**Special Conditions for Construction, Major Renovation,**

**or Purchase of a Head Start Facility**

GRANTEE NAME:
**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

GRANT NUMBER:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Purchase ( ) Major Renovations ( ) Construction ( )

These special conditions apply to the agreement between the
Administration for Children and Families (ACF), United States Department
of Health and Human Services (HHS) and (insert grantee name) regarding
the purchase, and major renovation of the Head Start facility located at
(insert the address of the facility). The agreement includes the
awarding of \$\_\_\_\_\_\_ in Federal funds for the purchase or
construction or major renovation of the facility.

1.  Immediately upon: 1) purchasing a facility financed with ACF grant
    funds; 2) receiving permission from ACF to use grant funds to
    construct a facility; or, 3) receiving permission from ACF to use
    grant funds to renovate a facility owned by the grantee, the grantee
    must record a Notice of Federal Interest in the property in the
    appropriate local land records office for the jurisdiction where
    your property is located. In accordance with 45 CFR §1309.21(d), the
    Notice must include the following information:

```{=html}
<!-- -->
```
A.  The date of the award of grant funds for the purchase and/or
    construction or renovation, and the address and legal description of
    the property to be purchased or renovated;

B.  That the grant incorporated conditions which restrict the use of
    property and provide for a Federal interest in the property;

C.  That the property may not be used for any purpose inconsistent with
    that authorized by the Head Start Act (42 U.S.C. §§9831 [et
    seq]{.underline}.) and applicable regulations;

D.  That the property may not be mortgaged or used as collateral, or
    sold or otherwise transferred to another party, without the written
    permission of the responsible HHS official;

E.  That these grant conditions and requirements cannot be altered or
    nullified through a transfer of ownership;

F.  The name (including signature) and title of the person who completed
    the Notice for the grantee agency and the date of the Notice.

You should bring two copies of the Notice with you at the time you
record the original notice, and have the land records clerk stamp those
two copies as filed. One copy of this filed stamped Notice of Federal
Interest must be submitted to: Grants Officer, Administration for
Children and Families, Office of Family Supportive Services, Room 4114,
26 Federal Plaza, New York, New York 10278 within 10 working days of the
transaction establishing the Federal interest.

2.  The final inspection report, by a licensed engineer or architect, of
    the facility which has been purchased, constructed, or renovated
    indicating that the building is structurally sound and safe for use
    as a Head Start facility must be submitted to the Regional Office
    within 30 days of the inspection;

3.  The use of the facility purchased, constructed, or renovated with
    ACF grant funds may not be used for purposes other than that for
    which it was funded without the express written approval of the
    Regional Office for the useful life of the facility;

4.  The grantee must provide the ACF Regional Office with both
    telephonic and written notice on the day of, or as soon as
    practicable after the day that the grantee first knows, that it has
    defaulted on a mortgage and loan involving real property purchased,
    constructed, or renovated with ACF grant funds;

5.  As provided in 45 CFR §1309.23, the grantee must obtain the
    following forms of insurance upon the completion of purchase,
    construction, or renovation of a facility with ACF grant funds:

```{=html}
<!-- -->
```
A.  A title insurance policy which insures the fee interest in the
    facility for an amount not less than the full appraised value, which
    contains an endorsement identifying ACF as a loss payee that will
    reimburse ACF if the title fails \[45 CFR 1309.23(a)(1)\].

```{=html}
<!-- -->
```
B.  A physical destruction insurance policy, which insures the full
    replacement value of the facility from risk of partial and total
    physical destruction. The insurance policy is to be maintained for
    the period of time the facility is owned by the grantee.

> C. The grantee must obtain adequate hazard or casualty insurance,
> including flood insurance where appropriate, for the replacement value
> of the facility;
>
> D. Where major renovations have been undertaken and completed for a
> purchased facility, the grantee is responsible for submitting to the
> ACF grants officer evidence that the facility is insured for its full
> re-appraised value. This insurance must be reviewed annually by the
> grantee\'s insurance agent/broker and updated as needed to reflect
> changes in the value of the facility;
>
> E. The grantee must obtain adequate liability insurance to prevent
> potential litigators from a claim on the facility, which diminishes or
> jeopardizes the Federal interest in the facility.

6\. As provided in 45 CFR §1309.23(b) the grantee shall submit copies of
the above-mentioned insurance policies to ACF within five days of the
completion of the purchase, construction, or renovation of the facility.
If the grantee has not received the policies in time to submit copies
within this period, it shall immediately submit evidence that it has
obtained the appropriate insurance policies and shall submit copies of
the policies within five days of its receipt of them;

7\. As provided in 45 CFR §1309.40, certified copies of the deed, loan
instrument, mortgage and any other legal documents related to the
purchase, construction, or renovation of the facility or to the
discharge of any debt secured by the facility must be submitted to the
Regional Office within ten days of their execution;

8.  As provided in 45 CFR §1309.41, all records pertinent to the
    purchase, construction, or renovation of the facility must be
    retained by the grantee for a period equal to the period of the
    grantee's ownership of the facility plus three years;

9.  Any audit of the grantee which has purchased, constructed, or
    renovated the facility with ACF grant funds shall include an audit
    of any mortgage or encumbrance on the facility. Reasonable and
    necessary fees for this audit are payable with grant funds;

```{=html}
<!-- -->
```
10. Consistent with the cost principles referred to in 45 CFR Part 1309
    and 45 CFR Part 74 (for non-governmental grantees), or 45 CFR Part
    92 (for state and local government grantees), reasonable

> fees and costs associated with and necessary for the purchase,
> construction, or renovation of the facility are payable with ACF grant
> funds with prior written approval from the Regional Office \[45 CFR
> §1309.43\];

