Can a Mississippi economic development district amend its industrial-use covenants to allow a hospital to convert a business park building into medical offices?

Plain-English summary

The Simpson County Economic Development District (the "District") owned an 80-acre business park in Magee, Mississippi. The District had recorded restrictive covenants on the property limiting use to industrial and warehouse purposes. The District had sold two parcels with buildings to a private buyer; those parcels had since been foreclosed. Covington County Hospital wanted to buy one of the buildings to use as medical offices for its physicians. The District's attorney asked whether the District could amend the restrictive covenants to allow the medical-office use.

The AG split the analysis between (1) property already sold by the District and (2) property still owned by the District:

Property already sold: The 2021 opinion (consistent with a 2011 opinion to the same attorney) said amendment was permissible if (a) the covenants permitted amendment, (b) the District owned a majority of the acreage so it could vote the amendment through, and (c) the new use complied with applicable zoning. There is no Mississippi statute requiring industrial-park land, once sold, to remain in industrial or warehouse use forever.

Property still owned by the District: Section 19-5-99(5)(a) requires economic development districts to convey land "for industrial and warehouse use." Whether a particular use qualifies as industrial or warehouse is a fact question. The AG declined to address all possible future amendment scenarios as too broad, but did note that for property still in District hands, the statute mandates industrial/warehouse-use conveyance.

A footnote noted that economic development districts could also separate "surplus" land that is no longer suitable for industrial purposes and dispose of it under § 19-7-3, providing an additional pathway for non-industrial repurposing.

Currency note

This opinion was issued in 2021. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion said for each audience, at the time

For Mississippi economic development districts

For property a party originally bought from the District (and is now reselling), the opinion found "no statutory prohibition on the District amending the covenants to remove the industrial/warehouse use restriction," so long as the covenants permit their amendment and the changes comport with applicable zoning. The AG noted state law does not require that industrial-park land, once sold, continue in industrial or warehouse use. For property still owned by the District, § 19-5-99(5)(a) requires conveyance "for industrial and warehouse use." A footnote notes that districts may separate land that is "surplus and no longer suitable for industrial purposes" and dispose of it under § 19-7-3.

For Covington County Hospital

The opinion addressed the District's authority, not the hospital's plans directly. For the building the hospital wanted (property the District had already sold, which had since been foreclosed), the District could amend the covenants to remove the industrial/warehouse restriction if the covenants permit amendment and the new use comports with applicable zoning. The AG added that whether a particular use qualifies as industrial or warehouse, and what uses zoning allows, are factual determinations it could not make by official opinion.

For zoning officials in Magee

Zoning compliance was a gating condition. The AG quoted Hudson v. Morrison Heights Baptist Church (2001): "[R]egardless of what the covenants say, restrictive covenants can never allow uses of property that are forbidden by zoning laws." Any covenant amendment still had to conform to applicable zoning laws and ordinances.

For attorneys advising on industrial park covenants

The opinion is consistent with the AG's 2011 opinion to the same District: absent a statutory prohibition, a district may amend covenants on resold property where the covenants permit amendment and zoning allows the new use. The AG declined the broader second question (limits on all future amendments) as "too broad to address by official opinion."

For other public economic development entities

The opinion's reasoning is specific to economic development districts under § 19-5-99, whose conveyance authority § 19-5-99(5)(a) ties to industrial and warehouse use. It does not address other public real-estate entities, which operate under their own enabling statutes.

Common questions

Q: What is an economic development district under § 19-5-99?
A: A unit established by a county board of supervisors "to secure and further industrial development of the county." It can buy, sell, lease, and trade industrial sites and rail lines, develop industrial parks, and execute deeds and easements. Its conveyance authority is statutorily limited to industrial and warehouse use.

Q: Why does a District conveyance have to be for industrial or warehouse use?
A: Section 19-5-99(5)(a) limits it. The statute authorizes districts to dispose of industrial sites or rail lines "for industrial and warehouse use," and § 19-5-99(1) states the districts' purpose is "to secure and further industrial development of the county." The AG read that to mean that when the District conveys land, it must be for industrial or warehouse use.

Q: Once the District has sold industrial property, can the use be changed later?
A: The AG found "no provision of state law that would require that industrial park land, once sold, to continue to be utilized for industrial or warehouse purposes." If the recorded covenants permit amendment and the District (owning a majority of the acreage) can vote the amendment, the District may amend the use restriction, subject to zoning.

