Can a Texas county lease out county-owned land with a renewal option, and can it skip competitive bidding?

Texas AG Opinion JM-1043: Can a County Lease Its Land With a Renewal Option, and Skip the Bidding?

Plain-English summary

Counties in Texas own land, and sometimes they lease it out. The Val Verde County Attorney ran into two questions about how that has to be done and put them to the Attorney General. The backdrop was a parcel of county land that had been leased to the same person since 1977 and used as a gun range. Over the years the lease had been renewed and extended several times, and the latest round was a brand-new five-year lease with a five-year extension option, handed out with no competitive bids. A neighbor had complained about the gun range, and the commissioners wanted to know whether they had done this correctly.

Question one was whether a commissioners court can write a lease that includes an option to extend. The Attorney General said yes. Section 263.001 of the Local Government Code lets a county lease its property, and a 1977 opinion (H-1025) had already concluded a county may lease its school lands on terms similar to those private citizens use, including a reasonable renewal option. That opinion leaned on a 1928 Texas Supreme Court case, Ehlinger v. Clark, which said nothing in the relevant constitutional provision stops a commissioners court from dealing with its land on ordinary commercial terms. The AG added a caution: an option is fine, but a lease with an unreasonably long term or extension could push past the county's authority.

A natural objection is that a long lease ties the hands of future commissioners courts. The AG answered that the rule against binding successors applies mainly to governmental functions, and leasing out county-owned real property is not one of those; it is more like an ordinary business decision, so a reasonable long-term lease is allowed.

Question two was whether the county could skip competitive bidding. Here the answer was no. Section 263.001 requires that a sale or lease of county property be made at a public auction, with published notice, unless a specific exception in chapter 263 applies. The county had not pointed to any exception. And the consequence of skipping the auction is serious: the AG cited authority that a disposition of county property made without the required public auction, and not falling within an exception, is void. So the renewal option was permissible, but the no-bid lease itself was on shaky ground.

Currency note

This opinion was issued in 1989. 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.

Chapter 263 of the Local Government Code, including section 263.001 and the exceptions in the surrounding sections, has been amended since 1989. Anyone dealing with a present-day county lease or sale of real property should check the current version of chapter 263 and its exceptions rather than rely on this 1989 analysis.

Who this opinion affected (as of 1989)

Commissioners courts: The opinion confirmed they could lease county land with a reasonable renewal option, but told them the lease had to go through the public auction process in section 263.001 unless a chapter 263 exception applied.

People and businesses leasing county land: The opinion warned that a lease granted without the required public auction, and outside any exception, could be void, which put the security of a no-bid lease in doubt.

Neighbors and the public: The opinion reinforced that county land dispositions are supposed to happen through an open, noticed auction rather than a private arrangement.

Common questions

Can a Texas county lease its land with an option to renew?
Yes, within reason. The AG concluded section 263.001 of the Local Government Code lets a commissioners court lease county property and include a reasonable option to extend, though an unreasonably long term or extension could exceed the county's authority.

Does a long-term county lease illegally bind future commissioners courts?
No. The AG concluded the rule against binding successor courts applies mainly to governmental functions, and disposing of county-owned real property is not a governmental function, so a reasonable long-term lease is allowed.

Can a county skip competitive bidding on a lease of its land?
Generally no. The AG concluded the lease must be made at a public auction under section 263.001 unless a specific exception in chapter 263 applies, and a disposition made without the required auction, and not within an exception, is void.

Background and statutory framework

The request came from the Val Verde County Attorney and concerned a parcel of county-owned land that had been leased to the same individual since 1977 and used as a gun range. After a chain of leases and option extensions, the commissioners court had entered a new five-year lease with a five-year extension option, with no competitive bids announced. The AG noted at the outset that fact questions cannot be resolved in the opinion process, so its recitation of the facts was only the basis for the opinion, not an affirmation of them.

On the first question, the AG concluded a commissioners court may lease county-owned property and may include a reasonable option to extend. Section 263.001(a) of the Local Government Code provides that the commissioners court, by an order entered in its minutes, may appoint a commissioner to sell or lease county-owned real property, and that the sale or lease must be made at a public auction held in accordance with the section unless the chapter provides otherwise. As the AG explained in a footnote, these provisions were codified from former article 1577 of the Civil Statutes in 1987 (Acts 1987, 70th Leg., ch. 149, at 707, 1035); before a 1973 amendment (Acts 1973, 63rd Leg., ch. 499, at 1329), article 1577 provided only for the "sale or disposal" of county property, and earlier opinions (M-799 (1971) and V-1085 (1950)) had concluded that authority did not include leasing. Attorney General Opinion H-1025 (1977) had addressed a lease of county school land for a five-year period with a five-year renewal option and concluded a county may lease its school lands on terms similar to those made by citizens generally, including a reasonable option to extend. That opinion quoted Ehlinger v. Clark, 8 S.W.2d 666, 671 (Tex. 1928), where the court, considering a county oil lease on school land with a renewal clause, said nothing in the constitutional provision involved limited the commissioners court's right to deal with its mineral estate on terms similar to those made by citizens generally. The AG therefore concluded a county may lease its property under section 263.001 with a reasonable option to extend, without passing on the validity of any particular lease terms.

