Kansas University will be able to rent out lab space to a for-profit company and still avoid paying property taxes.

The property tax exemption comes courtesy of a new state law and action by the Kansas Board of Regents.

The deal involves the former Oread Labs at 15th Street and Wakarusa Drive, which were purchased by the KU Center for Research Inc. in a bankruptcy sale in 2001.

Officials say the lab space would be ideal for certain start-up companies.

But for KU to avoid paying property taxes while leasing to for-profit companies, the Center for Research had to transfer ownership of the property to the Kansas Board of Regents, according to a board staff memo. The regents complied with that request at its meeting on Thursday.

Now the space will be available for lease, said Kevin Boatright, a spokesman for the Center for Research.

Boatright said this fits with the goal of the state, university and local area in trying to lure more research and technology.

“As an economic development initiative, we think this was very prudent,” he said.

No specific company has been targeted, he said, but the space could be leased to companies that will work in trying to commercialize technology developed by KU faculty.

A provision of a wide-ranging tax law approved this year by the Legislature included the property tax exemption for research purposes, and it is aimed at helping start-up companies.

Under the law, rental income received by the postsecondary institution must be used for educational or scientific purposes. To qualify for the tax exemption, the lease must be for no more than five years.

The labs have been used by KU but those operations are moving to the new addition of the Structural Biology Center, Boatright said.