Real Property Guidance

These pages consist of information, guidance, and materials related to Real Property. These pages only apply to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.  The information contained within these pages are not intended to replace federal regulations. It is the responsibility of the recipient to ensure that only allowable costs are charged to the grant program.

Real Property Guidance Overview

This page only applies to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.

Real Property includes land, including land improvements, structures (including modular units affixed to the real property) and appurtenances. It does not include moveable machinery and equipment.

ACF grant programs must have specific authority to provide support for acquisition, construction, and/or renovation of real property. Recipients (and on behalf of subrecipients) must request prior approval and receive authorized approval before incurring costs for these purposes.

Requirements that pertain to acquisition, construction, and renovation of real property, including recipients obligation to ACF to use the property and the duration of the obligation, will be based on the requirements of the governing statute, any implementing program regulations, and requirements of 45 CFR §75.318, the terms and conditions of the award, and any related federal laws and executive orders, as applicable. If the governing statute establishes a requirement that differs from that in 45 CFR Part 75 and relevant requirements under the award, the statute take precedence.

Recipients (and on behalf of subrecipients) that proceed on the basis of unauthorized officials and/or incur costs before authorized officials approve requests do so at their own risk.  For more information, refer to the applicable real property pages contained within Real Property Guidance.

Real Property Prior Approvals

This page only applies to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.

According to 45 CFR §75.308, 45 CFR §75.407, and 45 CFR §75.318 prior written approvals are required for Acquisition, Construction, Major Renovations, and Disposition of or Encumbering Real Property.

In addition, 45 CFR §75.318(b)(1), states “…except as otherwise provided by Federal statutes or by the HHS awarding agency, real property will be used for the originally authorized purpose as long as needed for that purpose, during which time the non-Federal entity (i.e., recipient) must not dispose of or encumber its title or other interests.” Therefore, an encumbrance (with or without a subordination) requires prior approval and is only approved by the ACF Chief Grants Management Officer. Recipients (and on behalf of subrecipients) that proceed on the basis of unauthorized officials and/or incur costs before authorized officials approve requests do so at their own risk. ACF is not bound to unauthorized decisions, unallowable costs, and/or risky terms. There is no guarantee a request will be approved.

Request for Approval

Please refer to the Real Property Prior Approval Guidance document for specific items required for Purchases/Acquisition, Encumbrance, Construction and/or Major Renovation requests.

Approval and Next Steps

The only official notification approving the request will be in the form of the Notice of Award (NOA). Once a request is approved via the NOA, the recipient and pass-through entity must ensure that the NFI is filed and/or posted, accordingly, and submit in OLDC the SF-429 Attachment A's annually about the property. Exceptions include minor renovation, and when the facility in question is formally designated Bureau of Indian Affairs (BIA) Trust property.

When real property is purchased, constructed or renovated (see Major Renovation) with Federal funds, a Federal interest is established. This interest does not expire, until formal approved disposition. See Property Glossary.

Encumbrance (Lien) Notice

An encumbrance is a right to, interest in, or legal liability on real property. These include liens, mortgages, easements, encroachments, licenses, or deed restrictions. Real property acquired, constructed, or renovated with federal funds may not be conveyed, transferred, assigned, mortgaged, leased, or in any other manner encumbered by the recipient, except as expressly authorized in writing by ACF. See 45 CFR §75.308(c)(1)(xi), 45 CFR §75.318(b)(1), 45 CFR §75.323, HHS Grants Policy Statement II-48-49 and II-66 Visit disclaimer page .

There is a common misconception that only new financing requires approval. Renewal or extension of an existing financing is also an encumbrance. Without formal prior approval all encumbrances (with or without a subordination) on a property with federal interest are unallowable. The use of federal funds to support an unapproved encumbrance (e.g., for mortgage payments, interest payments) is also unallowable and can result in a disallowance.

