RAQs: Recently Asked Questions

Topic: Legal Requirements for Selling Library Building - 12/13/2019
We are a Special Legislative District Library. We are constructing a new library and will be selli...
Posted: Friday, December 13, 2019 Permalink

MEMBER QUESTION

We are a Special Legislative District Library. We are constructing a new library and will be selling our current building. I would like to know if there are any specific steps we are legally required to take in selling the property. For example is public notice of the sale required? Are we required to entertain a certain number of offers, etc.? Thank you for any information you can provide.

WNYLRC ATTORNEY'S RESPONSE

A new library building!  How exciting.  And what a huge additional array of additional duties it presents, as the library begins to think about moving.

Transitioning library space is a huge undertaking.  And when it involves selling the legacy structure previously occupied, the task can get even bigger.

Here are just a few of the plot twists I have run into during real estate deals involving old buildings:

  • We found out that the building wasn’t actually owned by the library (it was owned by the sponsoring municipality);
  • We learned that part of the parking lot the owner had used for over twenty years wasn’t actually on their property (it was on their neighbor’s);
  • The inspection showed that the building had a ruptured sewage line and had, for decades, been wallowing in its own filth, causing major foundation issues;
  • We verified there was friable asbestos in all the wall plaster;[1]
  • We imposed a restrictive covenant requiring the original floorboards to never, ever be removed (also called a “preservation easement”);
  • We discovered a secret underground tunnel.[2]

Why am I setting out this litany of events, when the member just wants to know if there are any posting/bidding/process requirements when a Special Legislative District or “SLD” public library sells a former building?

I mention them because every real property transaction—no matter what type of library is involved—is different.  And while the base requirements to transfer the building are actually very simple (we’ll get to them soon), the lurking contingencies can create painful extra “required” steps if not addressed well before the sale.

So, before I confirm the one step that absolutely must be taken, here is the “Ask the Lawyer: Basic Factors for Painlessly[3] Selling Your Library Building.”

Sale Factor

Why You Consider It

What You Do With It

 

1.

Your Library’s CHARTER

 

 

Your Charter may list the location of your current building.  So before you move or move to sell the structure, make sure the details aren’t at odds with anything in your founding document.

 

 

Okay, this is very important: Start a folder or a file on a shared drive. Going forward through this list, we’ll call this your library’s “Sale File”. 

 

The “Sale File” is going to contain everything your library needs to gather to anticipate complications and get your legacy property ready for sale.

 

 

2.

Your Library’s BYLAWS

 

 

The bylaws may reference the library’s location, and more importantly, they are the key to a board resolution authorizing the sale.

 

 

Put the bylaws in the Sale File. 

 

Your lawyer will prepare the resolution the board must pass to authorize the sale of the property based on what’s in the Bylaws.

 

 

3.

The DEED to the property.

 

The deed is proof that your library owns the property; it is also proof of the exact boundaries of what is to be sold.

 

 

Put the deed in the Sale File.

 

If you can’t find it, DON’T PANIC, you can get a copy from your County Clerk.[4]

 

 

4.

The SURVEY of the property.

 

 

The survey is a precise measurement of the property.  It is also a nice picture of the property, and shows important things like the exact acreage, and where your fence (if you have one) is.

 

Put the Survey in the Sale File.

 

If you can’t find it, DON’T PANIC, but alert your lawyer (see more on that below) because you’ll need one, and it will be an expense related to the sale.

 

 

5.

Any DONOTION DOCUMENTS or CONTRACTS that the property is controlled by.

 

 

Your legacy building[5] may have conditions on the ownership.  This is a huge variable and it is important to address or rule in or out right away.

 

 

If you have any DONATION DOCUMENTS or CONTRACTS related to the building, put copies in the Sale File. 

 

It will be the job of your lawyer to affirmatively rule out any donor direction or contract conditions controlling the property, but they can’t deal with what they aren’t aware of.

 

 

6.

Any LIENS or MORTGAGES on the property.

