When the legislature gave the ECU Medical Faculty Practice Plan 'flexibility' to handle its own real property acquisitions, did that mean it no longer needs Council of State approval, Joint Legislative Commission consultation, or AG legal work for those transactions?

Plain-English summary

In 1998 the General Assembly gave the East Carolina University Medical Faculty Practice Plan a "flexibility" package: more local control over personnel, purchasing, property, and construction decisions for the Plan's medical operations. The property provision, G.S. 116-40.6(d), let the board of trustees adopt rules to do what the Department of Administration normally does for state-property transactions. The Plan's lawyer asked the AG four questions about how the new statute worked.

The AG's bottom-line answer: the flexibility statute let the Plan run the operational machinery itself, but it did not exempt the Plan from the substantive approval and review requirements that protect state property. Those still apply.

Whose name goes on the deed. The Plan is not a separate corporate entity; it is a sub-agency within ECU. The State retains title. G.S. 146-24(b) requires all state real-property conveyances to be in the name of "State of North Carolina." Every deed must be executed in the State's name, signed by the Governor, attested by the Secretary of State, and bear the great seal of NC (G.S. 146-75 and 146-76). The Plan cannot acquire or dispose of property in its own name; the deed runs to or from "State of North Carolina."

Council of State approval still required. G.S. 146-22 and 146-27 require Council of State approval for state-property acquisitions and dispositions, plus consultation with the Joint Legislative Commission on Governmental Operations for transactions where the appraised value is at least $25,000. The 1998 flexibility statute said the board of trustees may "perform the functions otherwise prescribed for the Department of Administration." The functions DOA performs (per G.S. 146-22 and 146-27) include consulting with the Legislative Commission and obtaining Council of State approval. So the Plan must do those same things. The last sentence of G.S. 116-40.6(d) does require a post-consummation report to the Governor and Council of State, but that is in addition to the standard approvals, not a substitute for them.

Outside legal counsel is still off limits. G.S. 147-17 makes the Attorney General the counsel of every state agency receiving state support. Private counsel can be hired only with Governor approval after the AG indicates it is impractical to render the service. The flexibility statute did not amend G.S. 147-17 or change the AG's role. The AG continues to handle real-property legal work for the Plan, including hiring any outside counsel the AG decides is needed for a specific transaction. Buyers from the State must still hire their own counsel.

Eminent domain is not authorized. The flexibility statute lists ways the Plan can acquire property: purchase, gift, lease, or rental. It expressly excludes condemnation and eminent domain. The Plan cannot use the State's eminent-domain power.

Encumbrance is not authorized. The flexibility statute also expressly says it does not authorize the Plan to encumber state real property. So the Plan cannot mortgage state property, take out construction loans secured by state property, or otherwise burden the State's title.

Same answer for UNC Health Care. G.S. 116-37(i) is nearly identical legislation for the UNC Health Care System, and G.S. 116-37(a)(4) lets the UNC Health Care board apply 116-37(i)'s rules to UNC Hospitals and the Chapel Hill clinic patient-care programs. The AG noted in a footnote that the same interpretation applies there.

Bottom line on "flexibility." The 1998 statute traded administrative speed for procedural autonomy. The Plan no longer needs to route every step through the State Property Office for execution. But it still needs Council of State approval, still must consult the Legislative Commission, still must use the AG's office for legal work, and still must run deeds in the State's name. The flexibility is operational, not substantive.

Currency note

This opinion was issued in 1999. 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.

The UNC system "flex" statutes have been amended several times since 1999, with various expansions and contractions of campus-level autonomy. The ECU Medical Faculty Practice Plan continues to operate but has been reorganized within the ECU health-sciences structure. Anyone analyzing a current university real-property transaction should pull the current text of G.S. 116-40.6(d), 116-37(i), and the Chapter 146 framework to confirm which approvals are still required.

Common questions

Q: Why would the legislature pass a "flexibility" act that doesn't actually relax substantive requirements?
A: Because the legislature wanted to relax the operational bottleneck (DOA's queue, which was famously slow) while keeping the substantive protections (Council of State approval, Legislative Commission consultation). The 1998 statute lets the Plan generate its own appraisal, its own negotiation, its own paperwork, and bring a ready-to-execute deal to the Council of State. That is faster than waiting for DOA to do all of those things itself.

Q: Is the Council of State approval just a rubber stamp?
A: No, and that is the point. The Council of State exercises substantive review of state-property transactions. Some deals get sent back for re-negotiation, downsizing, or rejection. Built into the structure is a check on individual agencies running off with state property in ways the Council disagrees with.

Q: What is the Joint Legislative Commission on Governmental Operations?
A: A standing legislative committee that exercises oversight of state-agency operations, including specifically over real-property transactions above the statutory dollar threshold. Consultation is mandatory; the Commission does not have a formal veto, but its opposition usually deters a transaction.

