but the charter-school first-refusal step was skipped, the AG concluded the title transfer could carry a cloud.
A.C.A. § 6-21-816(a)(1) sets the gateway test for sale or lease: the district must determine the property is (1) no longer needed for school purposes, or (2) unused or underutilized. Either is sufficient. Underutilization is a sufficient but not a necessary condition.
A.C.A. § 6-21-816(b)(1) creates a separate right of first refusal for charter schools to purchase or lease "academic facilities" at fair market value. The Bentonville facts (undeveloped land) likely fall outside that provision.
For donations specifically, A.C.A. § 6-21-108(b) plus the Arkansas constitutional requirement that public-school property donations benefit district students govern the analysis. Opinion 2023-065 walked through those requirements.
The "cloud on title" analysis cites general right-of-first-refusal cases:
- Minnesota ex rel. Alexander v. Block, 660 F.2d 1240 (8th Cir. 1981) (federal right of first refusal does not "take" property).
- Bortolotti v. Hayden, 866 N.E.2d 882 (Mass. 2007) (right of first refusal on same terms as bona fide offer does not cloud title).
- Smith v. Hevro Realty Corp., 507 A.2d 980 (Conn. 1986) (third-party purchaser brought quiet-title action against right-of-first-refusal holder).
- Buxton v. Glennon, 448 A.2d 420 (Conn. 1982) (when title is burdened by an option to purchase, buyer may reject as unmarketable).
Citations and references
Statutes:
- A.C.A. § 6-21-803(17) (definition of unused or underutilized public school facility)
- A.C.A. § 6-21-108(b) (statutory donation requirements)
- A.C.A. § 6-21-815(c)(1) (charter school lease/purchase availability)
- A.C.A. § 6-21-816(a)(1) (sale or lease of public school facilities)
- A.C.A. § 6-21-816(b)(1) (charter school right of first refusal for academic facilities)
Commission Rules cited:
- Commission Rule 3.01 (annual reporting requirement)
- Commission Rule 3.02 (Division publication of unused/underutilized list)
- Commission Rule 3.03 (appeals of Division designations)
Cases:
- Minnesota ex rel. Alexander v. Block, 660 F.2d 1240 (8th Cir. 1981) (right-of-first-refusal-not-a-taking)
- Bortolotti v. Hayden, 866 N.E.2d 882 (Mass. 2007) (right of first refusal does not cloud title)
- Smith v. Hevro Realty Corp., 507 A.2d 980 (Conn. 1986) (third-party purchaser quiet-title action)
- Buxton v. Glennon, 448 A.2d 420 (Conn. 1982) (option to purchase makes title unmarketable)
Prior AG opinions referenced:
- Ark. Att'y Gen. Op. 2023-065 (initial Bentonville donation opinion)
- Ark. Att'y Gen. Op. 2023-106 (first follow-up opinion on Bentonville donation)
Source
Original opinion text
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:
- 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.
-
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? -
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."
- 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. 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 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, but I also do not serve as legal counsel for the Bentonville School District, so I am not the proper official to provide guidance. I will, however, respond to your other questions below.
Questions 2 and 3. 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, Arkansas law does not necessarily require that land be deemed an "unused or underutilized public school facility" before it can be donated, sold, 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. 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. 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. The school district must also make the unused or underutilized public-school facility available to a public charter school for lease or purchase. 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.
Question 4. 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." 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 that clouds title. 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. 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.
Senior Assistant Attorney General Kelly Summerside prepared this opinion, which I hereby approve.
Sincerely,
TIM GRIFFIN
Attorney General