Can a real estate agent who sits on an appraisal district's board sell a building to that same appraisal district?

Texas AG Opinion JM-1187: Can an Appraisal Board Member Broker a Sale to the District?

Plain-English summary

The Wood County Criminal District Attorney described a situation where an appraisal district signed an earnest money contract to buy property to house its offices, and the seller's real estate agent happened to be a member of the appraisal district's own board of directors. That board member abstained from every vote on the purchase. The county attorney asked whether the deal ran afoul of Tax Code section 6.036 (the appraisal-district-specific conflict-of-interest statute), the common-law doctrine of incompatibility, or common-law conflict-of-interest rules generally.

The Attorney General found the incompatibility doctrine did not apply, since it only concerns holding two incompatible public positions, and the board member's realtor work was a private undertaking. Turning to Tax Code section 6.036, which bars an appraisal district from contracting with one of its own board members, the opinion explained the answer turned on a fact the county attorney hadn't specified: was the board member's contractual relationship only with the seller, as a listing or selling agent typically is, or did the board member also act as an agent for the appraisal district itself? If only the former, there was no section 6.036 problem, since real estate commissions are ordinarily paid by, and brokers ordinarily represent, the seller. If the board member also represented the district, the transaction would violate section 6.036, and simply abstaining from the vote would not fix it. The opinion separately walked through Local Government Code chapter 171's conflict-of-interest rules for local public officials, which apply to appraisal district board members in addition to, not instead of, section 6.036, and which require a board member with a "substantial interest" in a business entity involved in a matter to file a disclosure affidavit and abstain, unless enough other board members share and disclose the same interest.

Currency note

This opinion was issued in 1990. 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 mentioned here.

Who this opinion affected (as of 1990)

Appraisal district board members with outside business interests: The opinion meant a board member acting purely as an outside party's private agent, such as a seller's real estate broker, in a transaction with the district did not necessarily violate the conflict-of-interest statutes, but a board member who also acted as the district's own agent in the same deal did violate section 6.036 no matter how the vote went.

Appraisal districts negotiating real estate purchases: The opinion flagged that the district needed to know precisely whose agent the board-member realtor was functioning as, since that fact, not the abstention alone, determined whether the deal was lawful.

County and district attorneys advising local taxing entities: The opinion illustrated how Tax Code section 6.036 and Local Government Code chapter 171 apply together, with chapter 171 supplying the disclosure-and-abstention mechanism and preempting the common law, while section 6.036 remains a separate, appraisal-district-specific bar on board-member contracts.

Common questions

Does a board member have to quit voting to avoid a conflict of interest?
Abstaining is necessary but not always sufficient. The opinion found that if the board member himself had entered into a contractual relationship with the appraisal district (not just with the seller), the transaction would violate Tax Code section 6.036 regardless of the board member's abstention from votes.

Is it automatically a conflict for a realtor who sits on the board to sell a building to the district?
Not automatically. The opinion explained that a real estate commission is generally paid by, and a broker is generally recognized as agent of, the seller, so a board member acting only as the seller's broker, with no agency relationship to the district itself, would not violate section 6.036 on these facts.

What has to happen if a board member does have a substantial financial interest in a matter before the board?
Under Local Government Code section 171.004, the board member must file an affidavit disclosing the interest before any vote or decision on the matter and must abstain from further participation, unless a majority of the board shares and discloses the same kind of interest in the same action, per section 171.005.

Background and statutory framework

Tax Code section 6.036 governs conflicts of interest specifically for appraisal district board members and prohibits an appraisal district from entering into a contract with one of its own board members. The opinion read that prohibition as turning on whether the board member himself, not merely a third party he represented, had a contractual relationship with the district. Because the county attorney's description suggested the board member's contract ran only to the seller, the opinion found no section 6.036 violation on that reading, drawing on Janes v. CPR Corp. for the general rule that a real estate commission is paid by the seller and a broker is recognized as the seller's agent, while noting under Phillips v. Campbell that a broker may act for both buyer and seller with the full knowledge and consent of both, and citing Chamberlain v. North Cent. Inv. Corp. on the relationship between a vendor and members of a multiple listing service. If the board member had in fact acted as the district's agent as well as the seller's, the opinion held the transaction would violate section 6.036 and that the board member's abstention from voting would not cure it.