11. All transactions related to the purchase, construction, or
    renovation of the facility must comply with the procurement
    procedures in 45 CFR Part 1309 and 45 CFR Parts 74 and 92, and must
    be conducted in a manner to provide, to the maximum extent
    practicable, open and free competition \[45 CFR §§74.43 and 74.44\];

12. All laborers and mechanics employed by contractors or
    sub-contractors in the purchase, construction, or renovation of the
    Head Start facility shall be paid wages at not less than those
    prevailing on similar construction in the locality, as determined by
    the Secretary of Labor in accordance with the Davis-Bacon Act, 40
    U.S.C. §276(A) [et seq]{.underline}.;

13. The rules on title, use, transfer of title, disposition, and Federal
    share of property found in 45 CFR Part 1309 and 45 CFR Part 74 (for
    non-governmental grantees) or 45 CFR Part 92 (for state and local
    government grantees) apply to all real property acquired with ACF
    grant funds;

14. Use of the facility for other than the purpose for which the
    facility was funded, without the express written approval of the
    responsible HHS official, is prohibited \[45 CFR §1309.21(c)\];

15. The grantee must meet all of the requirements in 45 CFR Parts 74 or
    92 pertaining to the purchase, construction, or renovations and
    dispositions of real property, or the use and disposal of equipment,
    as appropriate;

16. Where a grantee requires additional financing to purchase,
    construct, or renovate a facility and a lender will not make a loan
    unless the interest of the federal government is subordinated to
    that of the lender, the grantee must seek the permission of the
    responsible HHS official to enter into a [subordination
    agreement]{.underline} with the lender, grantee, and ACF. In
    subordinating its interest in a facility purchased, constructed, or
    renovated with ACF grant funds, the responsible HHS official does
    not waive recording the Notice of Federal Interest and 45 CFR
    §1309.22. Pursuant to 45 CFR §1309.21(f), [a written agreement by
    the responsible HHS official to subordinate the Federal Interest
    must provide the following]{.underline}:

```{=html}
<!-- -->
```
A.  \(i\) The lender shall notify the Office of the Regional
    Administrator, Administration for Children and Families, the Office
    of the Commissioner, Administration on Children, Youth and Families,
    Washington, D.C., and the Office of General Counsel, Department of
    Health and Human Services, Washington, D.C., or their successor
    agencies, immediately, both telephonically and in writing of any
    default by the Head Start grantee;

> \(ii\) The written notice of default must be sent by registered mail
> and a return receipt requested;
>
> \(iii\) The lender will not foreclose on the property until at least
> 60 days after the required notice by the lender has been sent.

B.  Such notice will include the following:

```{=html}
<!-- -->
```
(i) The full names, addresses, and telephone numbers of the lender and
    the Head Start grantee;

> \(ii\) The following statement prominently displayed at the top of the
> first page of the notice: "The Federal Interest in certain real
> property or equipment used for the Head Start program may be at risk.
> Immediately give this notice to the appropriate government official.";
>
> \(iii\) The date and nature of the default and the manner in which the
> default may be cured; and
>
> \(iv\) In the event that the lender will be exercising its remedy of
> foreclosure or other remedies, the date or expected date of the
> foreclosure or other remedies.

C.  The Head Start grantee which purchased, constructed, or renovated
    facilities with respect to which the responsible HHS official has
    subordinated the Federal Interest to that of the lender,
    [must]{.underline} keep the lender informed of the current address
    and telephone numbers of the agencies to which the lender is
    obligated to give notice in the event of default.

```{=html}
<!-- -->
```
17. In the event that a default is not cured and foreclosure takes
    place, the mortgage or creditor shall pay ACF that percentage of the
    proceeds from the foreclosure sale of the property attributable to
    the Federal share as defined in 45 CFR §74.2 or, if Part 92 is
    applicable, to ACF's share as defined in 45 CFR §92.3. If ACF and
    the mortgage or creditor have agreed that ACF's Federal Interest
    will be subordinated to the mortgagee's or creditor's interest in
    the property, that agreement [must]{.underline} be set forth in a
    written subordination agreement that is signed by the responsible
    HHS official and that complies with 45 CFR §1309.21 and any other
    applicable Federal law;

18. When a grantee purchases a facility but not the land beneath it, the
    deed and title must include a right-of-way assurance and possession
    of the facility by the program for the useful life of the facility
    which is the period during which a facility is capable of being used
    as program facility;

19. The grantee will be required to submit annual financial statements
    related to the purchased or constructed facility and reports on
    material adverse changes in circumstances;

20. Submit a copy of the certificate of occupancy and a daycare license
    for the facility as evidence of your agency's compliance with the
    local licensing and code requirements. \[45 CFR §1309.10(f)\]

21. Submit a copy of the tabulation of the final bids received,
    certified by the architect/engineer, and a copy of the final bid
    selected for construction or renovation of the facility \[45 CFR
    §1309.21(e)\];

22. Submit a copy of the lease agreement when the construction or the
    renovation was done in a leased facility;

23. Submit a copy of the mortgage agreement, if the grantee takes
    mortgage for the facility \[45 CFR §1309.10(h)\];

24. ACF or a non-Federal party named by ACF when: (a) the property is no
    longer to be used for the originally authorized purpose; (b) the
    grantee project/program has been terminated for cause; and (c)
    previously recommended grant support has been denied or withheld for
    failure of the grantee to comply with the terms and conditions of a
    prior award. When this occurs, the grantee shall be entitled to be
    paid an amount computed by multiplying an appraised fair market
    value of the property by the non-Federal share of the property.
    However, before exercising this right, ACF shall provide the grantee
    with an opportunity to show cause why such right should not be
    exercised \[45 CFR §§74.32(c)(2) and (3)\].

*Revised March 31, 2002*