Limitation on Fair Market Value Lifted From Community College District Short Term Lease Requirements

The Legislature has recently provided community college districts with a new way to maximize resources when new legislation becomes effective in January, 2013. (Assembly Bill 1748, Chapter 78).

Education Code section 81378.1 currently provides a relatively simple process for community colleges to enter into leases of certain district property when the leases have terms between five days and five years (“short term leases”) and the fair market value of the leased premises is relatively low. Currently, the fair market value of the lease cannot exceed $25,000 per year. Under an amendment to Education Code section 81378.1, which becomes effective on January 1, 2013, there will no longer be a limitation or cap of $25,000 on the fair market value of the leased space.

The amendment does not change other requirements for short term leases pursuant to this section including: agenda and notice requirements, termination provisions in the event that the property is later needed for academic activities; requirements for the expenditure of revenues from the lease to supplement but not supplant state funding; inclusion in calculations for space actually available for use by the college; and conformity with zoning regulations. The section does not apply where the District is leasing an entire campus.

In the past when the fair market value of a short term lease exceeded the statutory limit on fair market value, districts which intended to lease the real property needed to follow the complex surplus property procedures found in Article 4 (Sale or Lease of Real Property). (Education Code section 81360 et seq.) Surplus property procedures resulted in heavy administrative burdens which some districts wanted to avoid. This change in the law will give community colleges an easier method for maximizing their resources and obtaining additional revenue through the use of short term leases.


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