How Should a Municipality in Texas Terminate an Easement?
The most important consideration for a city that desires to terminate an easement is to avoid retaining any interest in the land, which would create a “cloud” on the title of the real property. However, as an interest in real property, the easement cannot simply be “released” or “abandoned,” it must be conveyed or otherwise transferred to another party.
The city should comply with all the statutory requirements for a municipal sale of real property and execute and record a document that clearly states the city’s intention to sell, release, abandon, and terminate any interest in the land whatsoever. There are several different ways for an easement to be terminated, but all of them involve the transfer of an interest in real estate from one party to another. For that reason, it is important to execute and record a legal document that clearly identifies both the grantor and the grantee as parties to the transfer, describes by metes and bounds the property being conveyed, and makes it absolutely certain that the grantor (city) retains zero interest in the conveyed property.
The recorded document terminating an easement is most commonly titled a “release of easement;” however, as stated above, the real property interest cannot just be released but must be released to another party, usually the owner of the property that is subject to the easement. And the transfer of an interest in real estate from one party to another sounds like a sale. So is a release of easement actually a sale? Answer: probably. The Internal Revenue Service says it is and it would be difficult to argue otherwise. Therefore, to be safe, a Texas city wishing to release an easement should treat it as a sale of real property and follow the rules and procedures governing those transactions.
What If the Easement is a Narrow Strip of Land?
If the easement is a roadway, there are two chapters in the Texas Local Government Code that may apply to the sale of that easement. Chapter 253 provides that “the governing body of a municipality may sell and convey land or an interest in land that … is an abandoned part of a street or alley.” A sale of real property under chapter 253 must comply with several specific requirements, including the adoption of an ordinance directing the city’s mayor or city manager to execute the conveyance and the use of the proceeds from the sale to acquire and improve property for the purposes for which the sold property was used. In other words, the money earned from the sale of the roadway would have to be used to purchase another roadway or easement. Due to the restrictive nature of this provision in the statute, a city should probably elect to sell its easement under the provisions of Chapter 272 whenever possible.
Generally speaking, if a city wishes to sell land under Chapter 272 of the Texas Local Government Code, it must do so either by public auction or after notice and competitive bidding, and at fair market value as determined by an appraisal or auction. However, there are some exceptions. The notice and bidding requirements do not apply to certain types of land and other real property interests such as narrow strips of land, streets or alleys owned in fee or used by easement, etc.
If the notice and bidding requirement does not apply (e.g., for the sale of an easement), then the real property interest cannot be sold for less than fair market value unless the conveyance is with the adjacent property owner(s) who own the underlying property. The real property can be sold to abutting property owners in the same subdivision (if the land has been subdivided); or abutting property owners in proportion to their abutting ownership (the division must be equitable).
If the sale is not to the adjacent property owners, then the easement must be sold for fair market value. Fair market value can be determined by public auction or appraisal. If the city chooses to have the property appraised, the cost of any streets, utilities or other improvements constructed or to be constructed may be considered as part of the fair market value. If the home-rule municipality wishes to determine fair market value by conducting a public auction, then it must publish notice of the auction on two separate dates, and the sale must not be until after the 14th day after the date of the second publication. The notice must include a description of the land (including its location), the date, time, and location of the auction, and the procedures to be followed at the auction.
How Can a City Close a Street?
It should be noted that the Texas Transportation Code provides that home rule municipalities are authorized to close a public street or alley; however, no particular procedure is required. A city ordinance could establish that procedure. Home rule municipalities could keep ownership of the street after closing it; however, the more common practice is for the city to sell the street, in which case the rules of Chapter 272 would apply.
Other Ways To Sell
Chapters 253 and 272 of the Texas Local Government Code also provides that a city may sell or convey real property without the requirement of notice or bidding for any of the following purposes: development of low income housing, community development under the federal Block Grant Non-entitlement program, the sale of property acquired by tax foreclosure, the sale of property to an institution of higher learning to promote a public purpose related to higher education, the sale of unimproved land for use by the juvenile board of the county, the sale of federal property, the sale of adjoining property to a municipal development corporation, or the sale of real property to another political subdivision.
Adoption of Ordinance
NOTE: In his Texas municipal law handbook, Alan J. Bojorquez says that whether the sale of land is made under Chapter 253 or 272, the city should adopt an ordinance directing the mayor or city manager to execute the conveyance, even though that statutory language is found only in Chapter 253.
Deed Without Warranty, Termination, Release and Abandonment of Easement
Since there are particular requirements for a city to sell an easement, and because a “release” of easement may, in fact, actually be a sale, the city should use a “belt-and-suspenders” approach to drafting the conveyance document. Specifically, the document should combine the elements of a deed without warranty, termination, release and abandonment of easement. A deed without warranty conveys whatever interest the city has in the property, including any and all easements, without any warranty of title. It is similar to a quitclaim deed (which conveys whatever interest the grantee has in the land, if any), but title companies will generally insure title to a deed without warranty, but not a quitclaim deed. The document should also declare that it is the sale and release of the described easement. And while it is not technically correct to “abandon” an easement with a recorded document, it may be helpful to include the term “abandonment” anyway.
The simplest and safest way for a city to terminate an easement is to adopt an ordinance directing the city manager to execute a Deed Without Warranty, Sale, Termination, Release and Abandonment of Easement in favor of the grantee, acknowledge it and record it in the county records.
Drew Shirley is a Houston attorney with experience in tort and business litigation and business and real estate transactions. Shirley graduated cum laude from Duke University, then received two advanced degrees – a master’s in journalism and a law degree – from the University of Texas at Austin. He joined the Randle Law Office in 2015.