PART 314—PROPERTY Authority: 42 U.S.C. 3211; Department of Commerce Organization Order 10-4. Source: 71 FR 56675, Sept. 27, 2006, unless otherwise noted. § 314.1 Definitions. In addition to the defined terms set forth in § 300.3 of this chapter, the following terms shall have the following meanings: Adequate Consideration Disposition Dispose Estimated Useful Life, Federal Interest Federal Share Owner Personal Property Project Property Property Real Property Successor Recipient Unauthorized Use [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76136, Dec. 19, 2014; 82 FR 57059, Dec. 1, 2017] § 314.2 Federal Interest. (a) Subject to the obligations and conditions set forth in this part and in relevant provisions of 2 CFR part 200, Project Property vests upon acquisition in the Recipient (or, if approved by EDA, in a Co-recipient or Subrecipient). Project Property shall be held in trust by the Recipient for the benefit of the Project for the Estimated Useful Life of the Project, during which period EDA retains an undivided equitable reversionary interest in the Property (the “Federal Interest”). The Federal Interest ensures compliance with EDA Project requirements, including those related to the purpose, scope, and use of a Project. The Recipient typically must secure the Federal Interest through a recorded lien, statement, or other recordable instrument setting forth EDA's Property interest in a Project ( e.g., (b) When the Federal Government is fully compensated for the Federal Share of Project Property, the Federal Interest is extinguished and the Federal Government has no further interest in the Property, except as provided in § 314.10(e)(3) regarding nondiscrimination requirements. [82 FR 57059, Dec. 1, 2017] § 314.3 Authorized use of Project Property. (a) General. (b) Project Property that is no longer needed for Project purposes. (c) Real Property for sale or lease. (d) Property transfers and Successor Recipients. (e) Replacement Personal Property. (f) Replacement Real Property. (g) Incidental use of Project Property. http://www.eda.gov [82 FR 57059, Dec. 1, 2017] § 314.4 Unauthorized Use of Project Property. (a) Compensation of Federal Share upon an Unauthorized Use of Project Property. (b) Additional Unauthorized Uses of Project Property. (1) In violation of the nondiscrimination requirements of § 302.20 of this chapter or in violation of the terms and conditions of the Investment Assistance; or (2) For any purpose prohibited by applicable law. (c) Recovery of the Federal Share. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76137, Dec. 19, 2014; 82 FR 57059, Dec. 1, 2017] § 314.5 Federal Share. (a) For purposes of this part, “Federal Share” means that portion of the current fair market value of any Project Property attributable to EDA's participation in the Project. EDA may rely on a current certified appraisal of the Project Property prepared by an appraiser licensed in the State where the Project Property is located to determine the fair market value. In extraordinary circumstances and at EDA's sole discretion, where EDA is unable to determine the current fair market value, EDA may use other methods of determining the value of Project Property, including the amount of the award of Investment Assistance or the amount paid by a transferee. The Federal Share shall be the current fair market value or other valuation as determined by EDA of the Property after deducting: (1) Reasonable repair expenses, if any, incurred to put the Property into marketable condition; and (2) Sales, commission and marketing costs. (b) The Federal Share excludes that portion of the current fair market value of the Property attributable to acquisition or improvements before or after EDA's participation in the Project, which are not included in the total Project costs. For example, if the total Project costs are $100, consisting of $50 of Investment Assistance and $50 of Matching Share, the Federal Share is 50 percent. If the Property is disposed of when its current fair market is $250, the Federal Share is $125 ( i.e., i.e., [73 FR 62870, Oct. 22, 2008, as amended at 79 FR 76137, Dec. 19, 2014; 82 FR 57060, Dec. 1, 2017] § 314.6 Encumbrances. (a) General. (b) Exceptions. (1) Shared first lien position. (2) Utility encumbrances. (3) Pre-existing encumbrances. (i) The requirements of § 314.7(b) are met; (ii) Consistent with paragraphs (b)(4)(iv) and (b)(5)(iv) of this section, the terms and conditions of the encumbrance are satisfactory; and (iii) Consistent with paragraphs (b)(4)(v) and (b)(5)(v) of this section, there is a reasonable expectation that the Recipient will not default on its obligations. (4) Encumbrances proposed proximate to Project approval. (i) EDA, in its sole discretion, determines that there is good cause and legal authority to waive paragraph (a) of this section; (ii) All proceeds secured by the encumbrance on the Property shall be available only to the Recipient and shall be used only for the Project for which the Investment Assistance applies, for related activities of which the Project is an essential part, or other activities that EDA determines are authorized under PWEDA; (iii) A grantor or lender will not provide funds without the security of a lien on the Property; (iv) The terms and conditions of the encumbrance are satisfactory to EDA; and (v) There is a reasonable expectation, as determined by EDA, that the Recipient will not default on its obligations. In determining whether an expectation is reasonable for purposes of this paragraph, EDA shall take into account whether: (A) A Recipient that is a non-profit organization is joined in the Project with a co-Recipient that is a public body and all co-Recipients are jointly and severally responsible; (B) A Recipient that is a non-profit organization is financially strong and is an established organization with sufficient organizational life to demonstrate stability over time; (C) The approximate value of the Project Property so that the total amount of all debt plus the Federal share of cost as reflected on the EDA Investment award, and