WORKING DRAFT - DIVESTITURE POLICY – POSSUM KINGDOM LAKE
        BRA DIRECTOR'S MEETING ON 29 OCTOBER 2007
The Authority desires to set forth the following terms and conditions under which it
will voluntarily sell leased residential lots in the area surrounding Possum Kingdom Lake.
(a) Definitions. In this Policy:
(1) “Authority” means the Brazos River Authority.
(2) "Lake" means Possum Kingdom Lake.
(3) “Policy” means this divestiture policy, once adopted by the Board of Directors of
the Authority.
(4) "FERC Order" means the order of the Federal Energy Regulatory Commission
issuing a license to the Authority for project number 1490-003-Texas.
(5) "Project Land" means the land identified and defined by the FERC Order.
(6) “Residential Land” means that certain land owned by the Authority in the
immediate vicinity of the Lake, as further described on Exhibit “A”, attached hereto. This Policy
applies to the Residential Land. The Residential Land does not include any Project Land.
(7) "Residential Leaseholder" means a person who leases a Leased Lot directly from
the Authority for residential purposes. The term does not include a person who leases or subleases
Project Land or who leases land from the Authority for commercial purposes.
(8) “Leased Lot” means a tract of land which is a portion of the Residential Land and
leased to a Residential Leaseholder as of the effective date of the Policy, excluding any and all
Project Land.
(9) “Lease” means that certain residential lease agreement entered into by and between
the Authority and Residential Leaseholder, as the same may be amended, which encompasses the
Leased Lot.
(10) “Prospective Purchaser” means a Residential Leaseholder who submits to the
Authority an application to purchase the Residential Leaseholder’s Leased Lot, in compliance
with this Policy.
(11) “Purchase Price” means the price at which the Authority will sell a Leased Lot to
a Prospective Purchaser under this Policy.
(12) “Owner” means a Prospective Purchaser who completes the purchase of the
Prospective Purchaser’s Leased Lot from the Authority under the terms of this Policy.
(13) “Purchased Lot” means a Leased Lot that is purchased from the Authority by a
Prospective Purchaser under the terms of this Policy.
(b) Ability to Purchase. A Residential Leaseholder may apply to purchase that Residential
Leaseholder’s Leased Lot as provided by this Policy and such application shall be considered by
the Authority if the Residential Leaseholder is current on rent and all other associated fees per the
Lease.
(c) Application. Not later than the 30th day after the date on which the Authority’s Board of
Directors adopts this Policy, the Authority shall make available upon request a form for an
application to purchase the Residential Leaseholder’s Leased Lot(s) and a copy of the Policy. A
Residential Leaseholder who desires to purchase a Leased Lot must submit to the Authority the
following: (1) a completed application to purchase; (2) a non-refundable application fee in the
amount of $_____; (3) the most recent survey covering the Leased Lot in the Prospective
Purchaser’s possession (if any); and (4) a copy of the Prospective Purchaser’s existing title policy
for the Leased Lot, if any. The Authority shall process applications to purchase in the order in
which they are received.
(d) Survey and Inspection. Upon receipt of each application to purchase, the Authority may
perform an inspection of the Leased Lot and obtain a survey of the Leased Lot, which survey
shall be used for all purposes, including, without limitation, to determine the boundaries of the
Leased Lot to be purchased. If encroachments into adjacent property or into Project Lands or
other breaches of the Lease are found, they must be cured prior to the application to purchase
being deemed complete.
(e) Purchase Price. Once an application is deemed complete, the determination of a purchase
price shall commence. A Leased Lot sold under this Policy must be sold for not less than the fair
market value of the fee simple estate (the “Fair Market Value”). An appraisal of the Fair Market
Value of a Leased Lot under this Policy may not (i) include consideration of a freeze or other
suspension of lease rate increases for the homestead of a person who is 65 years of age or older,
(ii) take into account the value of any improvements constructed on the Leased Lot or over the
water or (iii) take into account any leasehold interest.