Q: Did the opinion interpret the District's covenants?
A: No. Citing § 7-5-25, the AG said it could not "interpret the terms or provisions of an agreement or contract" by official opinion, and its analysis assumed the covenants permit amendment (the District's covenants "provide for amendment by the owners of a majority of the acreage").

Q: How does zoning interact with covenants?
A: Zoning is a public regulatory restriction; covenants are private (or quasi-private, in this case) contractual restrictions. Both can apply simultaneously. The Hudson case confirms that covenants cannot allow uses zoning prohibits. So even with covenant amendment, zoning compliance is required.

Q: What's the surplus-property pathway under § 19-7-3?
A: A separate statute lets economic development districts dispose of land that is "surplus and no longer suitable for industrial purposes." This provides a route for non-industrial repurposing of district-owned land. The Moseley 2006 AG opinion (cited in this opinion's footnote) addresses the surplus-property mechanism.

Background and statutory framework

County boards of supervisors may establish economic development districts under § 19-5-99 "to secure and further industrial development of the county." Section 19-5-99(5)(a) authorizes a district to sell, lease, trade, exchange, or otherwise dispose of industrial sites or rail lines within industrial parks "for industrial and warehouse use," and to execute the necessary deeds, leases, contracts, and easements.

The opinion rests heavily on the AG's 2011 opinion to the same District, which found no impediment in state statutes to a district amending covenants to remove the industrial/warehouse restriction on property already sold, and no provision of state law requiring such land to remain in industrial or warehouse use after sale. The 2021 opinion reaffirmed that framework.

On the covenants-versus-zoning point, the AG (quoting its Nowak opinion, which in turn quoted Hudson v. Morrison Heights Baptist Church, a 2001 Mississippi Supreme Court decision) noted that "restrictive covenants can never allow uses of property that are forbidden by zoning laws." Any amendment must conform to applicable zoning.

In a footnote, the AG noted that districts may separate land that is "surplus and no longer suitable for industrial purposes" and dispose of it under § 19-7-3 (citing the Moseley opinion).

Citations and references

Statutes:

• Miss. Code Ann. § 7-5-25, AG opinions limited to state law and prospective questions
• Miss. Code Ann. § 19-5-99, county economic development districts
• Miss. Code Ann. § 19-5-99(1), purpose of districts ("to secure and further industrial development")
• Miss. Code Ann. § 19-5-99(5)(a), conveyance authority limited to industrial and warehouse use
• Miss. Code Ann. § 19-7-3, disposition of surplus land

Cases cited:

• Hudson v. Morrison Heights Baptist Church, 782 So. 2d 726, 732 (Miss. 2001), restrictive covenants cannot allow uses zoning prohibits

Prior AG opinions cited:

• MS AG Op., Welch (July 1, 2011), economic development district may amend covenants on resold property
• MS AG Op., Nowak (June 13, 2008), zoning takes precedence over covenants
• MS AG Op., Moseley (Aug. 24, 2006), surplus-land disposition under § 19-7-3

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/07/D.-Welch-June-23-2021-Amending-Restrictive-Covenants-on-Property-Previously-Sold-by-the-District.pdf

Original opinion text

June 23, 2021

Danny Welch, Esq.
Simpson County Economic Development District
224 North Main Street
Mendenhall, Mississippi 39114

Re: Amending Restrictive Covenants on Property Previously Sold by the District

Dear Mr. Welch:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, the Simpson County Economic Development District (the "District") purchased a tract of land containing approximately 80 acres for development as a business park in Magee, Mississippi (the "Business Park"), and the District executed and recorded restrictive covenants for the property. The covenants provide for amendment by the owners of a majority of the acreage. The District is the current owner of a majority of the acreage in the business park.

The District previously sold two parcels of land within the Business Park to an entity that built two buildings. However, these properties have since been foreclosed. Covington County Hospital is considering purchasing one of the buildings to use as medical offices for its physicians, among other potential uses. Covington County Hospital has requested that the District amend the restrictive covenants to allow the hospital to utilize the property for the above-listed purposes.

