Can a Mississippi school district reclassify Sixteenth Section land from commercial to residential during an existing 25-year lease, when the lessee wants to live there?
Plain-English summary
The Hazlehurst City School District (HCSD) had a tract of Sixteenth Section land in Copiah County classified as commercial and leased for 25 years (2018-2043). The lessee had been unable to make the property work for commercial purposes and wanted to instead place a dwelling on the land and live there. The HCSD Board determined that residential classification would maximize revenue. The lessee was on board with the change.
The Board's attorney asked: can the Board reclassify the land mid-lease, given that the existing commercial lease runs to 2043?
The AG said yes, with several conditions:
1. The tract must qualify as "residential land" under the statutory definition. Section 29-3-33 defines residential land as "any tract of land upon which the lessee or board-approved sub-lessee is residing," set up in a rectangular form, including the houses and permanent improvements, "provided, however, that such tract of land shall not exceed five (5) acres." So if the relevant tract is more than five acres, it cannot be classified residential under this provision; the Board would have to subdivide.
2. The reclassification must be based on highest and best use for maximizing revenue. Section 29-3-31 requires reclassifications to be based on "the highest and best use of [that] parcel or tract for producing a maximum of revenue by proper utilization." If residential use produces more revenue than the failing commercial use, the test is met.
3. Statutory procedures must be followed. Sections 29-3-37 and 29-3-39 set the procedure: notice, opportunity for objection, appeal rights.
4. The existing lease is not automatically canceled. A 1982 AG opinion (Hathorn) held that reclassification does not terminate an existing lease. So the commercial lease continues unless the parties terminate it. But because commercial and residential leases have different statutory requirements (rent calculation, term limits, etc.), the parties may need to terminate the old commercial lease and execute a new residential lease to align with the new classification.
5. Local zoning still applies. Section 29-3-132 says that nothing in Chapter 3 supersedes local zoning. So even if the Board approves residential classification, the City of Hazlehurst's zoning ordinances still apply. If the parcel is zoned commercial (or industrial, or otherwise non-residential), residential use may not be permissible regardless of the Board's classification. The Board must consider any other lawful restrictions on use, including zoning.
So the path forward is: confirm size (≤5 acres), confirm zoning permits residential use, make findings on highest-and-best-use revenue, follow the statutory reclassification procedure, terminate the old commercial lease, execute a new residential lease.
What this means for you
For Mississippi school boards considering Sixteenth Section reclassifications
This opinion gives operational guidance for mid-lease reclassifications:
- Identify the trigger. Conditions have changed (the lease is failing in its current classification, the lessee wants a different use).
- Check size and zoning. For residential, the tract must be ≤5 acres. Subdivide if needed. Check local zoning to make sure the proposed use is permitted.
- Find highest and best use. Make affirmative findings on the minutes documenting why the new classification produces more revenue than the current one.
- Reclassify. Follow Sections 29-3-37 and 29-3-39 procedures.
- Replace the lease. Terminate the existing lease (with the lessee's consent or per the lease's termination provisions) and execute a new lease consistent with the new classification.
If the lessee will not consent to lease termination, the Board has limited options. The Hathorn (1982) rule is that reclassification alone does not terminate the lease. The Board would need to either (1) keep the old commercial lease in place during the lessee's failure to use the property commercially, generating no revenue, OR (2) negotiate a mutual termination, OR (3) wait out the lease. Reclassification with a willing lessee, like in Hazlehurst's case, is the easy scenario.
For Mississippi Sixteenth Section lessees
If you are a current lessee wanting to use the property differently than the current classification allows:
- Approach the school board with a reclassification proposal
- Be prepared to terminate the existing lease and execute a new one consistent with the new classification
- Demonstrate that the new use produces equal or greater revenue
- Confirm local zoning permits the new use
The school board has some flexibility but it is constrained by statute. They cannot simply reclassify because you ask; they must find that the new classification meets the highest-and-best-use revenue test.