(f) Appraisal Process. The Fair Market Value shall be determined as follows:
(1) Within sixty (60) days of the Authority’s receipt of the Prospective Purchaser’s
completed application package, the Authority shall provide the Prospective Purchaser with an
appraisal of the Fair Market Value of the Leased Lot dated within one year of the date of the
application (herein as the “First Appraisal”). The Authority’s appraiser shall be an appraiser
certified under Chapter 1103, Occupations Code. Within twenty (20) days of receipt of the First
Appraisal, the Prospective Purchaser shall notify the Authority in writing as to whether the
Prospective Purchaser agrees with or disputes the Fair Market Value set forth in the First
Appraisal. If the Prospective Purchaser does not dispute the Fair Market Value as determined by
the First Appraisal within such 20-day time period, then the First Appraisal shall be final and
binding on all parties to establish the Purchase Price for the Leased Lot.
(2) If the Prospective Purchaser disputes the Fair Market Value determined by the First
Appraisal, the Prospective Purchaser may either (a) withdraw its application to purchase the
Leased Lot or (b) employ a disinterested appraiser certified under Chapter 1103, Occupations
Code to conduct a second appraisal of the Fair Market Value of the Leased Lot (the “Second
Appraisal”). The Second Appraisal must be completed and sent to the Authority not later than
the 60th day after the date the Prospective Purchaser notifies the Authority that the Prospective
Purchaser disputes the First Appraisal. If the Authority does not receive the Second Appraisal
within such 60-day time period, then the Prospective Purchaser’s application to purchase will be
deemed withdrawn.
(3) Within twenty (20) days of receipt of the Second Appraisal, the Authority shall
notify the Prospective Purchaser in writing as to whether the Authority agrees with or disputes the
Fair Market Value determined by the Second Appraisal. If the Authority does not dispute the
Fair Market Value as determined by the Second Appraisal within this 20-day time period, then
the Second Appraisal shall be final and binding on all parties to establish the Purchase Price for
the Leased Lot. If the Authority timely disputes the Fair Market Value determined by the Second
Appraiser, the two appraisers (or their designated agents) shall meet and attempt to reach an
agreement on the Fair Market Value of the Leased Lot, such meeting to occur not later than the
30th day after the date the Authority notifies the Prospective Purchaser that the Authority disputes
the Second Appraisal.
(4) If the two appraisers reach agreement on the Fair Market Value, within 20 days
after their meeting they shall issue a report of the agreed Fair Market Value to the Authority and
to the Prospective Purchaser, and this agreed Fair Market Value shall be final and binding on all
parties to establish the Purchase Price. If the two appraisers fail to reach agreement on or before
the 20th day after the date of the meeting, not later than the 30th day after the date of the meeting
the two appraisers shall appoint a disinterested third appraiser certified under Chapter 1103,
Occupations Code to reconcile the two previous appraisals (the “Third Appraisal”). The Third
Appraisal must be completed on or before the 30th day after the date of the third appraiser's
appointment, and the Fair Market Value determined by the Third Appraisal is final and binding
on all parties to establish the Purchase Price.
(5) The appraisal costs must be paid by the person who requests the appraisal, except
that the Prospective Purchaser and the Authority shall each pay one-half of the cost of the Third
Appraisal if a Third Appraisal is necessary. Should the Prospective Purchaser fail to pay its share
of the Third Appraisal, then the Prospective Purchaser’s application to purchase will be deemed
withdrawn.
(6) Within thirty (30) days after the Prospective Purchaser receives notice of the
Purchase Price established by the appraisal process set forth above, the Prospective Purchaser
shall enter into a purchase and sale agreement for the purchase of the Leased Lot at the Purchase
Price. If the Prospective Purchaser fails to execute a purchase and sale agreement within thirty
(30) days after the Prospective Purchaser receives notice of the Purchase Price established by the
appraisal process set forth above, the application of intent to purchase shall be deemed
withdrawn.
(7) The timelines established in the appraisal process set forth above may be extended
by the Authority.