When requesting prior approval, please note the following:

  • The official starting point for an encumbrance (with or without subordination) prior approval request is the submission of the SF-429 Attachment C, along with all relevant new (and old, if applicable) supporting documents (e.g., debt instrument, agreements, notes, amortization schedule), in the GrantSolutions On-Line Data Collection (OLDC) system.
  • ACF will consider low risk, ideal, and reasonable terms and provisions, which minimizes federal financial interest risk. These include, but are not limited to: long term, low interest, fixed rate, and fully amortized loans. Any debt instrument or related document that are not low-risk and reasonable will be scrutinized heavily, which will delay ACFs decision.
  • High risk and unreasonable terms and provisions should be avoided or waived to mitigate federal financial interest risk. These include, but are not limited to: short term, variable rate(s), floating rate(s), interest rate swap (e.g., alternative rate spread, hedge, London Inter-bank Offered Rae (LIBOR), Securities Industry and Financial Markets Association (SIFMA), variable-rate demand obligations (VRDO), futures, forwards), balloons (notes, loans, payments), uncapped, bundled loans, cross-collateralization, cross-default, pre-payment penalties, call notes (e.g., due on sale), interest after default, right to set-off, and security accounts. Risky and expensive loans typically reduce the funding available to support services, compromising optimal program effectiveness.
  • Please allow adequate time (at least 90 calendar days) for ACF review and decision.
  • Incomplete or unsupportable packages may be returned.
  • Recipients must demonstrate that they performed their due diligence by exploring the market and choosing the best option available. A comparable process that is considered a standard for due diligence is the procurement market search which requires a minimum of three bids. If a lender cannot meet the low risk terms and provisions, recipients are encouraged to look elsewhere.
  • There is no guarantee a request will be approved.

Real Property Notice of Federal Interest (NFI)

This page only applies to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.

Recording a Federal Interest

When federal funds are approved and used to support the acquisition, construction, and/or major renovation of a property, the recipient and pass-through entity must ensure that the NFI is filed and recorded with the local jurisdiction. (Some jurisdictions do not allow NFI’s to be filed for modular units classified as real property; therefore, the NFI must be posted on the structure). Federal interest exists irrespective of the filing of the NFI. The recipient and pass-through entity must ensure that the subrecipient also follow the same requirements.

Records for properties that have Federal interest must be maintained and retained for up to 3 years after final disposition.

Federal Interest

The Federal interest in the property does not expire, until a formal disposition request has been submitted with supporting document and is officially approved by the ACF Office of Grants Management. So long as a Federal interest remains, the title holding entity must report on the property annually. Recipients and pass-through entities are responsible for submitting these reports on behalf of their subrecipients. For ongoing requirements and disposition instructions, please see Property Glossary.

Request to Release a Federal Interest

When a property is no longer needed, the recipient and pass-through entity (and on behalf of subrecipients) must request disposition instructions (i.e., submit the SF-429 Attachment C Disposition Request along with supporting documentation) within the GrantSolutions On-Line Data Collection (OLDC) system.

The recipient and pass-through entity are considered direct recipients of ACF Federal award(s). As ACF does not have a relationship with subrecipients, ACF is unable to release a federal interest until the recipient or pass-through entity submits the request with supporting documentation for approval. The title holding entity must conduct research and gather information pertaining to the whole funding source scenario to determine the amount and percentage of federal funds used to establish the Federal interest on the property.

Determining Federal Interest to Remit Payment

Federal interest is determined by utilizing the following documentation such as, but not limited to:

  1. Initial and any subsequent funding requests related to the property.
  2. Property records (including capital asset records, improvements, etc.).
  3. Awards indicating the purpose and amount of Federal amounts used for the property. As applicable, the cost sharing / matching requirement included under the Federal award.
  4. Filed (or posted) Notice of Federal Interest.
  5. Encumbrance documents (e.g., loans, mortgages, amortization schedule, etc.). As applicable, the interest payments included under the Federal award.

For more information, please review Federal Interest Examples.

See Remit Payment and Property Glossary.

Real Property Standard ACF Templates

This page only applies to ACF grant programs with real property authority.  For more information see Applicable ACF Grant Programs with Real Property Authority.

