Covenant

OMB Control No. 0610-0096
Expiration Date: xx/xx/20xx

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[Insert the “instrument prepared by” clause and contact information as required by local law]

COVENANT OF PURPOSE, USE AND OWNERSHIP
This Covenant of Purpose, Use and Ownership (“Covenant”) dated this _______day of
_______________, 20__, is made by ________________________________ with an address of
_______________________________(“Recipient”) for the benefit of the United States
Department of Commerce, Economic Development Administration located at 1401 Constitution
Avenue, NW, Washington, DC 20230 with a regional office at __________________________
__________________________________________________________________(“EDA”):
RECITALS:
WHEREAS, pursuant to the Public Works and Economic Development Act of 1965 (42
U.S.C. § 3121 et seq.) (“PWEDA”), Recipient has applied to, received and accepted from EDA a
Financial Assistance Award dated _______________ (“Award”), in the amount of
____________________________________Dollars ($_____________________) (“EDA Award
Amount”) for EDA Award No. ___________________; and
WHEREAS, the Award is subject to certain terms and conditions pursuant to which
Recipient agreed to comply with, inter alia, the applicable requirements of EDA’s regulations at
13 C.F.R. Chapter III and government-wide regulations set out at 2 C.F.R. part 200; and
WHEREAS, pursuant to the application submitted by Recipient requesting said Award,
which includes all forms, documentation, and any information submitted to EDA as part and in
furtherance of the request for the Award, including any information submitted after the initial
application (“Grant Application”) and pursuant to the Award, the EDA Award Amount is to be
used for the purpose of financing the acquisition of and/or improvements to the real property
described in “Exhibit A,” attached hereto and made a part hereof (the “Project Property”)
consisting of ___________________________________________________________________
______________________________________________________________________________
______________________________________________________________(the “Project”); and

WHEREAS, ____ years from [the trigger date (e.g., date of award, construction end date,
etc.)], as determined by EDA, is the Estimated Useful Life, as defined in 13 C.F.R. § 314.1, of
the improvements made to the Project Property pursuant to the Project; and
WHEREAS, the Award provides, inter alia¸ that Recipient will not sell, lease, transfer,
convey, encumber, mortgage, or otherwise alienate any right to or interest in the Project
Property, or use the Project Property for purposes other than, or different from, those purposes
set forth in the Award and the Grant Application made by Recipient therefor (“Project
Purposes”), such alienation or use being prohibited by 13 C.F.R. part 314 and by 2 C.F.R. part
200; and
WHEREAS, in accordance with PWEDA, EDA is not authorized to permit transfer or
conveyance of Project Property to parties that are not eligible to receive EDA grants unless EDA
is repaid the Federal Share as defined at 13 C.F.R. § 314.5 (“Federal Share”) or unless the
authorized purpose of the Award is to develop land in order to lease or sell the land for a specific
use, approved in advance by EDA, in which case EDA may authorize a lease or sale of the
Project Property or a portion thereof if certain conditions are met; and
WHEREAS, Recipient, as owner of the Project Property agreed to record this Covenant
in the appropriate office for the recording of public records affecting real property so as to
constitute notice to all persons of any and all restrictions on title to and use of all or part of the
Project Property.
NOW THEREFORE, in consideration of financial assistance rendered and/or to be
rendered by EDA and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and to ensure that the benefits of the Project will accrue to the
public and be used as intended by both EDA and Recipient consistent with the Project Purposes,
Recipient hereby covenants and agrees as follows:
1.

COMPLIANCE WITH AWARD AND REGULATIONS

Recipient shall comply with the terms and conditions of the Award and the regulations
set forth in 13 C.F.R. Chapter III and 2 C.F.R. part 200.
2.

RESTRICTIONS DURING ESTIMATED USEFUL LIFE

For the Estimated Useful Life set forth above, Recipient will not sell, lease, transfer,
convey, encumber or mortgage any interest in the Project Property, nor shall Recipient use the
Project Property for purposes other than the Project Purposes without the prior written approval
of EDA.

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3.

LEASE OF PROJECT PROPERTY

If the Grant Application provides for and the Award authorizes Recipient to lease Project
Property, each lease arrangement shall be subject to the prior written approval of EDA during the
Estimated Useful Life. EDA must determine that the applicable lease arrangement is consistent
with the Grant Application and authorized general and special purpose(s) of the Award; will
provide adequate employment and economic benefits for the area in which Project Property is
located; is consistent with EDA policies concerning, but not limited to, non-discrimination, nonrelocation, and environmental requirements; and that the proposed lessee is providing adequate
compensation, as defined in 13 C.F.R. § 314.1, to Recipient for said lease.
4.

