501(c)(3) of the Internal Revenue Code of 1954).

(c) Real property will be requested for assignment only when the Department has determined that the property is suitable and needed for public health or educational purposes. The amounts of both real and related personal property to be transferred shall not be excessive to normal operating_requirements. Such property, except for transfers contemplated under § 12.10 will not be requested for assignment unless it is needed at the time of application for educational or for public health purposes, including research, or unless it will be so needed within the immediate foreseeable future. When construction is contemplated, the initiation of construction of the major functional facility in the approved program must begin within 18 months after the date of transfer. Construction shall be deemed to have been initiated when the transferee executes a contract providing a firm date in the reasonably near future for actual commencement of construction. The Department may, in its discretion, grant extensions of the 18-month period where the transferee can factually demonstrate that it has exercised due diligence in attempting to initiate construction within the said period and that such construction will be initiated during the period of any such extension.

(d) Land may be requested for assignment for transfer in accordance with § 12.10, for public tax-supported educational and public health purposes where, although there is no immediate need for the property, population trends, location, present facilities and plans for additional facilities justify immediate transfer to reasonably provide for future needs.

(e) Transfers will be made only when the proposed program is not in conflict with State or local zoning restrictions, building codes, or similar limitations.

(f) Only those activities devoted to academic, vocational or professional instruction, or organized and operated to promote and protect the public health, are eligible. Examples of such eligible activities are universities, colleges, junior colleges, junior or senior high schools, elementary schools or school systems, vocational or specialized schools, research activities, public libraries, and similar activities primarily educational in character, general and specialty hospitals, mental institutions, clinics, health

sanitation activities (including water and sewer departments), facilities providing public health services, and similar activities devoted primarily to the protection and promotion of public health. The program of an institution eligible for a transfer must contemplate use of the property as an integral part of an activity of the kind above described. The activity must obtain such licenses for operations as may be required by State and local law.

(g) Use of the property applied for must be for a fundamental educational or public health purpose. Examples of such fundamental utilizations are classrooms, vocational shops, libraries, laboratories, auditoriums, gymnasiums, cafeterias, dormitories, faculty housing, infirmaries, recreational facilities, hospitals, clinics, facilities providing public health services, and similar utilization. The property applied for must be for a purpose for which the eligible organization would be authorized to expend its own funds to acquire.

(h) An applicant's plan of operation shall not be approved unless it includes a provision that the applicant will not discriminate because of race, color, creed, or national origin in the use of any portions of the property.

(a) Surplus property transferred pursuant to this part shall be disposed of "as is," "where is," and without warranty of any kind.

(b) Unless excepted by the General Services Administration from the assignment of property to this Department, mineral rights will, in all cases, be conveyed together with the surface rights. However, where the property to be conveyed overlies a known mineral structure of commercial value, the Department, in its discretion will:

(1) Convey the mineral rights separately from the surface rights upon payment by the transferee of the fair value thereof, as determined by the Department, without application of the public benefit allowance; or

(2) Convey the mineral rights together with the surface rights with the requirement in the conveyance instrument that, during the period of restricted use, all revenues or the reasonable value, as determined by the Department, of benefits to the transferee deriving directly or indirectly from any and all mineral leases or royalties shall be considered to have

Where there is more than one applicant for the same property, the following principles shall be observed:

(a) Greater consideration will be given to programs of utilization most nearly consistent with the Government's purpose in acquiring or using the property. For instance, a surplus hospital will be considered for transfer for a health program in preference to an educational program if all other factors are equal.

(b) Property will be awarded to the applicant having a program of utilization which provides, in the opinion of the Department, the greatest public benefit.

(c) The Department will have, as an objective, the apportionment of an available property to fit the needs of as many applicant health and educational programs as is practicable.

§ 12.6

Notice of available property.

Reasonable publicity shall be given to the availability of surplus real property which is suitable for assignment to the Department for disposal for educational or public health use. The Department shall establish procedures reasonably calculated to afford all eligible users having a legitimate interest in acquiring property for educational or public health purposes including research who show due diligence a full and complete opportunity to make an application therefor: Provided, however, That publicity need not be given as to the availability of surplus real property which is occupied and being used by an applicant for eligible educational or public health purposes, including research, at the time the property is declared excess and the Department determines that the applicant has a continuing need for the property.

§ 12.7 Applications for surplus real

property.

Applications for surplus real property for educational or public health purposes, including research, shall be made to the Department through the regional office

specified in the notice of availability. Where cooperative agreements have been entered into with State Agencies for Surplus Property and where a State instrumentality has been designated by State law or executive order to represent or assist educational and health institutions in acquiring Federal surplus real property, the applications will be made through State Agencies or instrumentalities to regional offices of the Department.

§ 12.8 Assignment of surplus real property.

(a) Notice of interest in a specific property for educational or public health utilization shall be furnished the General Services Administration or other agency having disposal jurisdiction by the Department at the earliest possible date.

(b) Requests to the Administrator, or his designee disposal agency, for assignment of surplus real property to the Department for disposal for educational and public health purposes, including research, shall be based on the following conditions:

(1) There is an acceptable application for the property of record with the Department.

(2) The applicant is willing, authorized, and in a position to assume immediate care, custody, and maintenance of the property.

(3) The applicant is able, willing and authorized to pay the external administrative expenses incident to a transfer.