 

 

Your legacy building may have been used to secure a loan, or perhaps a sub-contractor has a lien related to a contract dispute.

 

If a valuation of the property was conducted as part of a loan, that should go to the lawyer, too.

 

 

These also need to go in the Sale File.  But generally, these are public documents, and can be obtained at the County Clerk’s.  And if you don’t know about them, don’t worry: it will be the job of your lawyer to affirmatively rule out any “burdens” on the property (although the library will likely have to pay them off).

 

 

7.

Any DEFECTS or DANGEROUS CONDITIONS the property has.

 

 

Hard-working, older legacy  buildings can have problems, and your library’s awareness of any defective or dangerous conditions will likely have to be disclosed as part of the sale. 

 

This is best planned up-front.

 

 

Once you have a lawyer for the sale, work with them to discuss any awareness the library has of lead paint, asbestos, mold, or any other conditions of concern.  Although certain conditions must be disclosed as part of a sale, this initial discussion should be done during a consultation that is protected by attorney-client privilege.

 

 

8.

The building’s ASSESSMENT.

 

 

Chances are, as a non-tax-paying entity, your library has not paid much attention to its assessment.  However, if the sale is to a non-exempt party, this number is going to get relevant.  It is good to consider that factor up front.

 

 

Yes, it goes in the Sale File.

 

9.

The Library’s LAWYER

 

 

In the boxes above, the word “lawyer” appears more times than the rules for good writing allow (for pacing and to avoid being repetitive, I should have said “your attorney,” and “your legal counsel”, but I wanted to make a point here). 

 

I trust you see the pattern that is emerging: real property transactions are complicated (we haven’t even gotten to the library and not-for-profit-specific stuff yet) and the sooner a knowledgeable attorney is assessing the transaction and making sure the library has addressed any contingencies, the better.

 

(NOTE: now that I have made my point, I will use synonyms for “lawyer”).

 

 

An attorney retained by the library to handle this transaction should bring the following to the table:

 

1. They should have handled at least three other transactions involving the transfer of real property owned by a not-for-profit;

 

2. They should provide the library with a retainer letter that quotes not only the rate for the closing (usually there is a “range” in a particular area), but the hourly rate for work on things like your bylaws resolution, dealing with any lingering concerns, etc.

 

3.  The attorney should be asking for the items in the “Sale File” (and more) if they don’t have them already.

 

The board should not be afraid to ask for proposals and to comparison shop!

 

 

10.

The library’s REAL ESTATE AGENT

 

 

This person should only be appointed after you determine your lawyer (if appointed at all).  If your library does use a licensed realtor, they should be selected for both their previous experience with similar properties, and their ability to productively cooperate with the library’s attorney.

 

 

The real estate agent should also be under contract (a contract first examined by the library’s lawyer) and the library should never agree to the agent serving in a “dual” role for the seller (the library) and the buyer.

 

 

11.

A VALUATION of the property

 

As fiduciaries of the library, your board owes it to the institution to work for the best possible price (unless the property is to transfer in something other than an “arms-length transaction”; more on that later).  This means their vote to sell should be backed by reliable information, provided to the board without bias, and based on professional credentials.

 

 

The board should consider the valuation, along with the input of the lawyer and the real estate agent, prior to resolving to accept a contract of sale.

 

12.

If relevant, the building’s LANDMARK status or location in a designated historic building, and any documents pertaining to its HISTORY.

 

 

This can impact the use your buyer can make of the building, and can also impact the costs of rehabilitating or renovating it.

 

Marketed properly, historic status is a benefit.  But you have to find the right buyer.  It is a big factor to plan around.

 

 

Once you’ve assembled the “Sale File,” the attorney retained to assist the with the sale will be able to help the library chart a path forward.

Why do I keep emphasizing the early involvement of an attorney?  One look at all the variables created by the factors in the chart above (and my bullet list of “interesting” contingencies) shows why the early involvement of a lawyer is necessary. 