Q: Why does the Attorney General handle the legal work?
A: Because G.S. 147-17 makes the AG the state's lawyer. The legislature consolidated state legal work in the AG's office to avoid duplication and conflicting positions. Agency-by-agency private counsel would be both expensive and inconsistent. The exception (private counsel with Governor approval) is narrow.

Q: Does this opinion apply to other "flex" statutes?
A: It applies directly to G.S. 116-40.6(d) (ECU MFPP) and G.S. 116-37(i) (UNC Health Care). The general approach (flex statute does not impliedly repeal Chapter 146 requirements) probably applies to other similar statutes, but each statute's text matters. A different flex statute with different language could produce a different result.

Q: What is the dollar threshold for Joint Legislative Commission consultation?
A: $25,000 in appraised value for non-transportation acquisitions, with parallel limits for dispositions. Below the threshold, Council of State approval is still required, but Commission consultation is not.

Background and statutory framework

NC's state-property framework lives in Chapter 146, which gives the Department of Administration the central role in acquiring and disposing of state real property. DOA serves as the "clearinghouse" for university and other state-agency property transactions. The architecture: an agency wants to buy or sell, submits a request to DOA, DOA investigates and negotiates, DOA brings the deal to the Council of State, the Council approves or rejects.

The DOA centralization is conceptually clean but operationally slow. By the 1990s, NC's research universities (especially the medical centers) were finding the DOA bottleneck incompatible with the pace of healthcare real estate, where opportunities to acquire physician practice locations or expand clinic operations had short windows. The legislature responded with "flex" statutes that decentralized the operational machinery while preserving the substantive checks.

G.S. 116-37(i) (1998) and G.S. 116-40.6(d) (1998) were two of the first university flex statutes covering real property. They authorized the boards of trustees (UNC Health Care, ECU MFPP) to adopt their own rules for "developing specifications, advertisement, and negotiations" with property owners. The board's rules had to be submitted to the State Property Office for review (but not approval); the State Property Office's comments went to the campus chancellor and to the UNC system president.

The AG opinion was needed because the 1998 statutes did not spell out which DOA functions migrated to the campus and which Chapter 146 requirements survived. The opinion gave the campuses a clean answer: rules and procedures are yours, substantive approvals stay with the Council of State and the Legislative Commission, and legal work stays with the AG.

The opinion has been a stable interpretation of the "flex" model. Subsequent flex statutes for other university operations (purchasing, construction, personnel) have generally followed the same model: campus-level rule-making and execution, with central approval and legal work preserved.

Citations

• N.C. Gen. Stat. ch. 116 (Higher Education)
• N.C. Gen. Stat. § 116-37(a)(4) (UNC Health Care board may apply 116-37(i) to UNC Hospitals and Chapel Hill clinics)
• N.C. Gen. Stat. § 116-37(i) (UNC Health Care System property flex statute)
• N.C. Gen. Stat. § 116-40.6(d) (ECU MFPP property flex statute)
• N.C. Gen. Stat. ch. 146 (State Property)
• N.C. Gen. Stat. § 146-22 (acquisition approval procedures, Legislative Commission consultation)
• N.C. Gen. Stat. § 146-24(b) (conveyances to State of North Carolina)
• N.C. Gen. Stat. § 146-27 (disposition approval procedures)
• N.C. Gen. Stat. §§ 146-75, 146-76 (form of deeds, Great Seal)
• N.C. Gen. Stat. § 147-17(a), (b) (AG as state agency counsel; outside counsel limited)
• 1998 N.C. Sess. Laws c. 212, s. 11.8(f) (enactment of ECU MFPP flex provisions)
• Sutton v. Aetna Casualty and Surety Co., 325 N.C. 259, 280 S.E.2d 759 (1989)
• Savings and Loan League v. Credit Union Commission, 302 N.C. 458, 276 S.E.2d 404 (1981)
• Food Town Stores v. City of Salisbury, 300 N.C. 21, 265 S.E.2d 123 (1980)
• Milk Commission v. National Food Store, 270 N.C. 323, 154 S.E.2d 548 (1967)

Source

• Landing page: https://ncdoj.gov/opinions/flexibility-legislation-pertaining-to-the-medical-faculty-practice-plan/

Original opinion text

Re: Advisory Opinion; Flexibility Legislation Pertaining to the Medical Faculty Practice Plan; Acquisitions and Dispositions of Real Property by the ECU Medical Faculty Practice Plan; N.C.G.S. § 116-40.6(d).

