The U. T. System Trust Fund Real Estate Policy Statement was adopted by the U. T. Board of Regents in April 1988 and was amended in August 1991. The policy was subsequently incorporated into the U. T. System Gifts Policy Guidelines that was adopted by the U. T. Board of Regents on August 10, 1995 and amended on November 9, 1995.

Section VIII (Gifts of Real Estate) of the U. T. System Policy Guidelines has now been rescinded, and a separate U. T. System Gift Policy Guidelines for Surface and Mineral Estates in Real Property has been adopted to reflect the authority of the Vice Chancellor for Business Affairs to accept current purpose gifts of real property of any value not processed or administered by the Office of Development and External Relations. The policy also confirms the authority of the Vice Chancellor for Development and External Relations or his/her designee to accept real property gifts of any value for endowments or other planned gifts. The policy states standards for the valuation of gifts of real property and the Real Estate Office and University Lands - West Texas Operations will make an initial determination of qualification of acceptance for all gifts and bequests of real property in accordance with standards set out in the new policy.

Gift policy guidelines for
surface and mineral estates in real property

A. Introduction

These guidelines apply to all gifts of surface and mineral estates in real property regardless of type, location, or designated use of the funds to be derived therefrom. In the absence of guidelines or policies relating to such gifts designated for campus use, these policy guidelines shall apply. The Board of Regents recognizes that the full implementation of these guidelines with respect to surface and mineral estates in real property donated or bequeathed to the U. T. System or any of its component institutions may not be achievable in all cases. The Real Estate Office (REO) and University Lands - West Texas Operations (ULWTO) will evaluate gifts of surface and mineral estates in real property and apply these guidelines to the extent reasonably practicable and in the best interest of the U. T. System.

B. Definitions

1. A "gift" includes conveyances and testamentary transfers, as well as trust distributions to the U. T. System or any of its component institutions.

2. "Real property" means, individually and collectively, the surface estate and the mineral estate.

3. "Surface estate" means any interest in the surface of real property including fee and leased fee interests, together with all appurtenances and improvements attached thereto, and all property interests that do not constitute the mineral estate.

4. "Mineral estate" means mineral rights of gas, oil and minerals, whether joined to or severed from the surface estate and the associated rights as properly conveyed to the U. T. System or component institution. An overriding royalty interest that is not subject to any costs shall also be a "mineral estate."

5. The "Responsible Officer" is the Vice Chancellor for Business Affairs or his/her designee (for current purpose gifts) or the Vice Chancellor for Development and External Relations or his/her designee (for endowments and other planned gifts) and is responsible, based on the recommendations of the REO and ULWTO, for the initiation and completion of the formal acceptance of the gift via administrative approval, the Docket, or the Agenda, as appropriate.

6. A "qualified gift of a surface estate" is:

a. any interest that will net more than $25,000 upon sale; or

b. a property for which there is an effective direct use by a component institution.

C. Procedures for Acceptance of Gifts of Surface Estates

1. Notification of the REO. The component institution (for current purpose gifts) or the Office of Estates and Trusts (OET) (for planned or endowment gifts) will notify the REO upon identification of a potential gift of real property.

2. Information to be submitted to the REO. The component institution or REO will request that the donor provide as much of the following information as possible to allow the REO to evaluate the proposed gift. If not paid by the donor, the benefited component institution shall pay all costs incurred by the REO to evaluate the gift or protect U. T. System’s interests with respect to the gift, including title policy premiums. The Board of Regents strongly encourages the acquisition of a title policy at the time the property is acquired whether the policy premium is paid with funds provided by the donor or the component.

a. Fee Interests in Surface Estates.

i) Map showing location of property

ii) Legal description of property

iii) Proof of ownership (deed)

iv) Survey of subject property and improvements (Category 1A survey preferred)

v) List of improvements

vi) Copies of current leases, if any

vii) Current title commitment and copies of all title exceptions, including deed restrictions or covenants and liens

viii) Copy of the donor's title policy, if any

ix) List of current expenses required to maintain/operate the property

x) Proof of payment of taxes and association fees, if any

xi) Recent appraisal or other acceptable valuation

xii) Copies of documents relating to past or current litigation directly affecting the real estate

xiii) A written statement from the donor identifying any known waste disposal sites or contamination or spills of hazardous or other regulated materials on the property, or a statement to the contrary, and assuring compliance with the U. T. System Environmental Review Policy for Acquisitions of Real Property Assets

xiv) Written statement from the donor outlining purpose of the gift

xv) Permission for access to the property to conduct on-site inspections

xvi) Such other information as may be requested by the Office of General Counsel, REO, or OET.

b. Leased Fee Interests in Surface Estates.

i) Copies of fully executed leases and lease amendments

ii) Items listed in a. above

iii) History of all lease payments

iv) Estoppel certificates

v) Insurance policy and certificates.

3. Sale of a Surface Estate by Executor or Trustee. The REO will generally request that the surface estate received from an estate or trust be sold rather than distributed to the University. The sale price shall be based upon a fair market value appraisal or other generally accepted industry standard for valuing the property. The REO shall provide assistance to facilitate the sale of the surface estate, when appropriate. If the surface estate is not sold within a reasonable period of time, the REO will evaluate the surface estate to determine whether the gift will be accepted or rejected.

4. Evaluation of Qualified Gifts of Surface Estates. The REO will evaluate and inspect a proposed gift of surface estate. Only qualified gifts of surface estates will be recommended for further review and evaluation.

