Underwriting Manual: School Property, Acquisition And Disposition Of

State Supplements

View state supplements to the national underwriting manual.

Underwriting Manual Subtopic

Private Schools

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A private school is one which is owned, supported and managed by a group of individuals or by a private corporation.

The powers and authority of persons or entity which controls a private school are either provided by statute or set out in its character or incorporation, trust agreement or internal rules of the religious denomination.

Absent any kind of statutory restriction private schools may acquire, encumber, lease or sell real property according to the provisions their charters, trust agreements or internal rules of denomination.

Underwriting Manual Subtopic

Public Schools

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A public school district is a subordinate agency, subdivision, or instrumentality of the state. It is not in itself a sovereign power, but is a creature of the legislature. All of its powers are expressly granted by or implied form state statutes.

In some states, school districts are treated as public or quasipublic corporations.

Acquisition of Real Property

School districts may be granted or delegated the authority to acquire property and construct facilities to be used for school purposes. School districts generally acquire property through the competitive bidding process or by deed, bequest, gift, condemnation, or some other like method. Even though actual ownership may rest with the state, title to school property may be placed with the local district or other political subdivisions as trustee.

Generally, the laws governing the acquisition of school property are the same as those controlling the acquisition of any property for public use. Even though the district and the state have absolute title to property, their title is not private title. It remains public property to be used by the public with only reasonable restrictions imposed by the state.

A school district has no inherent power of eminent domain. It can only exercise said power when authorized and in the manner expressed by the legislature. Generally, absent express authority, land already devoted to public use cannot be taken for school purposes.

The legislature itself has implied power to purchase land for a school site, and when authorized by statute, school districts or school boards or officers have also power to purchase lands for school purposes.

A conveyance of land to be held "as long as it is used for school purposes" creates a reversionary interest in the grantor or his heirs or assigns even though there is no express provision to that effect.

Sale of Real Property

School property can only be disposed of by express statutory authority.

State law establishes the proceedings to be followed and the requirements to be complied with in regard to the sale of school property.

In absence of statutory authority, a sale of public school realty is invalid. Under some statutes, school officials can only sell a school land when directed by public vote to do so.

Care should be exercised when school land is sold in determining that the former owner of the property did not retain a right of reversion in the land if the land ceased to be used for school purposes. Under either the terms of such conveyance or under some statutes, land reverts to the former owner when it ceases to be used for school purposes.

Underwriting Manual Subtopic

School Lands

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In 1784, the Continental Congress was able to negotiate the cession of the original 13 colonies’ ownership of the western lands to the federal government.  In order to manage the new land, 2 ordinances were adopted, the General Land Ordinance of 1785 and the Northwest Ordinance of 1787.

The General Land Ordinance of 1785 and the Northwest Ordinance of 1787 helped allow for the common practice of using land grants to support public education on large scale. The General Land Ordinance of 1785 created the rectangular survey system, a process for recording land patents to create a chain of title for the public land.  Every 36 square miles of land, called townships, were divided into 36 single square mile sections.  Section 16 of every township was reserved for the maintenance of public schools in the township.  Sections 8, 11, 26, and 29 were reserved to the US for future sale.

The Northwest Ordinance of 1787 created a system of territorial governments and a structured process for territories to become states.  Once the population of the territory was large enough they were authorized to have a legislature, and as they continued to grow they could petition to be made a state, allowed to hold a constitutional convention, vote for acceptance of the constitution, and eventually be admitted as a state.   At the time of admission to the union, the state would receive land grants for the reserved school land, as well as grants for other public institutions.  The first 16 states (13 original colonies plus Vermont, Tennessee and Kentucky) did not receive federal land grants.  Vermont, Tennessee and Kentucky were created out of land from the 13 colonies, and therefore did not contain any public domain lands. 

Ohio was the first state with public domain lands to be admitted into the union, and received the land grant for school lands.  Every state after Ohio, with the exception of 4, also received the land grants.  The excepted states are Maine, admitted as a free state as part of the Missouri Compromise of 1820, Texas, annexed as an existing sovereign government in 1848, West Virginia, which was created from Virginia’s land and admitted as a free state during the Civil War, and Hawaii in 1959, also an existing sovereign government.

In August, 1948, newly admitted states were given sections 16 and 36 for school funding.  Those states are California, Colorado, Idaho, Kansas, Minnesota, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Dakota, Washington, and Wyoming.  In 1894 Utah was given four sections, 2, 16, 32 and 36, due to the “arid worthless nature of the lands.”  Arizona and New Mexico received four sections for similar reasons.

The US Supreme Court has found, in decisions subsequent to the land grants, that in almost all cases a trust is created.  Originally the federal government was the trustor and the school was the beneficiary.  Over time, it became more practical to convey the land to the state or the county as the trustor for the benefit of the schools, and states have modified the statute language .  The Enabling Act for Ohio states that the lands be reserved “for the maintenance of schools.”  Colorado’s statute states that the lands are to be used “for the support of common schools,” and Illinois’s statute states that the land shall be held “as common school lands.”  Even with these modifications, land grants for public school funding are still active.