The opinion then turned to Local Government Code chapter 171, which separately governs conflicts of interest for local public officials, including appraisal district board members under section 171.001(1) and Attorney General Opinion JM-1060 (1989). It is an offense under section 171.003(a)(1) for a local public official to participate in a vote or decision on a matter involving a business entity in which the official has a "substantial interest," defined in section 171.002(a)(1) as owning 10 percent or more of the entity's voting stock or shares, or 10 percent or more or $5,000 or more of its fair market value, or receiving more than 10 percent of one's gross income from the entity in the prior year. A local public official with a substantial interest in a business entity or in real property involved in a matter must, under section 171.004, file a disclosure affidavit before any vote or decision and abstain from further participation, unless section 171.004(c) applies because a majority of the governing body's members share and disclose the same kind of interest in the same action; the opinion noted Attorney General Opinion JM-379 (1985) had read "participation" to include deliberation, not just voting. Because chapter 171 preempts the common law of conflicts of interest for local public officials under section 171.007(a), the opinion did not need to separately analyze the common-law conflict-of-interest rules, and noted that appraisal district board members must independently comply with both chapter 171 and Tax Code section 6.036, since section 6.036(f) states that section does not limit the application of any other law.

Citations

Statutes:

• Tax Code § 6.036
• Tax Code § 6.036(f)
• Local Gov't Code § 171.001(1)
• Local Gov't Code § 171.002(a)(1)
• Local Gov't Code § 171.003(a)(1)
• Local Gov't Code § 171.004
• Local Gov't Code § 171.005
• Local Gov't Code § 171.006
• Local Gov't Code § 171.007(a)

Cases:

• Janes v. CPR Corp., 623 S.W.2d 733, 740 (Tex. App.-Houston [1st Dist.] 1981, writ ref'd n.r.e.)
• Phillips v. Campbell, 480 S.W.2d 250 (Tex. Civ. App.-Houston [14th Dist.] 1972, writ ref'd n.r.e.)
• Chamberlain v. North Cent. Inv. Corp., 432 S.W.2d 581 (Tex. Civ. App.-Amarillo 1968, writ ref'd n.r.e.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1187
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1187.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

July 19, 1990

Honorable Marcus D. Taylor
Criminal District Attorney
Wood County
P. O. Box 689
Quitman, Texas 75783

Opinion No. JM-1187

Re: Eligibility of a realtor to serve on the board of directors of an appraisal district (RQ-1880)

Dear Mr. Taylor:

You ask about the following situation involving a member of the board of directors of an appraisal district:

The appraisal district signed an earnest money contract with an individual to purchase certain property to house the appraisal office. The realtor for the seller is a member of the appraisal district board of directors. That board member has abstained from all votes concerning this matter.

You ask whether the real estate transaction in question would contravene section 6.036 of the Tax Code,[1] the common law doctrine of incompatibility, or the common law rules relating to conflicts of interest.

The common law doctrine of incompatibility is inapplicable to the situation you describe since it applies to incompatibility of two or more public positions. See Attorney General Opinions JM-133, JM-129 (1984). The board member's work as a realtor is in a private capacity, not a public capacity.

