RES, in coordination with the District,

will make a determination of the recommended term for leases. The law mandates that

the

leased property interest

cannot be

needed for a highway purpose

for at least the term of the lease

. Leases that have a primary term of two years or less, or that include a cancellation provision that is two years or less, may be approved by the ROW Division Director. All other leases are required to be submitted to the Commission for approval. TxDOT's long term planning period is twenty years; therefore,

lease terms should not extend beyond twenty years

. However, there are situations where there will be construction of substantial improvements under a lease that may require an exception to this. The Commission at its sole discretion may approve a lease of any term.

Once

RES

determines that a property can be leased, the area needs to be specifically identified by a legally sufficient property description. When necessary, the property description should include a sketch with the survey calls and should show the relationship and distances of the

leased

area to the highway. The identified leased area will serve as the basis for the appraisal or valuation, as the property description in the lease and, if the lease requires Commission approval, as an exhibit in the minute order. The survey is to be provided by the

proposed

lessee, at the

proposed

lessee's expense, and will need to be reviewed and approved by

the District

prior to its incorporation, unless

RES

already has a property description.

A proposed lessee of real property may contract and make payment directly with a licensed surveyor.

RES

may assist the requester with selection of the surveyor and should provide the requester with instructions to the surveyor to assure the work product is compatible with TxDOT requirements. The proposed lessee is responsible for the full survey cost.

The consideration for a lease must

be at

least fair market rental value. Appraisal is merely a component of determining fair market value of the

leased

property and is not necessarily the dispositive factor in the determination. If the commission finds it to be in the public interest, the commission may waive the fair market value requirement for a lease to a public utility provider or an institution of higher education as defined by the , or for social, environmental, or economic mitigation purposes.

A proposed lessee of real property may contract and make payment directly with a TxDOT approved appraiser.

RES

may assist the requester with selection of the appraiser and should provide the requester with instructions to the appraiser to assure a valuation work product compatible with TxDOT requirements. The proposed lessee is responsible for the full appraisal cost.

TxDOT may, in its sole discretion, award a lease by any method it determines to be in its best interest including but not limited to:

Direct negotiation with an interested party
Sealed bid
Auction

Per 23 CFR 710.403 (a) and 23 CFR 710.405(e), FHWA is the approving authority for ROW leases and use agreements on the Interstate. Application should be sent to FHWA together with any recommendation and necessary supplemental information.

RES

is responsible for drafting lease agreements using TxDOT's standard forms.

Each lease requires the lessee to carry

commercial general liability

insurance insuring against injury and damage during the lease term. Depending on the use, the lessee may be required to carry additional insurance such as environmental or liquor liability. Specific coverages are described in the liability insurance provisions in the lease. All liability insurance policies must be with companies licensed by the Texas Department of Insurance and must include the following endorsements:

TxDOT is to be included as an additional insured
a waiver of subrogation in favor of TxDOT
a thirty day notice of cancellation to TxDOT if the insurance is canceled.

The lessee must furnish

RES

with a certificate of insurance providing the required coverage.

If improvements will be constructed under a lease, the lessee may be required to furnish TxDOT with a surety bond as security to ensure that, upon expiration of the lease, the lessee will fulfill its obligation to remove the improvements. The amount of the bond should be for the cost of removing the improvements as estimated by

the District

.

Pursuant to Texas Government Code, Section 2252.909, for leases entered or renewed on or after September 1, 2023, the lessee shall:

include in each contract for the construction, alteration, or repair of an improvement to the leased property a condition that the contractor execute a payment bond that conforms to Subchapter I, Chapter 53, of the Texas Property Code;
include in each contract for the construction, alteration, or repair of an improvement to the leased property a condition that the contractor execute a performance bond in an amount equal to the amount of the contract for the protection of TxDOT and conditioned on the faithful performance of the contractor's work in accordance with the plans, specifications, and contract documents; and
provide a notice of commencement to RES and the District at least 90 days before the construction, alteration, or repair of any improvement to the leased property begins. The notice is to identify the leased property where the work is to be performed, include copies of the performance and payment bonds described in (a) and (b) above, describe the work to be performed, state the total cost of the work to be performed, and include a written acknowledgment signed by the contractor stating that copies of the bonds will be provided to all subcontractors not later than the fifth day after the date a subcontract is executed.

RES will receive and maintain the certificate of insurance and surety bond information that is provided.

Once the lease is executed and is in effect,

RES

is responsible for managing the lease to ensure all required documents are in compliance and that the lessee honors all obligations outlined in the lease.

TxDOT's leases allow the lessee to sublease or assign a lease upon the written approval of TxDOT. Any request for a sublease or assignment must be submitted to RES in writing.

The approval of a sublease always requires that the lessee remain fully responsible for all terms, conditions and obligations under the lease. Under an assignment,

RES

may require the lessee to do the same or may release the lessee from the obligations under the lease. This decision should be made with consideration of the reputation and financial strength of the assignee.

The lessee and/or proposed assignee may be required to furnish any information that

RES

deems necessary to facilitate its approval.

A lease may be extended, provided that the property is not needed for highway purposes during the term of the extension.

The rental value must be reevaluated if at least five years have passed since the last evaluation; unless the lease contains a rent schedule with escalations.

There are occasions when circumstances change and a lease must be amended, contact RES for guidance.

The Finance Division is responsible for receiving all rental payments for leases.

All rental payments should be

deposited immediately upon receipt

, into Fund 6 with reference to the lease number and object of , and department code 550087. The Finance Division shall provide reports to RES of payments received and delinquent accounts.

The Finance Division will be responsible for collection activities such as Notice of Non-Payment Letters. The Finance Division and RES will coordinate on collection activities to include referral to the Office of the Attorney General.