Addressing the concern that such an agreement would bind future courts, the AG reasoned that restriction applies at best only to governmental functions of a political subdivision, and that disposition of county-owned real property is not such a governmental function. See Attorney General Opinion JM-908 (1988); City of Big Spring v. Board of Control, 404 S.W.2d 810 (Tex. 1966); Gulf Bitulithic Co. v. Nueces County, 11 S.W.2d 305 (Tex. Comm'n App. 1928, judgm't adopted). The AG cautioned, however, that a lease with an unreasonably long term or extension period, or other unreasonable terms, might lead a court to conclude the county had exceeded its authority. In a further footnote, the AG noted the provisions authorizing counties to dispose of school land in H-1025 and Ehlinger did not explicitly include the authority to lease, but that authority had been inferred (Falls County v. De Laney, 11 S.W. 492 (Tex. 1889)), citing also Tex. Const. art. VII, § 6, and what is now section 17.82 of the Education Code.

On the second question, the AG concluded a commissioners court may not grant a lease of this type without complying with the public auction requirements of section 263.001. Reading the county's reference to "competitive bidding" as meaning the public auction requirement, the AG pointed to the second sentence of subsection (a), requiring that the sale or lease be made at a public auction held in accordance with the section unless the chapter provides otherwise, and to subsection (b), requiring publication of notice of the auction. The county had not indicated the property was subject to any exception, such as section 263.002 (alternatives for abandoned seawall or highway property). The AG found ample authority for the rule that a disposition of county property not made in compliance with the public auction requirements of what is now section 263.001, and not within an exception under chapter 263, is void, citing Hardin County v. Nona Mills Co., 112 S.W. 822 (Tex. Civ. App. 1908, no writ), and Jack v. State, 694 S.W.2d 391 (Tex. App.—San Antonio 1985, writ ref'd n.r.e.).

Citations

Cases:

• Ehlinger v. Clark, 8 S.W.2d 666 (Tex. 1928) (county may deal with its land on terms similar to citizens generally, including a reasonable renewal option)
• City of Big Spring v. Board of Control, 404 S.W.2d 810 (Tex. 1966) (limits on binding successor bodies apply to governmental functions)
• Gulf Bitulithic Co. v. Nueces County, 11 S.W.2d 305 (Tex. Comm'n App. 1928, judgm't adopted)
• Falls County v. De Laney, 11 S.W. 492 (Tex. 1889) (authority to lease inferred from disposal authority)
• Hardin County v. Nona Mills Co., 112 S.W. 822 (Tex. Civ. App. 1908, no writ) (disposition without required public auction is void)
• Jack v. State, 694 S.W.2d 391 (Tex. App.—San Antonio 1985, writ ref'd n.r.e.) (same)

Statutory authority:

• Local Gov't Code § 263.001 (sale or lease of county real property at public auction)
• Local Gov't Code § 263.002 (alternatives for abandoned seawall or highway property)
• Local Gov't Code ch. 263 (exceptions to the public auction requirement)
• Former V.T.C.S. art. 1577 (Acts 1987, 70th Leg., ch. 149, at 707, 1035; Acts 1973, 63rd Leg., ch. 499, at 1329)
• Tex. Const. art. VII, § 6; Education Code § 17.82 (county school land)

Prior Attorney General opinions:

• Attorney General Opinion H-1025 (1977) (county may lease school land with a reasonable renewal option)
• Attorney General Opinion JM-908 (1988) (disposition of county real property not a governmental function)
• Attorney General Opinions M-799 (1971) and V-1085 (1950) (pre-1973 authority to "sell or dispose" did not include leasing)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1043
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1043.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; garbled case names have been corrected against the cited reporters; the linked PDF is authoritative.

THE ATTORNEY GENERAL OF TEXAS

May 1, 1989

Honorable Carmen Rivera-Worley
Val Verde County Attorney
207 Losoya Street
Del Rio, Texas 78840

Opinion No. JM-1043

Re: Whether a commissioner's court may enter into a lease with an option to extend, and related questions (RQ-1558)

Dear Ms. Rivera-Worley:

You ask:

1. Can [a] Commissioners Court enter into a lease coupled with an option to extend the lease?

2. May Commissioners Court grant a lease where there was no advertisement for competitive bidding?

Your request indicates that these questions arose in connection with the following factual circumstances. In 1977, an individual was granted a lease on a certain parcel of county-owned land in Val Verde County, with an option to extend the lease after the initial lease term. The lease term ran out in 1980, and the option was exercised. In 1982, the lease extension under the option expired and the commissioners court authorized the county judge to "advertise for bids" to lease the property. The same individual who had previously held the lease was granted the new lease, for a five year term with an option to extend for an additional five years. In 1987, the lessee announced that he would exercise his option to extend the lease for another five years. However, you state that instead of the existing lease being extended under the option at this time, a new lease was entered into, again for a five year initial term with an option to extend for another five years. "There were no competitive bids announced for this new lease."