Section 6.036 of the Tax Code governs conflicts of interest involving appraisal district board members. That

1. Although your request letter refers to section 6.03 of the Tax Code, we assume you are asking about section 6.036 of the Tax Code, which deals with conflicts of interest.

section prohibits an appraisal district from entering into a contract with a member of the board of directors of an appraisal district. Whether the real estate transaction you describe violates section 6.036 depends on whether the board member himself has entered into a contractual relationship with the board. Your description of the transaction in question suggests that the board member has a contractual relationship only with the seller, not with the board. If that is the case, there is no violation of section 6.036. If, however, the board member acted as an agent for the board as well as the seller, the transaction would be in violation of section 6.036 and the board member's abstention would not cure the violation. See generally Janes v. CPR Corp., 623 S.W.2d 733, 740 (Tex. App.-Houston [1st Dist.] 1981, writ ref'd n.r.e.) (real estate commission is generally paid by seller, and broker is generally recognized as seller's agent); Phillips v. Campbell, 480 S.W.2d 250 (Tex. Civ. App.-Houston [14th Dist.], 1972 writ ref'd, n.r.e.) (broker may act for both buyer and seller with full knowledge and consent of both principals); Chamberlain v. North Cent. Inv. Corp., 432 S.W.2d 581 (Tex. Civ. App.-Amarillo 1968, writ ref'd n.r.e.) (dealing with relationship between vendor and members of multiple listing service).

Chapter 171 of the Local Government Code governs conflicts of interest involving local officials.[2] It makes it an offense for a local public official to participate in a vote or decision on a matter involving a business entity in which the local public official has a substantial interest if it is reasonably foreseeable that an action on the matter would confer an economic benefit to the business entity involved. Local Gov't Code § 171.003(a)(1). A board member of an appraisal district is a "local public official" for purposes of chapter 171. Id. § 171.001(1); Attorney General Opinion JM-1060 (1989). A person has a "substantial interest" in a business entity if he owns "10 percent or more of the voting stock or shares of the business entity"

2. Chapter 171 preempts the common law of conflicts of interest as applied to local public officials. Local Gov't Code § 171.007(a); see also Attorney General Opinion JM-424 (1986). Also, a member of the board of an appraisal district must comply with both chapter 171 of the Local Government Code and section 6.036 of the Tax Code. See Tax Code § 6.036(f) (section 6.036 does not limit application of any other law).

or owns either 10 percent or more or $5,000 or more of the fair market value of the business entity or if "funds received by the person from the business entity exceed 10 percent of the person's gross income for the previous year." Local Gov't Code § 171.002(a)(1). You have not provided sufficient information for us to know whether the board member in question has a substantial interest in a business entity that is involved in a real estate transaction with the board.

If the board member does have such an interest, the board member must comply with section 171.004, which provides:

(a) If a local public official has a substantial interest in a business entity or in real property, the official shall file, before a vote or decision on any matter involving the business entity or the real property, an affidavit stating the nature and extent of the interest and shall abstain from further participation in the matter if:

(1) in the case of a substantial interest in a business entity, the action on the matter will have a special economic effect on the business entity that is distinguishable from the effect on the public; or

(2) in the case of a substantial interest in real property, it is reasonably foreseeable that an action on the matter will have a special economic effect on the value of the property, distinguishable from its effect on the public.

(b) The affidavit must be filed with the official record keeper of the governmental entity.

(c) If a local public official is required to file and does file an affidavit under Subsection (a), the official is not required to abstain from further participation in the matter requiring the affidavit if a majority of the members of the governmental entity of which the official is a member is composed of persons who are likewise required to file and who do file affidavits of similar interests on the same official action.

See also id. §§ 171.006 (effect of violation), 171.005 (separate vote required on matter in which member of governing body has substantial interest). We note that Attorney General Opinion JM-379 (1985) indicated that "participation" in a matter included deliberation with the board about the matter.

Because chapter 171 of the Local Government Code preempts the common law of conflicts of interest as applied to local public officials, we need not consider whether the common law would prohibit the transaction in question. Local Gov't Code § 171.007(a); see also Attorney General Opinion JM-424 (1986).

SUMMARY

Whether chapter 171 of the Local Government Code or section 6.036 of the Tax Code prohibits a member of the board of directors of an appraisal district from acting as a real estate agent for a vendor who sells real property to the appraisal district depends on the facts of the specific transaction.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Sarah Woelk
Assistant Attorney General