These documents have been formally pre-approved for use by all HHS regional Office of General Counsel (OGC) and headquarters OGC attorneys. Use of these documents will not require re-review by the counsel. If these documents are amended or other documents are provided in place of these, delays in prior approval and/or disposition requests may occur.

For accessibility issues, please contact your assigned Program Specialist. The templates and descriptions are as follows:

Office of Community Services (OCS) - Community Economic Development (CED) Notice of Federal Interest (NFI)

When OCS-CED Federal funds are used to support the purchase or make major renovation of a facility, the recipient must ensure that an NFI is filed and recorded with the local jurisdiction. The only exception is when the facility in question is on formally designated Bureau of Indian Affairs (BIA) Trust property; please see the Notice of Award remarks for additional information.

The NFI document identifies the property acquired or improved using Federal funding and applicable federal requirements. HHS/ACF’s interest applies to the entire Property, including, but not limited to, the facility and land. Federal law governs its use, encumbrance, and/or disposition. Before any attempt to purchase, sell, occupy, take a mortgage interest in or otherwise encumber, or foreclose upon the property, the NFI directs the Party to notify the responsible HHS official listed in the document.  For a fillable standard template of the form, please see OCS-CED NFI.

Office of Community Services (OCS) - Generic Subordination Agreement

When an OCS recipient seeks to finance a property improved or purchased with Federal funds, the lending institution may require that the Federal Interest be subordinated to its own as a condition of the loan.  A subordination is an agreement by which one party takes a second or third position — a subordinate position. This standard subordination agreement is designed to protect the Federal Interests.  HHS/ACF has and will continue to have a Federal Interest in the property because the recipient (Borrower) has used Federal funds awarded by HHS/ACF to purchase and/or to make major renovation to the Property, and may use additional Federal funds for this purpose, such as through principal or interest on the loan.  HHS/ACF has agreed that, subject to the terms and conditions of this Agreement, the Federal Interest in the Property is and shall be subordinated to the lien of the Lender secured by the mortgage or deed of trust.  For a fillable standard template of the form, please see OCS Subordination Agreement.

Office of Head Start (OHS) - Recipient Notice of Federal Interest (NFI)

When OHS funds are used to support the purchase, construction, or major renovation of a facility, the recipient must ensure that an NFI is filed and recorded with the local jurisdiction. The only exception is when the facility in question is on formally designated Bureau of Indian Affairs (BIA) Trust property; please see the Notice of Award remarks for additional information.

The NFI document identifies the property acquired or improved using Federal funding and applicable federal requirements. HHS/ACF’s interest applies to the entire Property, including, but not limited to, the facility and land. Federal law governs its use, encumbrance, and/or disposition. Before any attempt to purchase, sell, occupy, take a mortgage interest in or otherwise encumber, or foreclose upon the property, the NFI directs the Party to notify the responsible HHS official listed in the document. For a fillable standard template of the form, please see OHS NFI.

Office of Head Start (OHS) - Inter-Creditor Agreement

When an OHS recipient wishes to pursue a USDA loan, an Inter-Creditor Agreement must be included. The OHS Inter-Creditor Agreement is between the United States Department of Agriculture, Rural Housing Services (USDA-RD) and the United States Department of Health and Human Services, Administration for Children and Families (HHS/ACF). This agreement is strictly to facilitate inter-agency management and coordination of the respective laws, regulations and policy guidance governing USDA’s Rural Development Program and HHS/ACF’s Head Start Program.

Office of Head Start (OHS) - Lease Rider

When HHS/ACF approves a recipient's (Tenants) plan to use Head Start funds to construct a facility on leased property or complete a major renovation on leased property, HHS/ACF has and will continue to have a Federal Interest in the Leasehold. The Federal Interest includes any future HHS/ACF awards made for Improvements to the Leasehold. This Lease Rider evidences a Federal Interest in the Leasehold that secures the right of the federal awarding agency to recover the remaining value of the Improvements in the event that a lease is terminated prior to expiration of its full term. The Federal Interest in the Leasehold of a facility on which the Tenant has made major renovations with Federal Head Start funds continues for a period of at least 15 years and the Federal Interest in the Leasehold of land on which the Tenant has constructed a facility with Federal Head Start funds continues for a period of at least 30 years notwithstanding any termination of the lease prior to completion of its original term. The recipient has agreed to lease a portion of the leased property from the Lessor (owner of real property) for the purpose of operating a Head Start facility, pursuant to a lease, a copy of the Lease must be attached to the Lease Rider. For a fillable standard template of the form, please see OHS Lease Rider.

