FI0625 – Lease of Real Property by or to the University
|General Policies||Lease Agreements When The University Is Lessee|
|Lease Agreements When The University Is Lessor||Contacts|
To provide guidelines to university officials who are involved in the lease of real property by or to the university.
- In 1978, the General Assembly enacted a law which requires that certain leases by or to the state or any of its agencies and institutions be approved by the State Building Commission and the State Attorney General. The provisions of this law are applicable to the University of Tennessee. Accordingly, the following policies and procedures apply with respect to all real property leases coming within the scope of this law.
- Effective March 13, 1989, the State Building Commission adopted the revised policy that all leases requiring the approval of the State Building Commission, including those for institutions of higher education, comply with the requirements of the State of Tennessee Policy Regarding Advertiseable State Leases of Real Property and the Special Policy of State Building Commission to Provide Early Review of Higher Education Lease Proposal Actions.
These policies required that leases with consideration of more than $15,000 per year or a term greater than five years be reviewed and approved by the Tennessee Department of Finance and Administration, the Tennessee Higher Education Commission, and the State Building Commission prior to any action by the university to lease real property. When the university requests this review and approval, documentation of space needs, funding sources for lease payments, and lease proposal documents or unique space justification need to be submitted.
Any questions concerning applicability of the 1978 Act or State Building Commission policy to any proposed lease arrangement should be referred to the Office of the General Counsel.
The review of higher education leases is required for all proposed real property leases with annual consideration of more than $15,000 or a term greater than five years. Specific required approvals are as follows.
- All leases involving annual consideration of more than $15,000 but less than $50,000 shall be submitted for approval to the Department of Finance and Administration and the Tennessee Higher Education Commission prior to any leasing action by the university.
- All leases involving annual consideration of more than $50,000 or a term of longer than five years shall be submitted to the Department of Finance and Administration and the Tennessee Higher Education Commission for approval and recommendation to the State Building Commission Executive Sub-Committee. The approval of the Executive Sub-Committee is required prior to any leasing action by the university. Leases approved during the annual budget review process with the Tennessee Higher Education Commission will not require approval of the State Building Commission Executive Sub-Committee.
Any real property lease agreement that falls within the above classifications will be invalid unless the required approvals have been obtained.
- The necessity of obtaining the additional approvals of state officials may be avoided by ensuring, whenever possible or practicable, that real property lease agreements are negotiated for a term of five years or less and for an annual consideration of $15,000 or less.
- The remainder of this policy addresses procedures to be followed for leases subject to the above approval requirements. Leases determined not to be subject to these requirements will be handled in the same manner as routine contractual agreements (i.e., that leases should be submitted through normal contract review channels to be executed by the chief financial officer (or designee).
Drafting the Lease Agreement
- After the terms of the proposed lease of university property have been determined through appropriate negotiations, the campus chief business officer or campus contract officer should provide the Office of the General Counsel with a draft of the lease for review prior to preparation of the final draft of the proposed lease agreement. If desired, the General Counsel's Office will prepare the lease, provided that full information regarding the proposed arrangement is submitted.
Reviewing the Lease Agreement
- Upon completion of the drafting of the proposed lease, the general counsel will arrange for appropriate review by the chief financial officer (or designee), the treasurer, and the director of campus planning. After these reviews, the General Counsel's Office will return the lease agreement to the campus chief business officer or contract officer to obtain the lessee's signature on the original and two copies of the agreement.
Executing the Lease Agreement
- After execution of the agreement by the lessee, the chief business officer or contract officer will return the original and two copies to the chief financial officer (or designee) who will execute the agreement on behalf of the university and forward it through appropriate channels for the required approvals of the state.
Distributing the Executed and Approved Agreements
- When the approved lease agreement is returned to the university, the original will be transmitted for appropriate notation and recording to the university general counsel who, in turn, will forward it to the Treasurer's Office for placement in the permanent document files. In addition, one executed copy will be placed in the permanent document files; one executed copy will be transmitted to the lessee; and one executed copy will be returned to the originating campus or division, where additional copies will be distributed locally as required.
Advance Determination of Needs
- When it is necessary for the university to lease office space or other real property from outside vendors, the chief financial officer (or designee) must be notified nine months in advance of the date the property is needed. The notification should include documentation of space needs, funding source for lease payments, and unique space justification if appropriate (see 14 below). The financial officer (or designee) will refer the notification to the treasurer (or designee) and other appropriate staff for providing instructions and guidance to campus or unit officials on securing needed real property. Upon receiving notification of need for office space or other real property to be leased by the university, the treasurer (or designee) will initiate the correspondence and documentation required to solicit state approvals.
Determining Suitable Real Property to be Leased
- Upon securing the required state approvals, the treasurer (or designee) will forward to the campus or unit (1) a copy of the current state requirements for advertising and soliciting proposals from potential lessors and (2) current forms. The purchasing department that serves the campus or unit will be responsible for handling the advertisements and proposal solicitation in accordance with state requirements. Appropriate campus or unit officials should then participate in an evaluation of proposals. It is the responsibility of campus or unit officials to keep the treasurer (or designee) informed of the status of efforts to secure space through lease agreements.
Executing the Lease Agreement
After determination of the best acceptable lease proposal, a STANDARD FORM FOR LEASE (FORM T-55) should be completed in quadruplicate setting forth the agreed-upon terms. (Copies of FORM T-55 can be obtained from the Office of the Treasurer.) The terms of the lease agreement must be approved in advance by the treasurer (or designee), and deviations from the standard form lease agreement must also be approved in advance by the Office of the General Counsel. Campus or unit officials will then secure the signature of the lessor. Five copies of the lease agreement should be forwarded to the treasurer (or designee), who will process the lease for execution by the university and obtain the necessary state approvals. The following information must be forwarded with the lease agreement:
- Justification for needed space
- A statement identifying the source of funding to meet lease obligations
- A list of persons with financial interest in the property to be leased
- A barrier-free certification from lessor
- Documentation of advertisement and search for alternate space
- An analysis of lease proposals
- Blueprints of space to be leased
The information above is also required by the State Division of Facilities Management before leases will be submitted to the State Building Commission for approval.
Leases of Real Property Unique to University Program Needs
- If campus or unit officials desire to lease real property that is considered unique in satisfying program needs, documentation of the unique nature of the property should be forwarded to the chief financial officer (or designee). The financial officer (or designee) will then determine if the justification is adequate for submission to the State Building Commission for concurrence in the direct negotiation process. Upon approval, campus or unit officials will be authorized to negotiate the terms of a lease agreement with the lessor in lieu of space advertising and proposal solicitation.
- Based on the experience with such leases to date, a lead time of at least six months prior to the desired effective date of the lease must be allowed for obtaining the required official approvals. Prior to the approval of the State Building Commission and the state attorney general, the lease agreement shall not be binding on either party. Furthermore, no university official is authorized to commit university funds with respect to such a lease until the required approvals have been obtained. Accordingly, it is essential that space and other real property requirements which must be met through lease arrangements be determined as far in advance as possible.
Distributing the Executed and Approved Agreements
- When the approved lease agreement is returned to the university, the original and one executed copy will be retained by the Treasurer's Office for placement in the permanent document files; one executed copy will be transmitted to the lessor; and one executed copy will be returned to the originating campus or unit. The campus or unit business office will distribute copies locally as required.
|Health Science Center:||http://www.uthsc.edu/policies/w932_document_list.php?app=FSC|
|Institute of Agriculture:||https://ag.tennessee.edu/Pages/UTIApolicies.aspx|
Butch Peccolo (865) 974-2302 firstname.lastname@example.org