(g) Surplus Declaration. No Leased Lot shall be sold without a resolution by the Authority’s
Board of Directors declaring the Leased Lot “surplus” under Section 49.226 of the Texas Water
Code.
(h) Purchase and Sale Agreement.
(1) Within thirty (30) days after the Prospective Purchaser receives notice of the
Purchase Price established by the appraisal process set forth above, the Prospective Purchaser
shall execute and tender to the Authority a purchase and sale agreement for the Leased Lot in the
form provided by the Authority which shall include the following provisions:
(a) Purchase Price of the Leased Lot as determined by the appraisal process
set forth above;
(b) Earnest money in the amount of 1% of the Purchase Price, which shall
be credited against the Purchase Price at closing, if closing occurs;
(c) Feasibility period of ____ days, after which time the Earnest Money
shall be non-refundable, except in the event the Leased Lot is not declared “surplus” as set forth
below.
(d) If the Prospective Purchaser has not terminated the purchase and sale
agreement on or before the expiration of the feasibility period, the Authority will request that its
Board of Directors pass a resolution declaring the Leased Lot “surplus” at the Board of
Directors’ next meeting. The closing shall be contingent upon the receipt of such resolution.
(e) Unless otherwise agreed in writing by the Authority and the Prospective
Purchaser, the closing of the sale of the Leased Lot to the Prospective Purchaser shall occur on or
before the date which is the ___ day after the Authority’s Board of Directors passes a resolution
declaring the Leased Lot “surplus” as set forth above.
(2) The title company selected by the Authority will provide a title commitment to
Prospective Purchaser as soon as practicable after the effective date of the purchase and sale
agreement.
(3) The Lease on the Leased Lot and any Project Lands terminates upon Closing.
(i) Closing.
(1) The parties will execute, or provide, the following documents at closing:
(A) Special Warranty Deed (wherein the Authority shall reserve all owned
interests in all oil, gas, and other minerals in and under the real property);
(B) Owner’s Policy of Title Insurance issued by Title Company selected by the
Authority in the amount of the Purchase Price;
(C) Affidavit as to Debts and Liens executed by Prospective Purchaser; (if a
mortgage lien is identified on this affidavit or the title commitment which
will not be paid off at closing, the Prospective Purchaser shall be required to
provide written consent from such mortgagee to the purchase of the Leased
Lot as provided below);
(D) Acknowledgment and agreement of Prospective Purchaser to pay all
applicable Authority fees for services the Authority provides to Owners and
Purchased Lots from and after the date of closing in accordance with the
Declaration of Restrictive Covenants set forth below;
(E) Any other documents required by the title company or necessary to
consummate the transaction.
(j) Closing Costs. The Authority will not pay brokerage commissions to any person or entity on
the sale of a Leased Lot.
(1) At closing, the Prospective Purchaser is responsible for:
(a) payment of the Purchase Price;
(b) payment of any and all indebtedness secured by a lien on the Leased Lot
or written consent of the holder of any lien on the leasehold estate in the Leased Lot to
Prospective Purchaser’s purchase of the Leased Lot;
(c) payment of any and all indebtedness secured by a lien on any Project
Land subject to the Lease (but which is not being sold to the Prospective Purchaser pursuant to
this Policy);
(d) closing costs associated with the sale of the Leased Lot (including
without limitation the escrow fees, recording costs; title premium for any mortgagee title policy;
cost of removing or releasing any liens placed on the property and/or leasehold estate by the
purchaser or its predecessors-in-interest);
(e) Owner’s Title Policy in the amount of the Purchase Price (including the
cost of any endorsements or deletions);
(f) any taxes assessed on the Leased Lot from and after the date of closing.
(2) At closing, the Authority is responsible for the cost of preparing the Special
Warranty Deed.
(k) Lease Terminates Upon Closing. A lease in effect on the date an application to purchase a
Leased Lot is submitted under Section (c) of this Policy remains in effect until the sale of the
Leased Lot is completed. The lease expires on the date the sale of the Leased Lot is completed.