Office of Head Start (OHS) - Generic Subordination Agreement

When an OHS recipient seeks to finance a property improved or purchased with Federal funds, the lending institution may require that the Federal Interest be subordinated to its own as a condition of the loan.  A subordination is an agreement by which one party takes a second or third position — a subordinate position. This standard subordination agreement is designed to protect the Federal Interests.  HHS/ACF has and will continue to have a Federal Interest in the property because the recipient (Borrower) has used Federal funds awarded by HHS/ACF to purchase and/or to make major renovation to the Property, and may use additional Federal funds for this purpose, such as through principal or interest on the loan.  HHS/ACF has agreed that, subject to the terms and conditions of this Agreement, the Federal Interest in the Property is and shall be subordinated to the lien of the Lender secured by the mortgage or deed of trust.  For a fillable standard template of the form, please see OHS Subordination Agreement.

Real Property Reporting

Real Property Status Report (SF-429)

This page only applies to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.

When real property is purchased, constructed or improved (see Major Renovation) with Federal funds, a Federal interest is established. This interest does not expire. ACF, per 45 CFR §75.343, requires applicable property program recipients and pass-through entities to submit real property reports and requests about real property that is proposed or was purchased/acquired, constructed, and/or renovated with federal funds. Recipients and pass-through entities are responsible for submitting these reports on behalf of their subrecipients.

When a recipient determines that it is necessary to purchase/acquire, construct, and/or renovate a facility, the recipient must request prior approval. Please note that an encumbrance (e.g., new financing, refinancing or extensions of existing mortgages) with or without a subordination requires prior approval and is only approved by the ACF Chief Grants Management Officer. See Property Glossary.

When the facility is no longer needed, the recipient/grantee and pass-through entity must request disposition instructions (i.e., submit the SF-429 Attachment C via the On Line Data Collection (OLDC) system) after which ACF will approve one of the three options prescribed under 45 CFR §75.318, eliminating the Federal interest. So long as a Federal interest remains, the title holding entity (i.e., a current or former recipients and pass-through entities) must report on the property annually.

In accordance with program specific requirements, recipients and pass-through entities are required to submit the OMB approved Real Property Status Report SF-429 and Attachments, in which there is a Federal interest. The collection of SF-429 forms must be used for awards that establish a Federal interest on real property. Only reports submitted in the OLDC system are considered official submissions.

As of July 1, 2017, the following OMB approved real property report and request forms, OMB Control Number: 4040-0016, are available electronically through the OLDC. To access and submit the forms, please login to www.grantsolutions.gov Visit disclaimer page and navigate to the forms in OLDC. Again, only reports submitted in OLDC are considered official submissions. For more information on using the OLDC system, please reference Important Tips for OLDC.

The Real Property Status Reports and Requests, SF-429s, must be submitted as follows:

  • SF-429. The Cover Page must be submitted along with the other SF-429 Attachments (A, B, and C).
  • SF-429 Attachment A (or SF-429 Attachment A No Property). The Annual General Report is due annually and follows the same reporting cycle as the annual Federal Financial Report or program specific Expenditure Report.
  • SF-429 Attachment B. The Acquire or Improve Request may be submitted at any time to request prior approval to use federal funds to acquire or improve property. The official starting point for any real property purchase, construction, and/or major renovation process, a prior approval, is an OLDC submitted SF-429B form with uploaded supporting documentation. OHS recipients, please see special note below.
  • SF-429 Attachment C. The Disposition or Encumbrance Request may be submitted at any time to request an encumbrance or disposition instructions. Recipients and pass-through entities must request prior approval to use federal funds to encumber a property, or to dispose of real property acquired or improved with federal funds. At the time of disposition, per 45 CFR §75.318(c), recipients and pass-through entities may be required to provide compensation to the U.S. Treasury when acquired or improved real property is sold or retained. The official starting point for any real property disposition or encumbrance process, a prior approval, is an OLDC submitted SF-429C form with uploaded supporting documentation.