any amendments as applicable, does not exceed the value of the Project Property as improved; and (D) Such other factors as EDA deems appropriate. (5) Encumbrances proposed after Project approval. (i) EDA, in its sole discretion, determines that there is good cause and legal authority to waive paragraph (a) of this section; (ii) All proceeds secured by the encumbrance on the Property shall be available only to the Recipient and shall be used only for the Project for which the Investment Assistance applies, for related activities of which the Project is an essential part, or other activities that EDA determines are authorized under PWEDA; (iii) A grantor or lender will not provide funds without the security of a lien on the Property; (iv) The terms and conditions of the encumbrance are satisfactory to EDA; and (v) There is a reasonable expectation, as determined by EDA, that the Recipient will not default on its obligations. In determining whether an expectation is reasonable for purposes of this paragraph, EDA shall take into account whether: (A) A Recipient that is a non-profit organization is joined in the Project with a co-Recipient that is a public body and all co-Recipients are jointly and severally responsible; (B) A Recipient that is a non-profit organization is financially strong and is an established organization with sufficient organizational life to demonstrate stability over time; (C) The Recipient's equity in the Project Property based on the appraised value of the Project Property at the time the encumbrance is requested so that the total amount of all debt plus the Federal share of cost as reflected on the EDA Investment award, and any amendments as applicable, does not exceed the value of the Project Property as improved; and (D) Such other factors as EDA deems appropriate. (c) Unauthorized encumbrances. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62870, Oct. 22, 2008; 79 FR 76137, Dec. 19, 2014; 82 FR 57060, Dec. 1, 2017] § 314.7 Title. (a) General title requirement. (b) Disclosure of encumbrances. (i) Liens; (ii) Mortgages; (iii) Reservations; (iv) Reversionary interests; and (v) Other restrictions on title or on the Recipient's interest in the Property. (2) No encumbrance will be acceptable if, as determined by EDA, the encumbrance interferes with the construction, use, operation or maintenance of the Project during its Estimated Useful Life. (c) Exceptions. (1) Project Real Property acquisition. (i) The Recipient provides EDA with reasonable assurances that it will obtain fee title to the Real Property prior to or concurrent with the initial disbursement of the Investment Assistance; and (ii) EDA, in its sole discretion, determines that the terms and conditions of the purchase agreement adequately safeguard the Federal Government's interest in the Project Real Property. (2) Leasehold interests. (i) Fee title to the Real Property is not otherwise obtainable; and (ii) EDA, in its sole discretion, determines that the terms and conditions of the lease adequately safeguard the Federal government's interest in the Real Property and demonstrate the economic development and public benefits of the leasehold transaction. (3) Railroad right-of-way construction. (4) State or local government owned roadway or highway construction. (i) All EDA-funded construction is completed in accordance with EDA requirements; (ii) The Recipient confirms in writing to EDA, satisfactory to EDA, that: (A) The Recipient is committed during the Estimated Useful Life of the Project to operate, maintain and repair all improvements for the Project consistent with the Investment Assistance; and (B) If at any time during the Estimated Useful Life of the Project any or all of the improvements in the Project within the State or local government owned roadway or highway are relocated for any reason pursuant to requirements of the owner of the public roadway or highway, the Recipient shall be responsible for accomplishing such relocation, including expending the Recipient's own funds as necessary, so that the Project continues as authorized by the Investment Assistance; and (iii) The Recipient obtains all written authorizations ( i.e., (5) Construction of Recipient-owned facilities to serve Recipient or privately owned Real Property General. (A) In cases where an authorized purpose of the Project is to sell Project Real Property, the Recipient or Owner, as applicable, provides evidence sufficient to EDA that it holds title to the Project Real Property intended for sale or lease prior to the disbursement of any portion of the Investment Assistance and will retain title until the sale of the Property in accordance with paragraphs (c)(5)(i)(C) through (E) of this section; (B) In cases where an authorized purpose of the Project is to lease Project Real Property, the Recipient or Owner, as applicable, provides evidence sufficient to EDA that it holds title to the Project Real Property intended for lease prior to the disbursement of any portion of the Investment Assistance and will retain title for the entire Estimated Useful Life of the Project; (C) The Recipient provides adequate assurances that the Project and the development of land and improvements on the Recipient or privately owned Project Real Property to be served by or that provides the economic justification for the Project will be completed according to the terms of the Investment Assistance; (D) The sale or lease of any portion of the Project or of Project Real Property served by the Project or that provides the economic justification for the Project during the Project's Estimated Useful Life must be for Adequate Consideration and the terms and conditions of the Investment Assistance and the purpose(s) of the Project must continue to be fulfilled after such sale or lease; and (ii) Additional conditions on sale or lease. (iii) Agreement between Recipient and Owner. (iv) Unauthorized Use and compensation of Federal Share. [71 FR 56675, Sept. 27, 2006, as amended at 73 FR 62870, Oct. 22, 2008; 79 FR 76137, Dec. 19, 2014; 82 FR 57061, Dec. 1, 2017] § 314.8 