Rents under the lease agreement for the year in which Closing occurs will be prorated and
refunded to the Prospective Purchaser at Closing. If the Prospective Purchaser withdraws its
application or fails to close on the purchase of the Leased Lot in accordance with this Policy and
the purchase and sale agreement, or if the purchase and sale agreement is otherwise terminated,
the lease will continue in full force and effect. In such event, any application fee paid by the
Prospective Purchaser will not be refunded, but will be retained by the Authority.
(l) Declaration of Restrictive Covenants. Prior to the sale of any Leased Lot by the Authority, a
Declaration of Restrictive Covenants shall be recorded against all of the Leased Lots. Such
Declarations will include provisions similar to the following:
(1) A Purchased Lot is subject to all existing restrictions, including any applicable
easements, placed on the Purchased Lot by the Federal Energy Regulatory Commission under the
FERC Order, if any, and any other restrictions and easements filed of record or visible and
apparent.
(2) A Purchased Lot may be used only for a single-family residential structure and
related facilities and only for normal residential, noncommercial, recreational use and enjoyment.
(3) Except as provided by this Policy, the owner of a Purchased Lot shall pay the
Authority all reasonable fees established by the Authority for any and all services the Authority
provides to Owners and/or Purchased Lots.
(4) The Authority hereby grants to the Prospective Purchaser a nonexclusive easement
and right of way over and across existing roads owned by the Authority for access to and from the
Purchased Lot, but the Authority makes no representation or warranty as to Prospective
Purchaser’s legal right of access to the Purchased Lot over any part of the road under which
Authority is claiming right of way based on implied, estoppel or prescriptive rights. The
Authority is not undertaking or assuming any duty to maintain any road.
(5) The Prospective Purchaser shall not block access, over, through or across any road
which is located on the Purchased Lot.
(6) Owners shall be required to join a Homeowner’s Association/Property
Owner’s Association at such time as one is established, if ever, and pay membership fees to such
association, as are established by the association from time to time.
(7) Owners shall comply with:
(a) the Authority's "Shoreline Management Plan and Customer Guide," and
any amendments to that document to the extent the plan applies to the Purchased Lot, the Project
Land and any other land owned by the Authority; and
(b) the applicable rules, regulations, and orders of the Federal Energy
Regulatory Commission.
(8) To maintain the quality of the Lake's water and of the environment in the Lake's
vicinity, an Owner agrees to:
(a) obtain the written consent of the Authority before altering the natural
drainage of the terrain;
(b) comply with any local, state, or federal laws related to water quality or
the environment, including laws governing toxic wastes and hazardous substances; and
(c) connect to and use, at the Owner’s expense, any wastewater treatment
system or service that becomes available to the Purchased Lot, not later than twelve (12) months
after the system or service becomes available to Owner or Purchased Lot.
(9) The water level in the Lake varies and the Authority is not responsible for
maintaining any lake level.
(10) The Authority reserves the right to modify Morris Sheppard (Possum Kingdom)
Dam so that the water surface elevation of the Lake is raised from 1,000 feet above mean sea
level to 1,015 feet above mean sea level.
(11) The Authority is not responsible or liable for any personal injury or damage to a
Leased or Purchased Lot or to any improvements on a Leased or Purchased Lot caused by any
increase in the water level of the Lake or caused by natural flooding.
(12) The Authority reserves the right of ingress and egress for a person authorized by
the Authority, including an Authority agent or employee over and across a Purchased Lot for all
reasonable purposes of the Authority, including the construction of any roads, drainage facilities
and power, water, wastewater, and other utility mains and lines that the Authority considers
necessary.
(m) The Authority reserves its interest in all oil, gas, and other minerals in and under any and all
real property sold under this Policy.
(n) If the owner of a Purchased Lot does not comply with this Policy, the Authority may seek any
available legal remedy.
(o) In the event of a dispute arising under this section between the Authority and a Purchaser, the
prevailing party is entitled to recover court costs and any reasonable attorney’s fees.
(p) A provision that applies to Prospective Purchaser of a Leased Lot under this Policy applies to
any subsequent owner of a Purchased Lot.