Your development office has just informed you that one of your biggest donors has expressed an interest in donating to your institution real property near campus.  A very gracious “thank you” seems in order since the gift is quite generous. However, there are a number of issues related to gifts of real property that are not present in gifts of cash or even securities.  Educational institutions should be aware of these issues in assessing the desirability and prudence of accepting gifts of real property.

Environmental

One of the primary concerns is whether the property is contaminated in any way.  The institution could be jointly and severally liable for clean-up costs related to, and damages to others caused by, environmental hazards on or originating from the property.  Prior to taking title, educational institutions would be wise to obtain an environmental audit and site assessment by an environmental consultant to determine the status of the property.  Whether or not particular issues are identified, institutions should also consider obtaining certain declarations and indemnifications from the prior owner as a way to mitigate their risks.

Tax Liens

Tax liens on the property pose another headache for educational institutions.  If there are unpaid property taxes or other tax liens on the property, the donor and the institution will need to make provision as to who will make the delinquent payments so that the liens may be released so that the institution will not risk losing the property to foreclosure.

Zoning

Educational institutions will need to consider the use to which they intend to put the donated property.  Zoning regulations may not permit the intended use.  If not, the institution will need to decide if it can petition the appropriate regulatory authority to have the property re-zoned or to obtain a variance from the zoning regulations.
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