**U. S. Department of Agriculture Michigan Guide 4**

**Rural Development Attachment 1**

**[LEGAL REQUIREMENTS GUIDE]{.underline}**

**For the use of Rural Development applicants in preparing the legal
requirements for Rural Utilities Service (RUS) loans and grants.**

**1. Color Coded Right-of-Way Map - Provide a map that outlines**

**system improvements, such as pipeline, wells, storage tanks,**

**pump stations, lagoons, treatment plants, as well as existing**

**pipeline, wells and other structures creating a continuous**

**uninterrupted system. Color code the map to show the**

**appropriate type of right-of-way. (example: private, public,**

> **or railroad easement, fee simple title, special permits.)The sites
> that include structures must be numbered or labeled to**

**correspond to the deeds and title opinions, or title insurance**

**policies.**

**2. Right-of-Way Certificate - The applicant certifies on RD Form**

**442-21, that they have acquired all rights-of-way, easements,**

**permits, franchises and authorizations needed for the**

**construction, operation and maintenance of the facility to be**

**installed or enlarged. The certification must be attached to**

**the color coded Right-of-Way Map and be [without]{.underline}
exceptions.**

**3. Easements - RD Form 442-20, Easement of Right-of-Way, may be**

**used. A sample copy of the type of easement to be used and a**

**list of the easements obtained should be provided to RD.**

**4. Opinion of Counsel Relative to Rights-of-Way, Form RD 442-22. The
applicant\'s local attorney must review action taken by the applicant in
obtaining rights-of-way, easements, permits and licenses for the
construction, operation and maintenance of the**

**facility. The attorney should examine all instruments, permits**

**and public records to determine legal sufficiency of the**

**instruments covered by the Right-of-Way Certificate executed by**

**the applicant. Further, the local attorney must examine the**

**Right-of-Way Map to determine whether continuous and adequate**

**land and right-of-way has been acquired by the applicant as**

**certified in their Right-of-Way Certificate. This opinion must**

**be [without]{.underline} exceptions and display the proper date of the
Right-**

**of-Way Certificate executed by the applicant on RD Form 442-21.**

**5. Preliminary Opinion of Title - This opinion should cover all**

> **land optioned, fee simple ownership, public and private easements
> that include structures other than piping materials and individual
> on-site grinder pumps or septic tanks, above or below ground. The
> opinion may be recorded on MI Form 1927-9, Preliminary Title Opinion,
> with the legal description attached as a Schedule A, or a title
> insurance commitment may be obtained. For leasehold interests see item
> 12. The preliminary title opinion must be unqualified, not contain any
> restrictions, including reverter clauses that will adversely affect
> the system**

**Revised (6/29/01)**

**Michigan Guide 4 Page 2**

**Attachment 1**

> **and may involve a physical search of the records. It is preferable
> that searches commence with a patent or land grant. Where this is not
> possible, the search must commence at least 40 years prior to the date
> of the opinion. References to abstracts or assumptions that abstracts
> are complete are unacceptable. Face amount for title insurance
> policies must equal the value of land after improvements, and must be
> approved by Rural Development. A numbering or labeling system must be
> used so that each opinion may be located on the Right-of-Way Map.**

**6. Final Opinion of Title - A Final Title Opinion may be completed**

**on RD Form 1927-10, or a final owners title insurance policy**

**may be issued. The final opinion could be rendered at the time**

**the preliminary opinion is completed in cases where title to**

**land is already with the borrower and recordings are unecessary.**

**7. Copy of Deeds - A copy of all deeds to the land held by the**

**applicant identified on the Right-of-Way Map must be provided.**

**8. Attorney\'s Opinion on Engineering Agreement - The local attorney
shall give written opinion on the Legal sufficiency of the contract
between the Engineer and the applicant.**

**9. An Opinion from the Local Attorney - Certifying that the**

**executed contract documents, including performance and payment**

**bonds, are adequate. That the persons executing the documents**

**have been properly authorized to do so and that the agreements**

**constitute valid and legally binding obligations upon the**

**parties executing the same in accordance with terms, conditions,**

**an provisions thereof. Refer to RUS Bulletin 1780-14, page 7**

**CERTIFICATE OF OWNER'S ATTORNEY, located in the construction**

**contract documents.**

**10. Information on condemnation suits should be provided to the**

**Rural Development Area Office if they are listed as exceptions**

**on the Form RD 442-21 or Form RD 442-22.**

**11. Shared lien agreements, subordination's and the various bond**

**transcript documents will be reviewed by the Rural Development**

**Manager prior to loan closing.**

**12. Leasehold Interests -- Normally are acceptable for structure sites
only when the borrower is a corporation and the Government's security
will be a note and mortgage. Lease agreements shall not contain
provisions for restricted use of the site or facility, forfeiture or
summary cancellation clauses. Lease agreements shall provide for the
right to transfer, encumber, assign and sub-lease without restriction.
Lease agreements will be written for a term at least equal to the term
of the loan and must be approved by Rural Development.**

**Revised (6/29/01)**