One of our municipal clients recently asked whether the town selectmen could lease town-owned real estate to a private business, without prior approval by the town meeting. No town charter or ordinance expressly gave the selectmen that authority.
This column is adapted from our answer to the town and is provided here for the benefit of other town managers and selectmen who may face similar questions.
The general rule in municipalities with a town meeting form of government is that the sale or transfer of municipally-owned real estate is a local legislative function. Unless the power to sell or transfer town-owned real estate is granted to the municipal officers by a local charter or ordinance, a town meeting vote approving the sale or transfer is normally required. In this respect, a town is “owned” by its voters, and not by the municipal officers.
Town meeting votes for this purpose can take several forms.
– The town meeting may be asked to approve a particular proposed transfer, often in the form of a real estate purchase and sale agreement, in which case the approval vote is limited to that transaction.
– The town meeting may instead vote to authorize the municipal officers to sell or dispose of a particular property, without regard to a proposed buyer or the particular terms of the sale. Authority in this form leaves the terms of the sale up to the municipal officers.
– Alternatively, the town meeting may be asked to approve an annual authorization, granting the municipal officers authority to sell or transfer any, all, or particular categories of town-owned real estate. Town meeting votes for this purpose are often limited to sale of tax- or other lien-acquired properties.
If any of the foregoing votes are by regular warrant article rather than by a vote approving a town ordinance, the authority granted by one annual town meeting is normally deemed to expire at the end of the fiscal year in which the vote is taken, or on the date of the next annual town meeting. This is why town meetings that give their selectmen authority to sell tax-acquired properties, for example, normally do so by a recurring article that appears on each year’s town meeting warrant.
Exception: Short-Term Leases and License Agreements
Short-term leases and license agreements are an exception to the general rule. In Maine, unless otherwise provided by a municipal charter or ordinance, the municipal officers (selectmen) of a town are responsible for management of town-owned properties, including properties held by the town in a solely proprietary capacity, such as unsold lots in a town-owned business park.
Management responsibility for town-owned properties includes the authority to approve short-term leases and license agreements for use of the town’s property by others. For example, if a private concert promoter wants to rent a town-owned park for a summer-long weekly concert series and the town has no written policies governing such use, the request would normally be considered and approved (or not) by the town selectmen, without a town meeting vote.
Other common examples include YMCA use of town-owned athletic fields; temporary outdoor art installations on a town commons; private fairs and circuses on town-owned land; a summer theater group’s seasonal use of a town-owned “opera house”; after-hours use of town-owned buildings by private social or civic groups; and a host of other private activities on town property. Such uses may also include temporary occupancy of vacant town-owned buildings by private businesses for retail, storage or production purposes.
To the extent that a short-term lease or license agreement can be characterized as “management” rather than “transfer” of a town’s property, approval is normally within the authority of the town’s selectmen and does not require a town meeting vote.
Drawing the Line
Maine’s statutes and case law are surprisingly unhelpful in defining what constitutes “management” versus “transfer” of town-owned property. Even Maine Municipal Association’s published “Municipal Officers’ Manual” provides relatively little guidance on this issue. So the advice given below has been developed as a matter of practice over a number of years, rather than as hard-and-fast legal rules.
Our advice generally is as follows:
(1) Actions or legal instruments that convey fee title or a long-term interest in real estate – a “real interest” or an “interest in land” as those terms are used by the real estate attorneys – require town meeting approval. Most town deeds (with some possible esoteric exceptions such as a deed releasing a future contingent interest or reciprocal release deeds to resolve a boundary line dispute) should be approved by the town meeting in one of the manners discussed above.
(2) Instruments and agreements that create multi-year tenancies should also be approved by a town meeting vote. Examples in this category include long-term land leases, e.g. 20 years, or annual leases of town property that are renewable for a multi-year term at the sole discretion of the lessee.
(3) Short-term leases, i.e. leases for periods of less than a year, that are not recorded at the local registry of deeds and that are not renewable by the lessee, are, in our opinion, within the approval authority of the municipal officers, without a town meeting vote. Leases of less than a year’s duration generally are not deemed to create an “interest in land”. A one year limitation on the duration of such agreements also preserves the right of the town to recover use of the property concerned for other town purposes, on a regular basis.
(4) Leases, license agreements and tenancies at will that are terminable by the municipality on short notice (e.g., 30, 60 or 90 days) without preconditions such as a breach by the lessee or licensee, also do not require a town meeting vote. For example, a lease or license agreement may state that the term of the agreement is for several years, but if the agreement also includes language that gives the municipality an unrestricted right to terminate the agreement at any time, for any reason, it normally should be considered as short term “management” of the property concerned.
This column summarizes our firm’s general approach on this issue. However, in any particular situation, the town charter (if any), town ordinances and the proposed agreement should all be reviewed to determine where local approval authority lies.
Municipal selectmen also need to take care not to violate the self-dealing prohibitions of 30-A MRSA sec. 2605 or of any local ethics ordinance or policy adopted by the town. For example, even if the town meeting has given the selectmen authority to sell town-owned real estate, an agreement to sell town property to one of the selectmen is void under sec. 2605 unless the sale is the result of an advertised bid procedure and the selectman concerned publicly discloses his/her interest and abstains from all of the selectmen’s votes relating to the sale.
Finally, even if the selectmen have approval authority over a particular proposed agreement, it may be politically prudent to refer the agreement to the town’s voters for approval anyway, especially if the proposal is controversial, or involves competing bids for the same property.