For Mississippi real estate attorneys
When advising on Sixteenth Section deals:
- Confirm the classification of the tract before any deal
- Reclassification is possible mid-lease but requires Board action and typically a new lease
- Existing leases survive reclassification absent termination
- Local zoning is independent of Sixteenth Section classification
- The 5-acre cap on residential land is a hard statutory limit
Be cautious advising lessees on long-term commercial leases of Sixteenth Section land. If commercial use is uncertain, build in mutual-termination rights so the lessee can negotiate reclassification later if needed.
For Mississippi cities and counties with zoning authority
Sixteenth Section reclassification does not override your zoning. If a school board reclassifies a tract as residential, but your zoning prohibits residential use, the lessee still cannot use the land residentially. Coordinate with the school district when reclassifications are proposed:
- The school district may want to know your position on the proposed use
- The lessee may need a zoning variance or rezoning to make the new use viable
- The combined process (school district reclassification + city zoning approval) takes time
For school district attorneys handling reclassification
Build a clean record:
- Findings on the minutes about why the current classification is producing inadequate revenue
- Findings on the minutes about why the new classification represents highest and best use
- Procedural compliance (notice, objection process, appeals)
- Lease termination documents
- New lease consistent with the new classification
A clean record protects against challenges from objecting parties or from later second-guessing.
Common questions
Q: What is the difference between Section 29-3-31 and Section 29-3-39?
A: Section 29-3-31 sets the substantive standard for classification (highest and best use for revenue maximization). Section 29-3-39 imposes the duty to periodically reclassify when conditions change. The 2021 Rhodes opinion involves both: changed conditions trigger reclassification (29-3-39), and the new classification must meet the substantive standard (29-3-31).
Q: What happens if reclassification reduces annual rent?
A: That can be a breach of the Board's trustee duty unless the new classification truly represents the highest and best use. If reclassification produces less revenue but the alternative was no revenue (failed commercial lease), the new classification may still be the highest and best of the available options. Document the analysis carefully.
Q: Can the Board sub-divide a larger tract to fit the 5-acre residential cap?
A: That is a fact-specific question the opinion does not directly address. Section 29-3-33's residential definition speaks of "any tract of land upon which the lessee...is residing" and caps at 5 acres. If the original tract is, say, 10 acres, the Board could potentially carve out a 5-acre residential portion (with the dwelling) and reclassify the remaining 5 acres separately. Check with experienced Sixteenth Section counsel.
Q: What if the existing lessee doesn't want to terminate the existing commercial lease?
A: Then the existing lease continues. The Hathorn (1982) opinion is clear that reclassification does not terminate the lease. The parties would have to negotiate mutual termination. If the lessee refuses, the Board's options are limited.
Q: Is the new lease's rent set the same way as the old commercial lease?
A: No. Different classifications have different rent calculations under the Sixteenth Section statutes. Residential rent is calculated differently than commercial rent. The new lease must comply with residential-classification rent rules.
Q: Does the reclassification affect the term limits of the lease?
A: Yes, potentially. Different classifications have different statutory maximum lease terms. Residential leases may have shorter or longer term limits than commercial leases. The new lease must comply with the residential-classification term rules.
Q: What about urban Sixteenth Section land?
A: The Kemp (1991) opinion the AG cited noted that boards overseeing Sixteenth Section lands in urban areas cannot ignore zoning even if alternative uses would yield more revenue. The same rule applies in the Hazlehurst case: zoning compliance is required.
Q: How does this opinion interact with the Oct 1, 2021 Rhodes opinion (rubbish site)?
A: They are companion opinions answering different questions for the same school district. The Oct 1 opinion addressed reclassifying to "other land" for a rubbish lease. The Oct 7 opinion addresses reclassifying to "residential" for a residential lease. Both apply the highest-and-best-use framework. Different facts, different outcomes.
Q: Can the Board reclassify if no current lease exists?
A: Yes, even more easily. Without a lease in place, there is no existing-lease complication. The Board just makes the reclassification and then markets the land at the new classification. Section 29-3-39 contemplates periodic reclassification surveys exactly for this situation.