5. Special Conditions.

a. Unencumbered Surface Estate. The REO generally will not recommend acceptance of a qualified gift of an unencumbered surface estate unless there is a clear benefit to the U. T. System and the following conditions are met:

i) Adequate provisions are made by the donor or the component institution for the expense of management until disposition. The donor should be encouraged to contribute funds for the management of the property until disposition occurs. Any unreimbursed costs of management or sale of the property will be charged either against income from the property or proceeds from the sale of the property;

ii) The gift is of a 100% interest in the property; and

iii) There are no undue limitations on the U. T. System’s ability to own, manage, and dispose of the property.

b. Encumbered Surface Estate. The REO generally will not recommend acceptance of a qualified gift of a surface estate that is mortgaged or encumbered unless there is a clear benefit to the U. T. System and the following conditions are met:

i) The donor donates funds or makes other appropriate arrangements to meet all debt requirements;

ii) Adequate provisions are made by the donor or the component institution for the expense of management until disposition. The donor should be encouraged to contribute funds for the management of the property until disposition occurs. Any unreimbursed costs of management or sale of the property will be charged either against income from the property or proceeds from the sale of the property;

iii) The gift is of a 100% interest in the property; and

iv) There are no undue limitations on the U. T. System’s ability to own, manage, and dispose of the property.

6. Environmental Assessment. An environmental assessment of the gift must be completed in accordance with the "U. T. System Environmental Review Policy for Acquisitions of Real Property Assets."

7. Evaluation Criteria. The REO will consider all criteria for acceptance outlined in this policy and information gathered with respect to the property in determining whether to recommend acceptance of a qualified gift of real property. To demonstrate a clear benefit to the U. T. System, the REO will evaluate the return expected from a qualified gift of a surface estate based on, but not limited to, such factors as income potential, development characteristics, type of property interest, holding costs, management requirements, holding period, location, potential environmental liabilities, encumbrances, and any other potential liabilities or risks associated with the asset.

8. Gift Acceptance. The REO will make a recommendation to the Responsible Officer or the Board of Regents who will accept or reject the gift.

9. Title. Title to each property shall be held in the name of the Board of Regents, and not in the name of any component institution, department, or individual. The REO will ensure that all deeds for gifts of surface estates are recorded in the county where the property is located and will retain the original deed in its permanent records.

10. Valuation of a Surface Estate.

a. Appraisal Preferred. The preferred method of valuation for the purpose of determining gift value, sale price, or lease rates for a surface estate shall be an appraisal prepared by an independent State-certified or other licensed appraiser.

b. Small Gifts. The value of a surface estate less than $50,000 may be determined by solicitation of offers or by any other generally accepted industry standards including tax assessments.

c. Public Auction or Bids. An appraisal is not required when a surface estate is sold at public auction or by use of sealed bids.

D. Procedures for Acceptance of Gifts of Mineral Estates

1. Notification of the ULWTO. The component institution (for current purpose gifts) or OET (for planned or endowment gifts) will notify ULWTO upon identification of a potential gift of a mineral estate. ULWTO will evaluate the mineral estate and determine whether the asset should be accepted or rejected by the U. T. System or in the case of a testamentary transfer or trust whether to request that the interest be sold. ULWTO will provide assistance to facilitate the conveyance or sale of the mineral assets.

2. Information to be submitted to ULWTO. The component institution or ULWTO will request that the donor provide as much of the following information as possible to allow ULWTO to evaluate the proposed gift. If not paid by the donor, the benefited component institution shall pay all costs incurred by ULWTO to evaluate the gift or to protect the U. T. System’s interests with respect to the gift.

a. Map, plat, or survey of the property

b. Legal description of the property

c. Proof of ownership (deed or assignment)

d. Copies of current oil and gas leases, if any

e. Copies of division orders, if any

f. Copies of other relevant documents, such as unit agreements and operating agreements

g. List of encumbrances including any liens and copies of the corresponding documentation

h. Abstracts of title or title opinions

i. Geological or geophysical records

j. Lease ratifications and lease assignments

k. Copies of appraisals or reserve studies

l. Copies of documents relating to past or present litigation directly affecting the property

m. Copies of insurance coverage carried by the well operator relative to environmental damage.

3. Sale of a Mineral Estate by Executor or Trustee. ULWTO will generally request that the mineral estate received from an estate or trust be conveyed. However, if the sale of the minerals is appropriate, the sale price shall be based upon a fair market value appraisal or other generally accepted industry standard for valuing the property. ULWTO shall provide assistance to facilitate the sale of the mineral estate, when appropriate. If the mineral estate is not sold within a reasonable period of time, ULWTO will evaluate the mineral estate to determine whether the gift will be accepted or disclaimed.

4. Evaluation of Qualified Gifts of Mineral Estates. ULWTO will evaluate a proposed gift of mineral estate. Only qualified gifts of mineral estates will be recommended for further review and evaluation.

5. Evaluation Criteria. ULWTO will consider all of the criteria for acceptance outlined in this policy and information gathered with respect to the minerals in determining whether to recommend acceptance of a qualified gift of a mineral estate.

6. Gift Acceptance. ULWTO will make a recommendation to the Responsible Officer or the Board of Regents who will accept or reject the gift.

7. Title. Title to each mineral estate shall be held in the name of the Board of Regents, and not in the name of any component institution, department, or individual. ULWTO will ensure that all deeds for gifts of mineral estates are recorded in the county where the mineral estate is located and will retain the original deed in its permanent records.

8. Valuation of a Mineral Estate. The preferred method of valuation for the purpose of determining value for a mineral estate shall be at the discretion of ULWTO, but shall always be by generally accepted industry standards.

Last reviewed September 2003