Request By:
Mr. Frank A. Wichmann
Attorney at Law
710 Coppin Building
Covington, Kentucky 41011
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of June 1, in which you, as City Attorney for the City of Erlanger, relate the following facts and question:
"On September 4, 1962, the City of Erlanger as a Lessor leased certain real estate to a Lessee for an original term of ten (10) years from September 1, 1962 until August 31, 1972 with options to the Lessee for three renewals thereof for ten, five and five years, thus obligating the City for a total of thirty (30) years. The Lessee exercised its option to renew the lease for the first ten (10) year period; and is now attempting to exercise the option for a renewal of the lease for a five (5) year period. Can the lease be enforced against the City by the Lessee for the five (5) year term occurring after the first twenty (20) years of the lease. "
The question presented is whether or not a city can lease its property under contract for a period exceeding twenty years, and our response would be in the affirmative so long as fraud is not attached to the contract and it involves a municipal rather than a governmental function.
Section 164 of the Constitution prohibiting a city from granting any franchise or making any contract in reference thereto for a term exceeding twenty years would not be applicable under the circumstances as pointed out in the case of
Board of Councilmen v. Pattie, 227 Ky. 343, 12 S.W. 1108 (1928), from which we quote the following:
"In
Capital Amusement Co. v. Board of Councilmen, 210 Ky. 622, 276 S.W. 528, we held that the city of Frankfort in the leasing of its Opera House for public entertainments, was exercising a private proprietary power or municipal function, as distinguished from a purely governmental function. The leasing of its Opera House by the city is not the granting of any franchise or privilege within the meaning of section 164 of the Constitution, nor is it the making of any contract in reference to any franchise privilege. The city has the same rights in and control over the Opera House owned by it that any individual would have in and over any property owned by him. It may sell or lease property owned by it in its private proprietary capacity, so long as no fraud attaches to its contracts. If it can sell its property, it necessarily follows that it can lease such property, and, since section 164 of the Constitution has no application, there is no limitation upon the term for which the lease may be made."
See also
Faulconer v. City of Danville, 313 Ky. 468, 232 S.W.2d 80 (1950);
Miller v. City of Owensboro, Ky., 343 S.W.2d 308 (1961), and the
City of Russell v. City of Flatwoods, Ky., 394 S.W.2d 900 (1965).
Under the circumstances the lease agreement executed by the City of Erlanger which extends by reason of the renewal options for a total period of thirty years would be considered valid and enforceable unless, as mentioned above, the element of fraud is present.