Section 106 of the National Historic Preservation Act requires Federal agencies to consider whether their federally-funded projects directly or indirectly adversely impact properties and sites that are listed or eligible to be listed on the National Register of Historic Places (“NRHP”) (54 U.S.C. § 300101 et seq.; 36 CFR §§ 60.1 et seq. and 800.1 et seq.). If an SBA loan transaction involves the purchase or renovation of a property or site, including installation of equipment, that is listed or eligible to be listed on the NRHP, then the SBA loan is considered as impacting such property and specific steps need to be taken by the lender.
Every lender contemplating a loan for purchase or renovation of a property is required to conduct due diligence on the property, following prudent lending practices, and document its loan file as to its findings.
If the due diligence indicates the property or site is listed on the NRHP or has historic significance such that it may be eligible to be listed, either individually or as part of a historic district on the NHRP, then lender must take certain actions.
If no renovations are involved, then prior to submitting the SBA Loan application or requesting an SBA Loan Number (if using delegated authority) the lender must obtain a Historic Property Borrower Certification executed by the borrower, co-borrower, and/or operating company on SBA Form 2481. Such executed Certification must be provided to local SBA counsel for review and clearance. Once clearance is provided, then lender can submit the application or request the loan number. The completed Certification and clearance from SBA counsel should be maintained in the lender’s file, as it would need to be provided with any guaranty purchase request should the loan default.
If renovations are involved, the lender must request a Section 106 review by local SBA counsel and must submit the loan to the SBA for approval, rather than using any delegated authority it may have. The following information must be included in the Section 106 review request:
- Name(s) of borrower, co-borrower, and/or operating company;
- SBA Loan Name;
- Results of lender’s due diligence, including any documentation reviewed and relied upon in its determination;
- Full and complete description of the planned renovations; and
- Statement regarding whether any of the planned renovations have begun. Please note that if work has begun, lender must instruct borrower, co-borrower, and/or operating company to stop work or loan may not be approved and/or disbursed.
If there is both a purchase and renovations to a property involved in the transaction and seller refuses to extend the closing date to allow the Section 106 review process to be completed, then lender must include this information in the Section 106 review request.
Upon local SBA counsel’s receipt of the Section 106 review request, such counsel will evaluate the property or site under the NRHP criteria and consult with the relevant State Historic Preservation Office (“SHPO”) and any other relevant parties. Please make sure to be responsive to any questions or requests from local SBA counsel after submission, as such information and documentation may be needed to consult with the SHPO and other applicable parties.
After the SHPO has responded, local SBA counsel will then consult with the Associate General Counsel for Litigation. Depending upon the findings, the SBA will either issue a Section 106 review clearance to the lender or further consult with the SHPO and other possible relevant parties on how to resolve the adverse effect posed by the proposed renovations.
In summary, if part or all of a lender’s SBA loan will be used for the purchase and/or renovations to historic property or property that is eligible to be listed on the NRHP, the lender should follow the SBA’s requirements discussed above in order to have an eligible SBA loan. For more information, contact the attorneys at Starfield & Smith, PC at 215-542-7070.