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Section 3: Leasing Policy

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Requests to Lease

A person desiring to lease a highway asset shall submit a request through TxDOT's website or by any other manner. Inquiries not directly received by ROW Real Estate Services Section (RES) must be forwarded to RES for processing.

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Term

TxDOT will make a determination of the recommended term for leases. The law mandates that leased property interest is not needed for a highway purpose for at least the term of the lease. Leases that have a primary term of two years or less, or that include a cancellation provision that is two years or less, may be approved by the ROW Division Director. All other leases are required to be submitted to the Commission for approval. TxDOT's long term planning period is twenty years; therefore, lease terms should not extend beyond twenty years. However, there are situations where there will be construction of substantial improvements under a lease that may require an exception to this. The Commission at its sole discretion may approve a lease of any term.

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Survey

Once TxDOT determines that a property can be leased, the area needs to be specifically identified by a legally sufficient property description. When necessary the property description should include a sketch with the survey calls and should show the relationship and distances of the lease area to the highway. The identified leased area will serve as the basis for the appraisal or valuation, as the property description in the lease and, if the lease requires Commission approval, as an exhibit in the minute order. The survey is to be provided by the lessee, at the lessee's expense, and will need to be reviewed and approved by TxDOT prior to its incorporation, unless TxDOT already has a property description.

A proposed lessee of real property may contract and make payment directly with a licensed surveyor. TxDOT may assist the requester with selection of the surveyor and should provide the requester with instructions to the surveyor to assure the work product is compatible with TxDOT requirements. The proposed lessee is responsible for the full survey cost.

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Appraisal / Valuation

The consideration for a lease must be for at least fair market rental value. Appraisal is merely a component of determining fair market value of the real property and is not necessarily the dispositive factor in the determination. If the commission finds it to be in the public interest, the commission may waive the fair market value requirement for a lease to a public utility provider or an institution of higher education as defined by the Education Code, Section 61.003, or for social, environmental, or economic mitigation purposes.

A proposed lessee of real property may contract and make payment directly with a TxDOT approved appraiser. TxDOT may assist the requester with selection of the appraiser and should provide the requester with instructions to the appraiser to assure a valuation work product compatible with TxDOT requirements. The proposed lessee is responsible for the full appraisal cost.

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Methods of Awarding Leases

TxDOT may, in its sole discretion, award a lease by any method it determines to be in its best interest including but not limited to:

RES will analyze identified surplus property that may be leased to determine the most effective method of award. Considerations may be, but are not limited to, value of property, number of abutters, number of interested parties, potential uses, lease term, market analysis.

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Preparation of Lease Forms

TxDOT is responsible for drafting lease agreements using TxDOT's standard forms.

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Insurance and Bonds

Each lease requires the lessee to carry commercial general liability insurance insuring against injury and damage during the lease term. Depending on the use, the lessee may be required to carry additional insurance such as environmental or liquor liability. Specific coverages are described in the liability insurance provisions in the lease. All liability insurance policies must be with companies licensed by the Texas Department of Insurance and must include the following endorsements:

The lessee must furnish TxDOT with a certificate of insurance providing the required coverage.

If improvements will be constructed under a lease, the lessee may be required to furnish TxDOT with a surety bond as security to ensure that, upon expiration of the lease, the lessee will fulfill its obligation to remove the improvements. The amount of the bond should be for the cost of removing the improvements as estimated by TxDOT.

RES will receive and maintain the certificate of insurance and surety bond information that is provided.

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Lease Management

Once the lease is executed and is in effect, TxDOT is responsible for managing the lease to ensure all required documents are in compliance and that the lessee honors all obligations outlined in the lease.

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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 RES in writing.

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, TxDOT 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 TxDOT deems necessary to facilitate its approval.

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Lease Extensions and Amendments

A lease may be extended, provided that the property is not needed for highway purposes during the term of the extension.

The rental value must be reevaluated if at least five years have passed since the last evaluation; unless the lease contains a rent schedule with escalations.

There are occasions when circumstances change and a lease must be amended, contact RES for guidance.

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Rental Payments and Collection for Non-Payment

The Finance Division is responsible for receiving all rental payments for leases.

All rental payments should be deposited immediately upon receipt, into Fund 6 with reference to the lease number and object of revenue code 3746, and department code 550087. The Finance Division shall provide reports to RES of payments received and delinquent accounts.

The Finance Division will be responsible for collection activities such as Notice of Non-Payment Letters. The Finance Division and RES will coordinate on collection activities to include referral to the Office of the Attorney General.

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