Q: What if the lessee builds a dwelling on the commercial-classified land before reclassification?
A: That likely violates the commercial classification and could be waste or breach of the lease terms. The lessee should not build a residence under a commercial lease without first reclassifying. Encourage the lessee to wait for reclassification before building.
Background and statutory framework
Mississippi's Sixteenth Section law uses categorical land classifications:
- Agricultural
- Industrial development
- Commercial
- Residential
- Forestry
- Hunting and fishing
- Recreational
- Catfish farming
- Other land
Each classification has its own definition, rules for lease term, rent calculation, and management. Section 29-3-33 contains the definitions; later sections set the rules for each class.
Residential land (Section 29-3-33): "Any tract of land upon which the lessee or board-approved sub-lessee is residing. Such lands shall be set up, as nearly as possible, in a rectangular form so as to include the houses and such other permanent improvements as may have been placed thereon by said lessee or his predecessor in title; provided, however, that such tract of land shall not exceed five (5) acres."
The 5-acre cap is rigid. Larger residential tracts cannot use this classification.
Reclassification framework:
- Section 29-3-31: classification must be "based upon the finding of the highest and best use of [that] parcel or tract for producing a maximum of revenue by proper utilization"
- Section 29-3-39: Board has duty to "survey periodically the classification" and reclassify "as it may deem advisable because of changes of conditions"
- Section 29-3-37: procedural rules for reclassification (notice, objection, appeal)
The statutory procedure typically requires:
1. Board adopts a tentative reclassification resolution
2. Notice published
3. Opportunity for objections from affected parties
4. Public hearing if objections raised
5. Final Board action
6. Report filed with Secretary of State
Effect on existing leases:
The Hathorn (1982) AG opinion is the controlling authority: "a change in classification pursuant to the statutes does not terminate or cancel an existing lease." The lease continues despite reclassification. But if the new classification has different statutory requirements (rent, term, conditions), the parties may need a new lease to align with the new classification. The 2021 opinion recognizes this practical reality.
Zoning interaction:
Section 29-3-132 is unambiguous: "Nothing in this chapter shall be construed to supersede or modify any power or authority of a county, municipality, or combination thereof, or any zoning or planning board or agency, or similar public authority, to adopt and enforce zoning or land use laws, ordinances or regulations." So Sixteenth Section classification operates within the zoning framework, not over it. If zoning prohibits a use, reclassifying does not authorize it.
Citations and references
Statutes:
- Miss. Code Ann. § 7-5-25, AG opinions limited to prospective state law
- Miss. Code Ann. § 29-3-31, classification based on highest and best use
- Miss. Code Ann. § 29-3-33, residential land definition (5-acre cap)
- Miss. Code Ann. § 29-3-37, procedural requirements for reclassification
- Miss. Code Ann. § 29-3-39, periodic reclassification duty
- Miss. Code Ann. § 29-3-132, zoning authority preserved
Cases:
- Benson v. Neshoba Cnty. Sch. Dist., 102 So. 3d 1190 (Miss. Ct. App. 2012), no leasing for substantially less than fair value
- Hill v. Thompson, 564 So. 2d 1 (Miss. 1989), same
Prior AG opinions:
- MS AG Op., Cheney (Sept. 24, 2004), highest and best use for maximizing revenue
- MS AG Op., Hathorn (Sept. 8, 1982), reclassification does not terminate existing lease
- MS AG Op., Kemp (Aug. 28, 1991), Board must consider zoning even if alternative use yields higher return
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/10/C.Rhodes-October-7-2021-Reclassification-of-Sixteenth-Section-Land.pdf
Original opinion text
October 7, 2021
Carroll Rhodes, Esq.
Attorney for Hazlehurst City School District
Post Office Box 588
Hazlehurst, Mississippi 39083
Re: Reclassification of Sixteenth Section Land
Dear Mr. Rhodes:
The Office of the Attorney General has received your request for an official opinion.