PROJECT PURPOSES AND TRANSFER OF PROJECT PROPERTY

Recipient further covenants that in the event the Project Property is used for purposes
other than the Project Purposes, or is sold, leased, transferred, conveyed, encumbered or
mortgaged without the prior written approval of EDA, Recipient will compensate the Federal
Government in the amount of the Federal Share, which amount shall be determined at the sole
discretion of EDA, such amount being: (a) EDA’s pro-rata share of the fair market value of the
Project Property as further set forth in 13 C.F.R. § 314.5, as that provision may be amended from
time to time, (b) the EDA Award Amount, or (c) the amount of grant funds actually disbursed.
5.

CHARGES; LIENS

Recipient shall protect the title and possession of all Project Property and pay when due
all taxes, assessments, mechanic and/or materialmen liens, and other charges, fines, and
impositions now existing or hereafter levied or assessed upon the Project Property.
6.

HAZARD INSURANCE

Recipient shall insure and keep insured all improvements now or hereafter created upon
Project Property against loss or damage by fire and windstorm and any other hazard or hazards
included within the term “extended coverage.” The amount of insurance shall be the full
insurable value of said improvements but in no event less than the full replacement value of the
improvements. Any insurance proceeds received by Recipient due to loss shall be applied to
restoration or repair of any damaged Project Property, provided such restoration or repair is
economically feasible. If such restoration or repair is not economically feasible, Recipient shall
use said insurance proceeds to compensate EDA for its Federal Interest, as defined at 13 C.F.R. §
314.2 (“Federal Interest”). EDA’s Federal Interest shall be satisfied when the amount received is
equal to the Federal Share as that term is defined at 13 C.F.R. § 314.5.

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7.

PRESERVATION AND MAINTAINANCE OF PROJECT PROPERTY

Recipient shall keep Project Property in good condition and repair during the Estimated
Useful Life and shall not permit or commit any waste, impairment, or deterioration of Project
Property, but shall give written notice thereof to EDA without delay.
8.

INDEMNIFICATION

To the extent permitted by law, Recipient agrees to indemnify and hold the Federal
Government harmless from and against all liabilities that the Federal Government may incur as a
result of providing an award to assist, directly or indirectly, in the preparation of the Project
Property or construction, renovation, or repair of any facility on the Project Property, to the
extent that such liabilities are incurred because of toxic or hazardous contamination of
groundwater, surface water, soil, or other conditions caused by operations of the Recipient or any
of its predecessors (other than the Federal Government or its agents) on the Project Property.
See also 13 C.F.R. § 302.19 (“Indemnification”).
9.

INSPECTION

EDA may make or cause to be made reasonable entries upon and inspection of Project
Property by EDA or an authorized representative of EDA.
10.

CONDEMNATION

The proceeds of any award or claim for damages, direct or consequential, in connection
with any condemnation or other taking of Project Property, or any part thereof, or for any
conveyance in lieu of condemnation shall be used by Recipient to compensate EDA for EDA’s
Federal Share. EDA’s Federal Share of said condemnation proceeds shall be equal to that
percentage which the EDA Award Amount bore to the total project costs under the Award for
which the condemned property was acquired or improved. See also 13 C.F.R. § 314.5 (“Federal
Share”).
11.

REMEDIES

Upon Recipient’s breach of any term or condition of the Award or term or condition of
this Covenant, then EDA, its designees, successors, or permitted assigns may declare the
amounts owed to EDA (i.e., the Federal Share) with interest thereon at the rate set forth in 31
U.S.C. § 3717, immediately due and payable, such amounts being: (a) EDA’s pro-rata share of
the fair market value of the Property as further set forth in 13 C.F.R. § 314.5, as that provision
may be amended from time to time, (b) the EDA Award Amount, or (c) the amount of the grant
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funds actually disbursed (the “Indebtedness”). The amount shall be determined at the sole
discretion of EDA in accordance with EDA’s authorities and regulations, and Recipient agrees
that the Indebtedness shall be due and payable by Recipient to EDA upon the termination of the
Award for material noncompliance or upon any attempt to use, transfer or alienate any interest in
the Project Property in violation of the Award or of the regulations in 13 C.F.R. Chapter III or 2
C.F.R. part 200 and does, moreover, agree that such Indebtedness shall be extinguished only
through and upon the full payment of the Indebtedness to the Federal Government.
12.

