House Bill 803

AN ACT TO AMEND SECTION 29-3-63, MISSISSIPPI CODE OF 1972, TO DELETE COMPARATIVE ANALYSIS AS A MEANS OF DETERMINING FAIR MARKET RENTAL VALUE OF FARM-RESIDENTIAL, RESIDENTIAL, RECREATIONAL AND OTHER SIXTEENTH SECTION LANDS; TO AMEND SECTION 29-3-81, MISSISSIPPI CODE OF 1972, TO RE-LEASE SIXTEENTH SECTION LANDS CLASSIFIED AS AGRICULTURAL LANDS FOR A TERM OF FIVE YEARS; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 29-3-63, Mississippi Code of 1972, is amended as follows:

29-3-63. (1) The holder of a lease of sixteenth section or lieu land, at the expiration of, shall have a prior right, exclusive of all other persons, to re-lease or to extend an existing lease as may be agreed upon between the holder of the lease and school board, subject to the classification of the land. * * * However, no holder of a lease of sixteenth section land classified as agricultural land shall have any priority rights in extending his lease contract, except as otherwise provided in Section 29-3-81. * * * The compensation on an annual basis shall be the fair market rental of the land excluding buildings and improvements made on such land by the lessee, the title to which is not held in trust for the public schools, but in no event shall the compensation be less than the minimum amounts prescribed in subsection (2) of this section.

(2) The school board * * * shall not lease or extend a lease on land classified as industrial or commercial at an annual rental less than five percent (5%) of the current market value, exclusive of buildings or improvements not owned by the school district. Such minimum acceptable percentage shall not apply to land classified as farm-residential, residential, recreational and other land; however, fair market rental will apply to those lands as determined by appraisal * * * or comparison with the private sector.

(3) The prior right to re-lease or extend an existing oil, gas and mineral lease, or any part of such lease, granted under this section shall be conditioned upon the existence of production of oil, gas or other minerals thereunder in paying quantities, or the existence of a well capable of such production, or the existence of drilling or reworking operations at the time of lease expiration. * * * However, the lease may, in the discretion of the school board * * *, be extended only as to the lands included in a unit or units as defined by the appropriate agency having jurisdiction over the unit or units. The replacement lease shall be upon such terms and conditions as may be agreed upon between the holder of the lease and the school board; however, the rental and royalty provisions shall not be less than the rental and royalty provisions as set out in the expired lease and the primary term shall not exceed the limitations in Section 29-3-99. Bonus payment for the replacement lease shall be consistent with the requirements set out in Sections 29-3-65 with respect to oil, gas and mineral leases.

(4) Where used in this section and Section 29-3-65, the term "oil and gas lease" or "oil, gas and mineral lease" shall include all leases originally executed pursuant to Section 29-3-99.

(5) The right to re-lease an oil, gas and mineral lease provided in subsection (3) above extends to oil, gas and mineral leases which have already expired as of May 7, 1992, subject to an accounting for production from the date of lease expiration to the date of the replacement lease authorized in this section.

SECTION 2. Section 29-3-81, Mississippi Code of 1972, is amended as follows:

29-3-81. (1) Sixteenth section lands, or any lands granted in lieu of sixteenth section lands, classified as agricultural may be leased for the cultivation of rice, or pasturage, for a term not to exceed ten (10) years. All other sixteenth section or lieu lands classified as agricultural may be leased for a term not exceeding five (5) years. All leases of land classified as agricultural shall be for a term to expire on December 31. Except in those cases when the holder of an existing lease on agricultural land elects to re-lease such land, as authorized under this subsection, it shall be the duty of the school board * * * to lease the sixteenth section or lieu lands at public contract after having advertised such lands for rent in a newspaper published in the county or, if no newspaper is published in the county, then in a newspaper having a general circulation therein, for two (2) successive weeks, the first being at least ten (10) days before the public contract. The lease form and the terms so prescribed shall be on file and available for inspection in the office of the superintendent from and after the public notice by advertisement and until finally accepted by the board. However, before the expiration of an existing lease of land classified as agricultural land, the school board, subject to the prior approval of the Secretary of State, shall authorize the holder of the existing lease to re-lease the land, on no more than one (1) occasion, for a term of five (5) years and for a rental amount that is no less than one hundred twenty percent (120%) of the total rental value of the existing lease. If the holder of the existing lease elects not to re-lease the land, the school board * * * shall publish an advertisement of agricultural land for rent which publication shall be not more than four (4) months before the expiration of the term of an existing lease of the land. An election by the holder of the existing lease not to re-lease the land shall not preclude his participation in the bidding process established under this section. Subject to the classification of the land, the school board * * * shall enter into a new lease on agricultural land before the expiration of an existing lease on the same land, and the new lease shall take effect on the day immediately following the day on which the existing lease expires. The school board * * * may require bidders to furnish bond or submit evidence of financial ability.

