Completing Your Grant: Section 12.6 Change of Use Restrictions

The CDBG regulations contain provisions regarding changing the use of real property within the grantee’s control that was acquired or improved, in whole or in part, with CDBG funds. These provisions require that the property be maintained for the original eligible use and to continue to meet a national objective for at least five years after the local unit of governments has received a signed Closeout Agreement from CDFA. 24 CFR 570.489(j)

If the project involved acquisition or improvement of real property using CDBG funds in excess of $250,000 (the federal small purchase threshold), during the five years following receipt of a signed Closeout Agreement:

  • A grantee may not change the use or planned use of any such property from that for which the acquisition or improvement was made, unless CDFA and grantee provide affected citizens with reasonable notice of and opportunity to comment on any proposed change.
  • The grantee must have a security document that references the use restictions.
  • The new use of the property must qualify as meeting one of the national objectives and is not a building for the general conduct of government. However, if CDFA and the grantee determine, after consultation with affected citizens, that the reuse of the property is deemed appropriate but is not a CDBG eligible activity and does not meet a national objective, it may retain or dispose of the property for the changed use. CDFA will require reimbursement in the amount of the current fair market value of the property, less any portion of the value attributable to expenditures of non-CDBG funds for acquisition of, and improvements to, the property. Following the reimbursement to CDFA for the CDBG program, the property no longer is subject to any CDBG requirements.
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