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Section 13: Lease Management

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Overview

Once the lease is executed and is in effect, the department is responsible for managing the lease, which includes the following:

  • Set up a tracking file to monitor that rental payments for each lease are being made on time.
  • Set up a tracking file for insurance certificates and surety bonds to monitor that they are being renewed and provided to TxDOT before their expiration, usually on an annual basis. A copy of each renewal should be forwarded to the ROW program office in Austin.
  • Review and approve construction plans for improvements to be constructed within the lease area.
  • Review and approve plans for on-premise signs.
  • Inspect the lease area thirty days after the commencement of the lease, during and upon completion of construction and at least once per year thereafter. This inspection may consist of a "windshield" inspection, unless otherwise necessary.
  • Reevaluate the rental value every five years in accordance with the terms of the lease to verify that TxDOT is receiving fair market value.
  • In the event of default (e.g., non-payment of rent or failure to renew the required insurance), a written notification should be sent to the lessee in accordance with the default provisions in the lease. These provisions normally allow for a ten-day period to cure any monetary default (which includes failure to provide insurance) and thirty days to cure any non-monetary default - with the exception of an emergency situation.
  • The notification referenced above will state that the lease will be cancelled if the default is not cured within the time specified in the lease. If the default is not cured within this time, the lease should be cancelled by sending written notification of such cancellation to the lessee.
  • Usually within three to six months before the expiration of a lease, the department should notify the lessee in writing of the impending expiration and describe any necessary requirements for the lessee to meet its obligation to leave TxDOT's property in good repair and condition.
  • If the lessee constructed improvements within the lease area and he will be required to remove them upon expiration of the lease, the department must notify the lessee in writing of such requirement within the time specified in the lease.
  • If the lessee requests to continue the lease, and the department determines that the leased property is surplus to TxDOT's needs, then the lease can be extended in accordance with procedures described below.
  • Notify the ROW program office in Austin when a lease needs to be amended, cancelled, or terminated.

All approvals and notifications referenced above must be in writing and signed by the District Engineer or designee.

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Assignments and Subleases

TxDOT's leases allow the lessee to sublease or assign a lease upon the written approval of TxDOT.

Any request for a sublease or assignment must be submitted to the department in writing.

The Form ROW-L-1, Sublease Approval Letter, is available.

The approval of an assignment should be in the form of a letter.

The District Engineer should sign both the approvals of a sublease and an assignment.

The approval of a sublease always requires that the lessee remain fully responsible for all terms, conditions and obligations under the lease. Under an assignment, the department may require the lessee to do the same or may release the lessee from the obligations under the lease. This decision should be made with consideration of the reputation and financial strength of the assignee.

The lessee and/or proposed assignee may be required to furnish any information that the department deems necessary to facilitate its approval.

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Lease Extensions and Amendments

As referenced above, a lease may be extended, provided that the property is surplus to TxDOT's needs during the term of the extension. The following are procedures for extending a lease:

  • The Area Engineer, District Design Engineer, and Maintenance Engineer should all be consulted when determining (1) whether the property is surplus and (2) the term length of the proposed extension.
  • The rental value must be reevaluated if at least five years have passed since the last evaluation. If the rental value will change, submit a Form ROW-L-10 with supporting data. If the value will not change, provide a supporting review.
  • Complete the Form ROW-L-5, Extension of Lease.
  • The department should submit three originals (signed by the lessee) and the approved value form to ROW program office in Austin for review and processing.

Upon review and approval, the ROW program office in Austin will coordinate execution of the lease extension by TxDOT and return two originals to the department. As with leases, the department should retain one original for its records and return one to the lessee.

There rare occasions when circumstances change and a lease must be amended, contact the ROW program office in Austin for guidance.

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