Recorded statement for Project Real Property. (a) For all Projects involving the acquisition, construction, or improvement of a building, as determined by EDA, the Recipient shall execute a lien, covenant, or other statement of the Federal Interest in such Project Real Property. The statement shall specify the Estimated Useful Life of the Project and shall include, but not be limited to, the Disposition, encumbrance and Federal Share requirements. The statement shall be satisfactory in form and substance to EDA. (b) The statement of the Federal Interest must be perfected and placed of record in the Real Property records of the jurisdiction in which the Project Real Property is located, all in accordance with applicable law. (c) Facilities in which the EDA Investment is only a small part of a large project, as determined by EDA, may be exempted from the requirements of this section. (d) In extraordinary circumstances and at EDA's sole discretion, EDA may choose to accept another instrument to protect the Federal Interest in Project Real Property, such as an escrow agreement or letter of credit, provided that EDA determines such instrument is adequate and a recorded statement in accord with paragraph (a) of this section is not reasonably available. The terms and provisions of the relevant instrument shall be satisfactory to EDA in EDA's sole judgment. The costs and fees for escrow services and letters of credit shall be paid by the Recipient. [71 FR 56675, Sept. 27, 2006, as amended at 79 FR 76138, Dec. 19, 2014; 82 FR 57061, Dec. 1, 2017] § 314.9 Recorded statement for Project Personal Property. For all Projects which EDA determines involve the acquisition or improvement of significant items of Personal Property, including ships, machinery, equipment, removable fixtures, or structural components of buildings, the Recipient shall provide notice of the Federal Interest in all Project Personal Property by executing a Uniform Commercial Code Financing Statement (Form UCC-1, as provided by State law) or other statement of the Federal Interest in the Project Personal Property, acceptable in form and substance to EDA, which statement must be perfected and placed of record in accordance with applicable law, with continuances re-filed as appropriate. Whether or not a statement is required by EDA to be recorded, the Recipient must hold title to all Project Personal Property, except as otherwise provided in this part. [82 FR 57062, Dec. 1, 2017] § 314.10 Procedures for release of the Federal Interest. (a) General. (b) Release of the Federal Interest after the expiration of the Estimated Useful Life. (c) Release prior to the expiration of the Estimated Useful Life. (d) Release of the Federal Interest before the expiration of the Estimated Useful Life, but 20 years after the award of Investment Assistance. (1) The Recipient has made a good faith effort to fulfill all terms and conditions of the award of Investment Assistance; and (2) The economic development benefits as set out in the award of Investment Assistance have been achieved. (3) See paragraph (e) of this section for limitations and covenants of use that are applicable to any release of the Federal Interest. (e) Limitations and Covenant of Use. (2) In determining whether to release the Federal Interest, EDA will review EDA's legal authority to release its interest, including the Recipient's performance under and conformance with the terms and conditions of the Investment Assistance; any use of Project Property in violation of § 314.3 or § 314.4; and other such factors as EDA deems appropriate. When requesting a release of the Federal Interest pursuant to this section, the Recipient will be required to disclose to EDA the intended future use of the Real Property or the tangible Personal Property for which the release is requested. (i) A Recipient not intending to use the Real Property or tangible Personal Property for explicitly religious activities following EDA's release will be required to execute a covenant of use. A covenant of use with respect to Real Property shall be recorded in the jurisdiction where the Real Property is located in accordance with § 314.8. A covenant of use with respect to items of tangible Personal Property shall be perfected and recorded in accordance with applicable law, with continuances re-filed as appropriate. See (ii) EDA may require a Recipient (or its successors in interest) that intends or foresees the use of Real Property or tangible Personal Property for explicitly religious activities following the release of the Federal Interest to compensate EDA for the Federal Share of such Property. If such compensation is made, no covenant with respect to explicitly religious activities will be required as a condition of the release. EDA recommends that any Recipient who intends or foresees the use of Real Property or tangible Personal Property (including by successors of the Recipient) for explicitly religious activities to contact EDA well in advance of requesting a release pursuant to this section. (3) Notwithstanding any release of the Federal Interest under this section, including a release upon a Recipient's compensation for the Federal Share, a Recipient must ensure that Project Property is not used in violation of nondiscrimination requirements set forth in § 302.20 of this chapter. Accordingly, upon the release of the Federal Interest, the Recipient must execute a covenant of use that prohibits use of Real Property or tangible Personal Property for any purpose that would violate the nondiscrimination requirements set forth in § 302.20 of this chapter. (i) With respect to Real Property, the Recipient must record a covenant under this subsection in the jurisdiction where the Real Property is located in accordance with § 314.8. (ii) With respect to items of tangible Personal Property, the Recipient must perfect and record a covenant under this subsection in accordance with applicable law, with continuances re-filed as appropriate, in accordance with § 314.9. [79 FR 76139, Dec. 19, 2014, as amended at 82 FR 57062, Dec. 1, 2017]