Now, at this point the astute reader will probably say: “This is a great chart and all, Ms. Lawyer, but are you really answering the member’s question?  They asked about required steps for the sale of a special legislative district library.”

The reason the chart (partially) answers the member’s question—or rather, positions someone to answer it—is because, based on the variables listed on the chart, there may be numerous steps required in the sale. 

But what steps—no matter what—are required?

For a library whose building is not owned or controlled by a village/town/city/county,[6] the sale is governed by a combination of the Education law, and the NY Not-for-Profit corporation law, which empowers a library’s governing board to acquire and dispose of library assets[7] in a way that best stewards the overall well-being of the library.[8] No public posting or precise bidding process is required. But there is one thing:

No matter what—the board will need to pass a resolution approving the sale…after receiving sufficient information to show they have examined the sale terms and made a decision in the best interests of the library.

How do you show the contract terms are in the library’s best interest?  By considering them in light of the library’s overall position, and the factors in the Sale File.

Now, with all that being said, I do have to emphasize an important distinction: the transfer of a library building is different than the transfer of an entire library. The transfer of an entire public library as a “going concern” may be subject to a municipal vote, which is allowed by Education Law Section 266.  But, as ruled in 1992 in the case of  Briody v. Lewiston[9], Section 266 does NOT apply to the sale of only the library’s building.

The Briody case, by the way, is a great example of why a library sale requires careful legal planning.  In that instance, the library conveyed its legacy building “pursuant to an agreement entered into in 1972, which provided that, if the Library moved to another location, it would convey its property to the Town and Village, which could dispose of the property for any purpose.” On the chart I provided above, this type of “Briody contingency” would be caught by a combination of factor 5, addressed by factor 9.

The good news is, when a library has already gone through the intricate dance required to fund, plan, and contract for a new building, they likely already have an attorney “briefed and ready” to assist with the sale of the old.  That attorney will also be in the position to help the library plan for contingencies that could delay the move (such as—shudder—complications during construction).

So, what steps get you to that board resolution, and a smooth process?  Assemble the Sale File, ask your attorney out for a stroll, and start planning a sale the board members can vote for with full confidence that they are making the best decision for the library.

Best wishes for an easy Certificate of Occupancy, a smooth transition to the new building, and a sale that shows the trustees are formidable fiduciaries!



[1] Man, they used to put that stuff in everything but breakfast cereal.

[2] SO COOL.

[3] Okay, I can’t promise it will be painless.  But think of this as the difference between working out regularly and running a 5K without training.

[4] I probably don’t need to tell an audience of librarians what a great resource a county clerk can be.  For instance, the Madison County Clerk has this great resource for finding deeds on their website: https://www.madisoncounty.ny.gov/DocumentCenter/View/152/How-to-Obtain-a-Copy-of-Your-Deed-or-Mortgage-PDF?bidId=

[5] I love buildings, especially when they ooze history and charm (sadly, this also means they might ooze lead and asbestos).  When a cultural institution is transitioning space, I often call the “old” building the “legacy” building.  It’s a way of saying “We’re looking to the future, but we honor the past.”

[6] Municipalities have to follow an array of “highest bidder” or return-on-investment rules, and yes, there will be some requirements on the process, too. But when those apply, it is not a sale by a public library, it is a sale by a municipality.

[7] Except for books.  There are special rules on those (Education Law Section 226, the same law that gives library trustees authority over property).  And of course, any assets governed by special grant terms or a donor contract.

[8] Unless the board is selling the building AND closing the library, or disposing of “substantially all” of its assets.  THEN you need permission of either the NY Supreme Court or the NY Attorney General for the sale.  But happily, that is not the situation here.

[9] 591 N.Y.S.2d 909, 1992 N.Y. App. Div. LEXIS 14855, 188 A.D.2d 1017

 

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The WNYLRC's "Ask the Lawyer" service is available to members of the Western New York Library Resources Council. It is not legal representation of individual members.