Please note that for the SF-429 Attachment B and Attachment C the Appraised value is the current fair market value based on an appraisal (no more than three (3) years old) conducted by an independent certified appraiser.

OHS recipients: Please DO NOT submit the SF-429 Attachment B and/or Attachment C request(s) until OHS informs you that your 45 CFR Part 1303 Subpart E - Facilities application (Part 1303 application) is complete and meets Head Start Program Performance Standard requirements. Once your Part 1303 application is complete you should proceed to submit your SF-429 Attachment B and/or Attachment C request(s). Any SF-429 Attachment B and/or Attachment C form(s) submitted for incomplete Part 1303 applications will be rejected in the Online Data Collection (OLDC) system. Acknowledgment of a complete Part 1303 application DOES NOT indicate official approval of your funding request. When you submit the SF-429 Attachment B and/or Attachment C, please upload the entire Part 1303 package to the SF-429 Cover Page on Line 9. Official approval of funding requests are only in the form of a Notice of Award (NoA). Until a NoA is issued, any costs incurred for the project are at the entity’s own financial risk. There is no guarantee of approval.

Real Property Disposition

This page only applies to ACF grant programs with real property authority. For more information see Applicable ACF Grant Programs with Real Property Authority.

When a recipient no longer needs the property, the recipient must obtain disposition instructions from your respective ACF Grants Management Officer (GMO) within the Office of Grants Management (OGM) for review and approval, by submitting the SF-429 Attachment C via the OLDC.

The official starting point for any disposition process, a prior approval, is an OLDC submitted SF-429C Disposition or Encumbrance Request form with supporting documentation.

The three standard disposition options available under 45 CFR §75.318(c) are:

  1. Retain title after compensating ACF. The amount paid to ACF will be computed by applying the federal share percentage of participation in the cost of the original purchase (and costs of any improvements) to the fair market value of the property (i.e., meaning the appraised value identified by an independent certified appraiser in an appraisal). However, in those situations where the recipient is disposing of real property acquired or improved with a Federal award and acquiring replacement real property under the same Federal award, the net proceeds from the disposition may be used as an offset to the cost of the replacement property. Note: this action may require additional lead time by the recipient and further discussions with Office of General Counsel and ACF to determine whether it is an acceptable option that fits within the timeframe and scenario to qualify as a replacement property.
  2. Sell the property and compensate ACF. The amount due to ACF will be calculated by applying the federal share percentage of participation in the cost of the original purchase (and costs of any improvements) to the proceeds of the sale after deduction of any actual and reasonable selling and fixing-up expenses. If the Federal award has not been closed out, the net proceeds from the sale may be offset against the original cost of the property. When the recipient is directed to sell the property, sales procedures must be followed and provide adequate competition to the extent practicable and result in the highest possible return.
  3. Transfer title to a third party designated/approved by ACF. ACF does not have the authority to own property; therefore, if option 3 is chosen, ACF must designate and approve of the third party to which the property will be transferred. The transferor (former recipient title holder) is entitled to be paid an amount calculated by applying the non-federal share percentage of participation in the purchase of the real property (and costs of any improvements) to the current fair market value of the property.

To access and submit the SF-429 forms, please login to www.grantsolutions.gov Visit disclaimer page and navigate to the forms. The step-by-step instructions and training recordings are housed in one of two places according to how you access the system, either under GrantSolutions Help/Support or OLDC News and Tips. If you are having technical issues with OLDC or any of the forms in OLDC, please contact the GrantSolutions Help Desk at 202-401-5282, 1-866-577-0771, or help@grantsolutions.gov.  Please contact your assigned Office of Grants Management representative for further information and/or questions.

 

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