Dear Mr. Getsinger:

Section 11.8(f), Chapter 212 of the 1998 Session Laws enacted management flexibility legislation pertaining to the East Carolina University Medical Faculty Practice Plan (hereinafter referred to as the "Plan"). The legislation addressed four particular areas including (1) personnel, (2) purchasing, (3) property and (4) construction. The wording of N.C.G.S. § 116-40.6(d) relating to property matters has raised certain questions for which you have sought the advice of this office.[1]

I. Procedures Normally Applicable to Acquisitions and Disposition of Real Property by the State and Agencies

With the exception of acquisitions and dispositions of highway rights-of-way, most acquisitions and dispositions of interests in real property by the State or its agencies are governed by Chapter 146 of the General Statutes. Pursuant to that Chapter, the State Property Office, acting on behalf of the Department of Administration, serves as the "clearing house" for acquisitions and dispositions of interests in real property by the State and its agencies. An agency desiring to acquire or dispose of an interest in real property submits a request to the State Property Office. In the case of acquisitions, the State Property Office investigates the proposed acquisition and determines if the property is needed and the acquisition is in the best interest of the State. The State Property Office will generally have the property appraised, negotiate with the owners for acquisition, obtain surveys when necessary and request the Attorney General's Office to have a title examination conducted with respect to the property. If negotiations for the purchase of the land are successful, the Department of Administration submits the proposed transaction to the Governor and Council of State for approval or disapproval. If the proposed acquisition is a purchase of land with an appraised value of at least $25,000.00, and for a purpose other than transportation, it may only be made after consultation with the Joint Legislative Commission on Governmental Operations. N.C.G.S. § 146-22. In the case of dispositions, if it is determined that the disposition is in the best interest of the State, the State Property Office will proceed to sell the property in accordance with its normal procedures for conveying interest in State property. Every sale, lease or rental of land owned by the State or any State agency must be approved by the Governor and Council of State, and, if the proposed disposition is a sale of land with an appraised value of at least $25,000.00, it may only be made after consultation with the Joint Legislative Commission on Governmental Operations. N.C.G.S. § 146-27. The final authority to approve or disapprove acquisitions and dispositions under Chapter 146, except in those circumstances where the authority has been otherwise delegated, is vested in the Governor and Council of State.

II. N.C.G.S. § 116-40.6(d)

N.C.G.S. § 116-40.6(d) reads as follows:

(d) Property. – Notwithstanding the provisions of Article 6 of Chapter 146 of the General Statutes to the contrary, the board of trustees shall establish rules and regulations to perform the functions otherwise prescribed for the Department of Administration in acquiring or disposing of any interest in real property for the use of the Medical Faculty Practice Plan. These rules and regulations shall include provisions for development of specifications, advertisement, and negotiations with owners for acquisition by purchase, gift, lease, or rental, but not by condemnation or exercise of eminent domain, on behalf of the Medical Faculty Practice Plan. The section does not authorize the board of trustees to encumber real property. Such rules and regulations shall be implemented by a property office maintained by East Carolina University. The board of trustees shall submit all initial rules and regulations adopted pursuant to this subsection to the State Property Office for review upon adoption. Any subsequent changes to these rules and regulations shall be submitted to the State Property Office for review. Any comments by the State Property Office shall be submitted to the Chancellor of East Carolina University and to the President of The University of North Carolina. After review by the Attorney General as to form and after the consummation of any such acquisition, East Carolina University shall promptly file, on behalf of the Medical Faculty Practice Plan, a report concerning the acquisition or disposition with the Governor and Council of State.

In light of the General Assembly's enactment of this provision, various questions have been raised. Those questions and our responses follow:

Question: Should the "State of North Carolina" be named as the grantor/grantee in dispositions and acquisitions of real property on behalf of the Plan?

Answer: Yes

The Plan is not a corporate entity. It is a sub-agency within the East Carolina University System. N.C.G.S. § 116-40.6(d) does not authorize or empower the Plan to either acquire or dispose of title to real property in its own name. N.C.G.S. § 146-24(b) provides that all conveyances of purchased real property shall be made to the "State of North Carolina". Every proposed conveyance in fee of State land must be executed in the name of the "State of North Carolina," and the deed must be signed by the Governor, attested by the Secretary of State and the great seal of the State of North Carolina must be affixed. N.C.G.S. § 146-75 and N.C.G.S. § 146-76.

Question: Under N.C.G.S. § 116-40.6(d) is the Plan exempted from the requirements contained in N.C.G.S. § 146-22 and N.C.G.S. § 146-27 pertaining to consultation with the Joint Legislative Commission on Governmental Operations and approval by the Governor and Council of State with regard to acquisitions and dispositions of real property?

Answer: No.

