ISSUES TO CONSIDER WHEN REAL ESTATE IS NO LONGER USED FOR SCHOOL PURPOSES
October 8, 2019
In a previous Legal Update, we discussed school boards’ authority in school district real estate transactions, including in situations in which a common school district or union high school district sells real estate no longer needed for school purposes. Specifically, we explained that the power to sell such real estate rests with the school board, as opposed to the electors. This article focuses on additional considerations that arise when a school district decides to sell or abandon real estate that it no longer needs for school purposes. In particular, it is important for a school district to examine the original real estate documents early on in the process to determine its ownership rights.
Historically, it was common for property owners to transfer property to a school district for use as a school site, but to include certain language reserving a future interest in the original owner (grantor) or his or her heirs. The specific language included in property transfer documents is critical in determining the implications of that language.
For instance, if a deed contains language that “the land is to be used and held for the site of a schoolhouse and whenever the use ceases the land shall revert to the grantor,” this will likely be classified as a “fee simple determinable with a possibility of reverter.” Saletri v. Clark, 13 Wis. 2d 325, 108 N.W.2d 548 (1961). Under this form of a future interest, title to the property automatically reverts to the grantor (or his or her heirs) once the property is no longer used for the specified purpose. There are still practical difficulties that must be addressed, however. For instance, it may be difficult to locate the original grantor and his or her heirs. In addition, even if they can be located, it is likely that additional documentation will need to be recorded with the local Register of Deeds as evidence that the title has changed hands.
By contrast, if a deed contains language that allows the original grantor (or his or her heirs) to re-enter the property upon the happening of a specified condition, such as that it is no longer used as a school site, this will likely be classified as a fee simple subject to “condition subsequent.” Id. Under this form of a future interest, the school district would continue to hold title to the property unless and until the original grantor (or his or her heirs) takes some action to regain possession of the property. Therefore, this form of a future interest differs from the future interest described above in that title to the property will not automatically revert upon the happening of the specified condition. There are also practical difficulties associated with this type of future interest. For instance, if the original grantor (or his or her heirs) does not come forward to reclaim the property, the school district may need to take additional steps to resolve issues with the title before being able to sell the property.
It is also possible for a school district to be occupying property based on a lease, rather than a deed. For instance, if the original document contains language such as “let, demise, and lease,” and is signed by both parties, as lessor and lessee, it is likely a lease. Ludtke v. Compound Sch. Dist. No. 5, Town of Lima, Rock Cty., 246 Wis. 235, 16 N.W.2d 562 (1944). If the original document is a lease, it is important to review the terms of the lease to determine whether it has terminated. If the lease has terminated, the original lessor (or his or her heirs) may be entitled to possession of the property. It may be necessary to record a lease termination agreement, or another form of notice, to clear the title for the property.
In all of the foregoing situations, school districts must also be mindful of the requirement that “[i]f a school site or other lands are to be abandoned which were acquired or are held upon condition that they revert to the prior owner when no longer used for school purposes, the school board shall sell any school buildings thereon or move them to another site within 8 months after the school buildings cease to be used for school purposes or the site ceases to be maintained as a school district playground or park.” See Wis. Stat. § 120.13(19m). Additional requirements apply if the property has been designated as a “historic property.” See Wis. Stat. § 120.12(21)(a).
Given the potential issues that can arise when selling or abandoning school district property no longer needed for school purposes, it is important to review the title for the property early on in the process. For instance, a letter report from a title company is a good place to start. If the letter report shows potential concerns or conditions related to the title for the property, it is likely that the school district will need to follow additional steps to resolve the title issues before it can sell or abandon the property.
For questions regarding this article, please contact the author, Attorney Jenna E. Rousseau (email: firstname.lastname@example.org; telephone: 844.833.0828), or your Strang, Patteson, Renning, Lewis & Lacy, s.c., attorney.
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