Charter Schools Temporarily Given Priority to Lease or Purchase District Surplus Property

August 2012

The law governing the manner in which school districts in California may lease or sell surplus real property has been temporarily changed, giving a priority to charter schools in certain situations.

On June 27, 2012 the Governor signed SB 1016 in conjunction with the passage of the 2012 California Budget.  SB 1016 requires school districts seeking to sell or lease certain surplus real property to first offer such a sale or lease to any charter school who has submitted a written request for such notification.  This provision will become inoperative on June 30, 2013.

This priority for sale or lease applies only to real property which:

·        Has been declared surplus property by the District after July 1, 2012;

·        Is "designed to provide instruction or instructional support."

If a charter school submits a written request for notification of a sale or lease of surplus real property, the district must provide such notice.  The charter school must respond within 60 days notifying the district of its intent to purchase or lease the property.  If more than one charter school provides such notice, the school district may determine to which charter school to sell or lease the property. 

A charter school who purchases or leases property under this new law may only use the property to provide direct instruction or instructional support.  If the property is purchased, this restriction lasts five years.  If the property is leased, this restriction ends upon the earlier of five years, or the return of the property to the district (as a practical matter, the terms of the lease would also govern the use of the property).  If a charter school fails to comply with this use restriction, it may forfeit the property and be liable for damages and attorneys fees incurred by a district.

SB 1016 also imposes restrictions on the price for which a district can sell or lease such property.  If real property is sold to a charter school, the maximum sales price may not exceed the district's cost of acquisition and improvements on the property (as adjusted for inflation).  If real property is leased to a charter school, the lease price may not exceed 5% of the maximum sales price discussed above.

Although these changes significantly affect the manner in which a District can lease or sell real property, they are set to expire on June 30, 2013.

If you have any questions regarding the lease or sale of district real property or any other legal matter, please call one of our six offices.

F3 NewsFlash prepared by Paul G. Thompson and James R. Traber.

Paul  is a partner in the F3 Sacramento office.

James is an associate in the F3 Sacramento office.

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© 2012 Fagen Friedman & Fulfrost, LLP

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