The individual leasing the land has used the land for a gun range and an owner of nearby property has complained to the commissioners about the hazards posed by the gun range. The commissioners agreed to approve the lease, on the understanding that you would make this opinion request.

We note at the outset that fact questions cannot be determined in the opinion process. Our recitation of the facts you present is in no way an affirmation of their veracity, but is only a statement of the basis on which this opinion is rendered.

I.

In response to your first question, we conclude that a commissioners court may lease county-owned property and that such agreement may include a reasonable option to extend the lease.

Section 263.001 of the Local Government Code provides for the sale or lease of real property owned by the county. Subsection (a) of section 263.001 states:

The commissioners court of a county, by an order entered in its minutes, may appoint a commissioner to sell or lease real property owned by the county. The sale or lease must be made at a public auction held in accordance with this section unless this chapter provides otherwise.[1]

Whether the authorization to lease county property includes the authorization to include in the lease provisions an option to extend the lease at the end of the initial lease term was addressed in Attorney General Opinion H-1025 (1977). The issue in that opinion arose with respect to the leasing of county school land for a five year period with an option to extend for an additional five year period. The opinion concluded that "a county may lease [its] school lands upon terms similar to those made by citizens generally, including a reasonable option to extend the lease period." In support of its conclusion, the opinion quoted the following language from Ehlinger v. Clark, 8 S.W.2d 666 (Tex. 1928), where the court considered the granting by a county of an oil lease on its school land, which agreement contained a "renewal" clause authorizing the lessee to defer commencement of drilling for twelve months upon payment of a certain sum:

There is nothing in the constitutional provision here involved which in the remotest degree limits the right of the commissioners' court to make a sale of its mineral estate upon terms similar to those made by citizens generally.[2]

8 S.W.2d 666, at 671.

Accordingly, we conclude that a county may lease county property pursuant to section 263.001 of the Local Government Code and that such lease may include a reasonable option to extend. We do not, however, here pass on the validity of any particular lease or option provisions.

It might be urged that a commissioners court could not make an agreement of this sort, which would be binding on future courts. However, we think such restriction applies in Texas at best only to governmental functions of a political subdivision such as a county, and that disposition of county-owned real property is not such a governmental function. See, e.g., Attorney General Opinion JM-908 (1988); cf. City of Big Spring v. Board of Control, 404 S.W.2d 810 (Tex. 1966); Gulf Bitulithic Co. v. Nueces County, 11 S.W.2d 305 (Tex. Comm'n App. 1928, judgm't adopted). We do caution, that were a court to find that such a lease had been entered into for an unreasonably long term, or with an unreasonably long extension period under an option provision, or subject to other unreasonable terms, it might well conclude that the county had thereby exceeded its authority. See Attorney General Opinion H-1025 (1977).

II.

In response to your second question, we conclude that a commissioners court may not grant a lease of this type without compliance with the public auction requirements of section 263.001 of the Local Government Code.

We presume that by the reference to "competitive bidding" in your question you mean the "public auction" requirements of section 263.001, which section provides in the second sentence of subsection (a) that "[t]he sale or lease must be made at a public auction held in accordance with this section unless this chapter provides otherwise." Subsection (b) provides for the publication of notice of the auction.

You do not indicate that the property in question is subject to an exception to the public auction requirement under chapter 263. (See, e.g., section 263.002, providing alternatives to the disposition by public auction for abandoned seawall or highway property.)

We find ample authority for the rule that a disposition of county property not made in compliance with the public auction requirements of what is now section 263.001, and not falling within an exception to these requirements under chapter 263, is void. See, e.g., Hardin County v. Nona Mills Co., 112 S.W. 822 (Tex. Civ. App. 1908, no writ); Jack v. State, 694 S.W.2d 391 (Tex. App. - San Antonio 1985, writ ref'd n.r.e.).

SUMMARY

The authorization in section 263.001 of the Local Government Code for a county to lease county property, includes the authority to include in the agreement an option to extend the lease on reasonable terms. Such lease must be made in compliance with the public auction requirements of that section, unless the transaction is subject to an exception under chapter 263 to the public auction requirement.

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

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General

Footnotes

1. Prior to their codification in the Local Government Code in 1987, these provisions appeared in article 1577 of the Civil Statutes. Acts 1987, 70th Leg., ch. 149, at 707, 1035. Until 1973, article 1577 provided only for the "sale or disposal" of county-owned real property. Acts 1973, 63rd Leg., ch. 499, at 1329. Several opinions of this office had concluded that the authorization in article 1577 prior to 1973, to sell or dispose of property, did not include the authorization to lease such property. See Attorney General Opinions M-799 (1971) and V-1085 (1950).

2. Notably, the provisions authorizing the county to dispose of school land under consideration in Attorney General Opinion H-1025 and in Ehlinger did not explicitly include the authorization to lease such land; but the authority to lease had been inferred from those provisions in Falls County v. De Laney, 11 S.W. 492 (Tex. 1889). See Tex. Const. art. VII, § 6, and the provisions of what is now section 17.82 of the Education Code.