Bids received by the school board * * * in response to the advertisement shall be opened at a regular or special meeting of the board. The school board * * *, at its option, may reject all bids or accept the highest and best bid received in response to the advertisement, or the school board * * * may hold an auction among those who submitted bids in response to the advertisement. If the school board * * * elects to hold an auction, no bidder shall be granted any preference. The opening bid at the auction shall be highest bid received in response to the advertisement.

(2) (a) If the school board * * * receives an acceptable bid in response to the advertisement and elects not to hold an auction among those submitting bids, then the holder of the existing lease may submit a second bid in an amount not less than one hundred five percent (105%) of the highest acceptable bid received if the holder of the existing lease: (i) submitted a bid in response to the advertisement; and (ii) constructed or made improvements on the leasehold premises after receiving approval of the school board * * * during the term of the existing lease. For purposes of this subsection, the term "improvements" shall not include any work or items that are done customarily on an annual basis in the preparing, planting, growing, cultivating or harvesting of crops or other farm products.

(b) If the holder of the existing lease elects to submit a second bid, the school board * * * shall hold an auction among those who submitted bids in response to the advertisement. The opening bid at the auction shall be the second bid of the holder of the existing lease. However, no leaseholder may submit a second bid if: (i) any rent, taxes or other payment required under his lease are past due; or (ii) he is otherwise in default of any term or provision of the lease and such default has not been corrected or cured to the satisfaction of the school board * * * after more than thirty (30) days' notice to the leaseholder of the default.

(c) If an auction is held, the auction may be conducted at the meeting at which bids are opened or at a subsequent regular or special meeting. The board shall announce the time and place of the auction at the meeting at which bids are opened, and no further notice of the auction is required.

(d) If no bid acceptable to the school board * * * is received after the advertisement or at auction, the school board * * * may lease, within ninety (90) days, the lands by private contract for an amount greater than the highest bid previously rejected in order to acquire a fair rental value for the lands. If no bids are received in response to the advertisement, the school board * * * may negotiate a private contract for a fair rental value, and the term of such contract shall expire on December 31 of the same calendar year in which the contract is made. The school board * * * may take the notes for the rent and attend to their collection. The board has the right and remedies for the security and collection of such rents given by law to the agricultural landlords.

(e) If an existing lease is terminated before the expiration of the term originally set therein, upon finding that immediate action is necessary to prevent damage or loss to growing crops or to prevent loss of opportunity to lease the land for the current growing season, the school board * * * may negotiate a private contract for a fair rental value, and the term of such lease shall expire on December 31 of the same calendar year in which the contract is made.

(3) Any holder of a lease on agricultural land that: (a) was granted before July 1, 1997; and (b) has an expiration date on or after April 1 but before December 31 during the final year of the lease term, may extend the term of such lease to December 31 next following the expiration date originally provided for in the lease. If such lease is extended, the rent for the period from the original expiration date in the lease to December 31 next following the original expiration date shall be one hundred five percent (105%) of the annual rent provided in the existing lease prorated over the period of the lease extension. At the expiration of the extended lease term or at the expiration of the original lease term if the lease holder does not extend such lease, the land shall be offered for lease as provided in subsections (1) and (2) of this section.

SECTION 3. This act shall take effect and be in force from and after July 1, 2002.