[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR314.6]

[Page 513-514]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
CHAPTER III--ECONOMIC DEVELOPMENT ADMINISTRATION, DEPARTMENT OF COMMERCE
 
PART 314--PROPERTY--Table of Contents
 
                          Subpart A--In General
 
Sec. 314.6  Encumbrances.

    (a) Except as provided in Sec. 314.6(c), recipient-owned property 
acquired or improved in whole or in part with grant assistance may not 
be used to secure a

[[Page 514]]

mortgage or deed of trust or otherwise be used as collateral or 
encumbered except to secure a grant or loan made by a State or Federal 
agency or other public body participating in the same project. This 
provision does not prevent projects from being developed on previously 
encumbered property, if the requirements of Sec. 314.7(b) are met.
    (b) Encumbering project property other than as permitted in this 
section is an unauthorized use of the property requiring compensation to 
the Federal Government as provided in Secs. 314.4 and 314.5.
    (c) EDA may waive the provisions of Sec. 314.6(a) for good cause 
when EDA determines all of the following:
    (1) All proceeds from the grant/loan to be secured by the 
encumbrance on the property shall be available only to the recipient, 
and all proceeds from such secured grant/loan shall be used only on the 
project for which the EDA grant was awarded or on related activities of 
which the project is an essential part;
    (2) The grantor/lender would not provide funds without the security 
of a lien on the project property; and
    (3) There is a reasonable expectation that the borrower/recipient 
will not default on its obligation.
    (d) EDA may waive the provisions of Sec. 314.6(a) as to an 
encumbrance on property which is acquired and/or improved by an EDA 
grant when EDA determines that the encumbrance arises solely from the 
requirements of a pre-existing water or sewer facility or other utility 
encumbrance which by its terms extends to additional property connected 
to such facilities.