The cardinal rule of statutory construction is that legislation must be construed to accomplish the General Assembly's intent. Sutton v. Aetna Casualty and Surety Co., 325 N.C. 259, 265, 280 S.E.2d 759 (1989). The best indicia of legislative intention are the language of the statute, its spirit and purpose. Savings and Loan League v. Credit Union Comm., 302 N.C. 458, 276 S.E.2d 404 (1981). Moreover, when interpreting statutes, the words in the statute are to be given their ordinary meaning unless the General Assembly has specifically defined them or they have an acquired technical meaning. Food Town Stores v. City of Salisbury, 300 N.C. 21, 265 S.E.2d 123 (1980). Finally, when trying to determine legislative intent, the courts do not consider statements or testimony by members of the General Assembly as to the statute's purpose or its intended construction. E.g., Milk Commission v. National Food Store, 270 N.C. 323, 332-33, 154 S.E.2d 548 (1967).

N.C.G.S. § 116-40.6(d) authorizes the Plan to establish rules and regulations to perform the "functions" otherwise prescribed for the Department of Administration in acquiring or disposing of real property. The functions prescribed for the Department of Administration in acquiring or disposing of real property require consultation with the Joint Legislative Commission on Governmental Operations and obtaining Governor and Council of State approval of acquisitions and dispositions of real property as set forth in N.C.G.S. § 146-22 and N.C.G.S. § 146-27.

We find no language in N.C.G.S. § 116-40.6(d) which specifically or impliedly exempts the Plan from these requirements. Although the last sentence in this section requires the Plan to file reports concerning acquisitions and dispositions with the Governor and Council of State following the consummation of the transactions, this provision cannot be interpreted as impliedly exempting the Plan from the requirements of N.C.G.S. § 146-22 and N.C.G.S. § 146-27.

Question: Under N.C.G.S. § 116-40.6(d) is the Plan authorized to employ outside legal counsel to perform legal services in connection with the acquisition and dispositions of real property?

Answer: No.

The Attorney General is counsel for all departments, officer, agencies, institutions, commissions, bureaus or other organized activities of the State which receive support in whole or in part from the State. Private legal counsel may be employed only with the approval of the Governor after the Attorney General has indicated it is impractical for the Attorney General to render the legal service. N.C.G.S. § 147-17(a) and (b).

Pursuant to existing arrangements between the Governor and the Attorney General, the Attorney General is responsible for hiring outside legal counsel to perform legal services in connection with the acquisition of real property on behalf of the State and its agencies. Normally the office of the Attorney General performs all legal services on behalf of the State or its agencies with regard to the disposition of an interest in real property. The purchaser of real property from the State is responsible for obtaining any legal services desired by him in connection with the proposed acquisition from the State.

N.C.G.S. § 116-40.6(d) in no way changes the responsibility for employment of outside legal counsel by the State or State agencies as set forth in N.C.G.S. § 147-17. Accordingly, the Office of the Attorney General will continue to be responsible for employment of outside legal counsel required in connection with acquisitions of real property pursuant to N.C.G.S. § 116-40.6(d).

In conclusion, all acquisitions and dispositions pursuant to N.C.G.S. § 116-40.6(d) must be made in the name of the State of North Carolina. Deeds conveying real property shall continue to be executed in the normal manner for execution of deeds by the State. All acquisitions and dispositions on behalf of the Plan must be approved by the Governor and Council of State, unless exempted by a previous rule adopted by the Council of State, and when the $25,000.00 benchmark is applicable, the Plan must consult with the Joint Legislative Commission on Governmental Operations prior to proceeding with the acquisition or disposition. Lastly, the responsibility of hiring outside legal counsel in connection with any acquisition on behalf of the Plan will continue to be performed by the Office of the Attorney General.

Very truly yours,

Grayson K. Kelley
Senior Deputy Attorney General
Special Litigation/Education Division

Roy A. Giles, Jr.
Special Deputy Attorney General

Thomas J. Ziko
Special Deputy Attorney General

RAGjr/TKZ:fpt

cc: Ben Irons, II; Greg Hassler; Susan Ehringhaus

[1] Legislation almost identical to N.C.G.S. § 116-40.6(d) was enacted with regard to acquisitions and dispositions of real property by the University of North Carolina Health Care System. See, N.C.G.S. § 116-37(i). In addition, pursuant to N.C.G.S. § 116-37(a)(4) the Board of Directors of the University of North Carolina Health Care System is empowered to adopt policies that make the provisions of N.C.G.S. § 116-37(i) applicable to the University of North Carolina Hospitals at Chapel Hill and the clinic patient care programs of the School of Medicine of the University of North Carolina at Chapel Hill with regard to acquisitions and dispositions of interests in real property. Accordingly, the opinions expressed herein with regard to the interpretation of N.C.G.S. § 116-40.6(d) are equally applicable to the provisions of N.C.G.S. §§ 116-37(a)(4) and 37(i).