Questions Presented

1. Does the District have legal authority to amend the restrictive covenants to allow for the intended uses set forth above by Covington County Hospital?

2. Are there any limitations on the uses or purposes that may be allowed by future amendments by the District to the restrictive covenants covering the remaining property still owned by the District, which may be conveyed to future purchasers of property in the Business Park?

Brief Response

1. With respect to property being conveyed by a party who originally purchased such property from the District, so long as the covenants permit their amendment and so long as any changes comport with applicable zoning requirements, we find no statutory prohibition on the District amending the covenants to remove the industrial/warehouse use restriction for the property. MS AG Op., Welch at *2 (July 1, 2011).

2. Your second question is too broad to address by official opinion. However, for your guidance only, property owned by the District must comply with Mississippi Code Annotated Section 19-5-99 and may be conveyed solely for industrial or warehouse use.

Applicable Law and Discussion

Pursuant to Section 7-5-25, the Office of the Attorney General is authorized to issue official opinions upon questions of state law only. Thus, we cannot by official opinion interpret the terms or provisions of an agreement or contract or infer facts that may be relevant to our opinion. This opinion does not interpret the terms or provisions of the District's restrictive covenants, a copy of which was enclosed with your request.

As you noted in your request, this office has previously issued an opinion to you in your capacity as counsel for the District. MS AG Op., Welch (July 1, 2011). Much like your current request, in 2011, you asked, among other things, whether the District had authority to amend the restrictive covenants to remove the "industrial/warehouse" restrictions only as to property already sold by the District, so the owners of those properties could develop it for commercial use. Id. at *2. In response, we stated:

Assuming the terms of the covenants permit their amendment as you have described, we know of no impediment in state statutes to the District amending the covenants to remove the "industrial/warehouse use" restrictions to the property which has already been sold by the district. We also find no provision of state law that would require that industrial park land, once sold, to continue to be utilized for industrial or warehouse purposes.

Id. (emphasis added). Consistent with our previous opinion to you, we find nothing in the District's enabling statute that requires the District to put restrictions on the title mandating perpetual industrial or warehouse use. However, any amendments allowing for uses other than industrial and warehouse must conform to applicable zoning laws and ordinances. MS AG Op., Nowak at *3 (June 13, 2008) (quoting Hudson v. Morrison Heights Baptist Church, 782 So. 2d 726, 732 (Miss. 2001) ("[R]egardless of what the covenants say, restrictive covenants can never allow uses of property that are forbidden by zoning laws.")).

What uses are allowable under relevant zoning requires a factual determination, which this office cannot make by official opinion. As we have previously opined in our 2011 opinion to you, with respect to property being conveyed by a party who originally purchased such property from the District, so long as the covenants permit their amendment and so long as any changes comport with applicable zoning requirements, we find no statutory prohibition on the District amending the covenants to remove the industrial/warehouse use requirement. MS AG Op., Welch at *2 (July 1, 2011).

Your second question, which asks us to identify "any limitations on the uses or purposes" of property owned by the District, is too broad to address by official opinion. However, for informational purposes, we provide the following.

Section 19-5-99 authorizes county boards of supervisors to establish economic development districts in an effort "to secure and further industrial development of the county. . . ." Miss. Code Ann. § 19-5-99(1). The statute states, in part:

(5) Economic development districts established under this section are authorized and empowered:
(a) To sell, lease, trade, exchange or otherwise dispose of industrial sites or rail lines situated within industrial parks to individuals, firms or corporations, public or private, for industrial and warehouse use . . . upon such terms and conditions, and for such considerations, with such safeguards as will best promote and protect the public interest, convenience and necessity, and to execute deeds, leases, contracts, easements and other legal instruments necessary or convenient therefor.

Miss. Code Ann. § 19-5-99(5)(a) (emphasis added). According to this section, when the District conveys land, it must be for industrial or warehouse use.[1] Whether a particular use is industrial or warehouse requires a factual determination that this office is unable to make by official opinion.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Misty Monroe
Misty Monroe
Special Assistant Attorney General

[1] In previous opinions, including the opinion we issued to you in 2011, discussed above, we have noted that economic development districts may separate land that is surplus and no longer suitable for industrial purposes and dispose of it pursuant to Section 19-7-3. See e.g., MS AG Op., Moseley at *2 (Aug. 24, 2006).