REMEDIES CUMULATIVE

EDA may enforce any and all remedies afforded by law or equity, including seeking and
obtaining a judicial determination(s) compelling Recipient to comply with the terms and
conditions of the Award and this Covenant, which may be exercised concurrently, independently
or successively.
13.

FOREBEARANCE NOT A WAIVER

Any forbearance by EDA in exercising any right or remedy hereunder, or otherwise
afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or
remedy. The procurement of insurance or the payment of taxes or other liens or charges by EDA
shall not be a waiver of EDA’s rights under this Covenant.
14.

RELEASE

EDA and the Recipient agree that, so long as the possession and use of Project Property
by Recipient has been only for the purposes set forth in the Award and the Grant Application,
then after the Estimated Useful Life of the improvements to Project Property, Recipient may
request a release of the Federal Interest in accordance with 13 C.F.R. part 314, which will not be
withheld except for good cause, as determined in EDA’s sole discretion; provided, however, that
in accordance with 13 C.F.R. part 314, restrictions upon the religious use or discriminatory
practices in connection with the use of Project Property shall survive this Covenant and any
release thereof, which shall be evidenced by a separate recorded covenant.
15.

GOVERNING LAW; SEVERABILITY

This Covenant shall be governed by applicable federal law, if any, and if there is no
applicable federal law by state law, and nothing contained herein shall be construed to limit the
rights EDA, its designees, successors, or assigns are entitled to under applicable federal or state
law. In the event that any provision or clause of this instrument conflicts with applicable law,
such conflict shall not affect other provisions of this instrument which can be given effect

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without the conflicting provision, and to this end the provisions of this instrument are declared to
be severable.
16.

RECORDING COVENANT AGAINST TITLE

Pursuant to 13 C.F.R. part 314, Recipient further agrees that Recipient shall execute and
place on record against the title to the Project Property acquired or improved in whole or in part
with the Award, this Covenant of Purpose, Use and Ownership. Recipient shall furnish EDA
with the original, recorded Covenant as executed. Recipient further agrees that whenever the
Project Property is sold, leased or otherwise conveyed pursuant to 13 C.F.R. part 314, Recipient
or transferor shall add to the document conveying such interest in and to the real estate an
express reference to this Covenant, satisfactory to EDA, whereby the purchaser or tenant
expressly accepts and agrees to be bound by this Covenant.
17.

NOTICE

Any notice from EDA to Recipient provided for in this Covenant shall be sent by
certified mail to Recipient’s last known address or at such address as Recipient may designate to
EDA, except for any notice given to Recipient in the manner as may be prescribed by applicable
law as provided hereafter in this Covenant. Likewise, any notice from Recipient to EDA shall be
sent by certified mail to EDA’s address.
18.

PARTIES BOUND BY THIS COVENANT

This Covenant and this Covenant’s rights, privileges, duties and obligations shall inure to
the benefit of and be binding upon each of the parties hereto, together with their respective
successors and permitted assigns.
19.

RESTRAINT ON TITLE

It is stipulated and agreed that the terms hereof constitute a reasonable restraint on
alienation of use, control, and possession of or title to the Project Property given to evidence and
secure the Federal Interest expressed herein.
20.

COVENANT RUNS WITH LAND

This Covenant shall run with the land.

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21.

AUTHORITY TO EXECUTE COVENANT

Recipient represents and warrants to and covenants with EDA that Recipient has been
duly authorized by Recipient’s governing body by all necessary action and has received all
necessary third party consents to enter into this Covenant.

IN WITNESS WHEREOF, Recipient has hereunto set its hand as of the day and year first above
written by its duly authorized officer.
RECIPIENT
_________________________________________
By:______________________________________
Title: ____________________________________
Attorney for Recipient
______________________________________
[Optional depending on RO:
“This approval by Recipient’s counsel shall be in addition to and in
no way a restriction or limitation of said Attorney’s separate written
legal opinion regarding this Covenant.]
STATE OF
COUNTY OF

)
) ss.
)

The foregoing instrument was acknowledged before me, a Notary Public in and for said County
and State, this _____ day of ______________, 20__, by __________________________on
behalf of _________________________________________________________________.

____________________________________
Notary Public
My commission expires:________________

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Exhibit A
Property Description

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