Background
You state that the Hazlehurst City School District ("HCSD"), governed by a five-member Board of Trustees (the "Board"), has a tract of Sixteenth Section land in Copiah County currently classified as commercial and leased by an individual for a term of 25 years, starting on November 1, 2018, and ending on October 31, 2043. However, according to your request, the lessee has been unsuccessful in using the property for commercial purposes and now seeks to place a dwelling on the land and live there. The Board has determined that the highest and best use of the property for producing the maximum amount of revenue would be reclassifying the property as residential. According to your request, the lessee is in agreement with the reclassification.
Question Presented
May the Board reclassify the property although there is an existing commercial lease that does not expire until 2043?
Brief Response
Yes, assuming other lawful restrictions on the use of the land have been satisfied, and the proper procedure is followed, the Board may reclassify the land.
Applicable Law and Discussion
As we have previously stated, "school trust lands must be classified according to their highest and best use for maximizing revenue." MS AG Op., Cheney at *2 (Sept. 24, 2004). Additionally, "[t]he board of education is under an obligation to obtain the highest return possible from sixteenth section land as a trustee for the school children of that district." Id. (citation omitted).
Mississippi Code Annotated Section 29-3-39 states, in pertinent part:
It shall be the duty of the board of education to survey periodically the classification of all sixteenth section land under its jurisdiction and to reclassify that land as it may deem advisable because of changes of conditions, and when any land is so reclassified, the board of education shall file a report thereof with the Secretary of State.
Mississippi courts have held that the school district, as trustee of the land, does not have "authority to lease real property held in trust for substantially less than the fair value thereof." Benson v. Neshoba Cnty. Sch. Dist., 102 So. 3d 1190, 1193 (Miss. Ct. App. 2012) (quoting Hill v. Thompson, 564 So. 2d 1, 9 (Miss. 1989)). While your request does not describe the size of the tract in question, you do explain that the Board has determined that the highest and best use for maximizing revenue of the tract is residential. "Residential land" is defined as:
any tract of land upon which the lessee or board-approved sub-lessee is residing. Such lands shall be set up, as nearly as possible, in a rectangular form so as to include the houses and such other permanent improvements as may have been placed thereon by said lessee or his predecessor in title; provided, however, that such tract of land shall not exceed five (5) acres.
Miss. Code Ann. § 29-3-33.
If the tract in question meets the definition of "residential land," it is the opinion of this office that the Board may reclassify the tract if the change in conditions so warrants and the classification is "based upon the finding of the highest and best use of [that] parcel or tract for producing a maximum of revenue by proper utilization." Miss. Code Ann. § 29-3-31. After the appropriate finding has been made regarding the reclassification of the tract, the Board must follow the statutorily mandated procedures set forth in Sections 29-3-37 and 29-3-39 regarding notice, objection, and appeal.
This office previously has opined "that a change in classification pursuant to the statutes does not terminate or cancel an existing lease." MS AG Op., Hathorn at *2 (Sept. 8, 1982). However, to the extent that the statutory requirements for a commercial lease of Sixteenth Section land and a residential lease of Sixteenth Section land differ, the parties may need to terminate the existing lease and execute a new one.
Section 29-3-132 states, "[n]othing in this chapter shall be construed to supersede or modify any power or authority of a county, municipality, or combination thereof, or any zoning or planning board or agency, or similar public authority, to adopt and enforce zoning or land use laws, ordinances or regulations." While exercising its duty to maximize the income from this particular tract of Sixteenth Section land, the Board must consider any other lawful restrictions on the use of such lands. MS AG Op., Kemp at *2 (Aug. 28, 1991) (stating "[b]y analogy, a school board responsible for oversight of sixteenth section lands located in urban areas may not ignore legally enacted zoning classifications, even if some alternative use which conflicts with such classifications would yield a higher return.").
In conclusion, the Board may reclassify a tract of Sixteenth Section land from commercial to residential, provided the current lease does not prohibit such reclassification, the land in question meets the requirements for residential land, and the Board of Trustees follows the statutorily mandated procedures.
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