Title Evidence Requirements for Real Property-Electric Program

AGENCY:

Rural Utilities Service, USDA.

ACTION:

Policy statement.

SUMMARY:

Rural Electrification Administration (REA) Bulletin 20-3, July 1956, “Obtaining Adequate Right-of-way and Submission of Title Evidence by REA Electric Borrowers” (Bulletin 20-3), is rescinded because it has not been updated to reflect subsequently published Rural Utilities Service (RUS) regulations and is obsolete.

DATES:

Effective September 14, 2000.

FOR FURTHER INFORMATION CONTACT:

Gail P. Salgado, Management Analyst, Office of the Assistant Administrator, Electric Program, Rural Utilities Service, U.S. Department of Agriculture, Room 4024-S, Stop 1560, 1400 Independence Avenue, SW, Washington, DC 20250-1560. Telephone: 202-205-3660. FAX: 202-690-0717. E-mail: GSalgado@rus.usda.gov.

SUPPLEMENTARY INFORMATION:

In 1995, RUS as the successor to REA developed and published new model forms of the electric distribution loan contract, set forth at 7 CFR Part 1718, Appendix A to Subpart C, and mortgage, set forth at 7 CFR part 1718, Appendix A to Subpart B. These contemporary documents are designed to provide the government with the assurance of reasonably adequate security for loans to electric distribution borrowers. Among other matters, the documents require that the borrower have good and marketable title to all mortgaged property including any real property owned or acquired for use in the construction and operation of the borrower's utility system (See 7 CFR part 1718, Appendix A to Subpart C, Model Form of Loan Contract, Section 2.1, Representations and Warranties). In the case of power supply borrowers, the requirements for loan security are generally set forth in 7 CFR 1710.113. Title requirements for mortgaged property are typically already set forth with greater specificity in the individual loan documents used by each power supply borrower. See also, § 1710.401(a)(7), setting out mortgage information required to be submitted as part of the loan application process.

RUS has determined that it will no longer routinely require the submission of detailed title evidence in connection with the construction of distribution, transmission, and headquarters facilities. However, RUS is retaining the right to require additional evidence of title in unusual individual cases. In such cases, RUS will request the borrower to submit any such additional necessary title evidence as part of its application for assistance. RUS will continue to require title evidence for generation projects.

It is expected that as a prudent utility, each borrower will comply with the provisions of its loan documents and continue obtaining sufficient and adequate right-of-way authorizations and title to any real estate it requires for the construction and operation of its facilities.

Effective September 14, 2000, REA Bulletin 20-3, July 1956, “Obtaining Adequate Right-of-way and Submission of Title Evidence by REA Electric Borrowers” (Bulletin 20-3), is rescinded and borrowers are no longer required to submit title documents to RUS as required by its provisions. However, RUS does retain the right to require additional evidence in unusual individual cases.