(c) A copy of each request for assignment of surplus real property shall be furnished the holding agency.

§ 12.9 General disposal terms and conditions.

(a) Surplus real property disposals under this part shall be limited to transactions which are primarily for educational or public health purposes, including research. Transferees shall be entitled to public benefit allowances which shall be applied against the sale price of the property to be conveyed. These allowances will be computed in consideration of benefits which have accrued or may accrue to the United States from the use of such property for educational or public health purposes, including research. The computation of these public benefit allowances shall be in accordance with Exhibits A and B attached hereto and made a part hereof.

(b) Transfer of surplus real property for educational or public health purposes is subject to the disapproval of the Administrator within 30 days after notice is given to him of a proposed transfer.

(c) Transfer shall be on the following terms and conditions:

(1) The transferee shall be obligated to utilize the property continuously in accordance with an approved plan of operation.

(2) The transferee shall not be permitted to sell, lease, rent, mortgage, encumber, or otherwise dispose of the property, or any part thereof, without prior written authorization of the Department or its designee.

(3) The transferee shall file with the Department such reports covering the utilization of the property as may be required.

(4) In the event the property is sold, leased, encumbered, disposed of, or is used for purposes other than those set forth in the approved plan without the consent of the Department, all revenues or the reasonable value, as determined by the Department, of benefits to the transferee deriving directly or indirectly from such use shall be considered to have been received and held in trust by the transferee for the United States and shall be subject to direction and control of the Department. The provisions of this paragraph shall not impair or affect the rights reserved to the United States in subparagraph (6) of this paragraph.

(5) It is not the Department's policy to require transferees to carry insurance as a condition of transfer. However, where a transferee carries insurance against damages to or loss of on-site property due to fire or other hazards, and where loss of or damage to transferred Federal surplus real property occurs, said insurance and all moneys payable to the transferee, its successors or assigns, thereunder shall be held in trust by the transferee, its successors or assigns. All such moneys shall be promptly used by the transferee for the purpose of repairing and restoring the property for its former use, or replacing it with equivalent or more suitable facilities. If not so used, there shall be paid to the Treasurer of the United States an amount not exceeding the unamortized public benefit allowance of the buildings, structures or improvements lost, damaged, or destroyed.

(6) With respect to on-site property, in the event of noncompliance with any

of the conditions of the transfer, title to the property transferred, and right to immediate possession shall, at the option of the Department, revert to the Government. In the event title is reverted to the United States for noncompliance or voluntarily reconveyed in lieu of reverter, the transferee, at the option of the Department, shall be responsible and be required to reimburse the Government for the decreased value of the property not due to reasonable wear and tear, acts of God, and alterations and conversions made by the transferee to adapt the property to the educational or health use for which the property was acquired. The Government shall, in addition thereto, be reimbursed for such damages including such costs as may be incurred in recovering title to or possession of the property as it may sustain as the result of the noncompliance.

(7) With respect to off-site property, in the event of noncompliance with any of the terms and conditions of the transfer, the unearned public benefit allowance shall, at the option of the Department, become immediately due and payable or, if the property or any portion thereof is sold, leased, or otherwise disposed of without authorization from the Department or its designee, such sale, lease, or other disposal shall be for the benefit and account of the United States and the United States shall be entitled to the proceeds of any such disposal. In the event the transferee fails to remove the property or any portion thereof within the time specified, then, in addition to the rights reserved above, at the option of the Department, all right, title, and interest in and to such unremoved property shall be retransferred to other eligible applicants or shall be forfeited to the United States.

(8) With respect to on-site property, the Government, at its option, shall have the right during any period of emergency declared by the President of the United States or by the Congress of the United States to the full unrestricted use of the surplus real property, or of any portion thereof, disposed of in accordance with the provisions of this part. Such use may be either exclusive or nonexclusive. Prior to the expiration or termination of the period of restricted use by the transferee, the Government shall not be obligated to pay rent or any other fees or charges during the period of emergency, except that the Government shall (i) bear the entire cost of maintenance of such por

tion of the property used by it exclusively or over which it may have exclusive possession or control, (ii) pay the fair share, commensurate with the use, of the cost of maintenance of such surplus real property as it may use nonexclusively or over which it may have nonexclusive possession or control, (iii) pay a fair rental for the use of improvements or additions to the surplus real property made by the purchaser or lessee without Government aid, and (iv) be responsible for any damage to the surplus real property caused by its use, reasonable wear and tear, the common enemy and acts of God excepted. Subsequent to the expiration or termination of the period of restricted use, the obligations of the Government shall be as set forth in the preceding sentence and in addition, the Government shall be obligated to pay a fair rental for all or any portion of the conveyed premises which it uses.

NOTE: The final sentence above serves to clarify by publication a long-standing interpretation of the obligations of the Government not explicitly provided for prior to publication of that sentence and does not represent any alteration of policy or interpretation. It is, therefore, explanatory of the Government's obligations under conveyances executed prior to the date of its publication as well as under conveyances executed subsequent thereto.

(9) The restrictions set forth in subparagraphs (1) through (6) of this paragraph shall extend for the following periods:

(i) Thirty (30) years for land with or without improvements being acquired for use in place;

(ii) A minimum of five (5) years for facilities being acquired separately from land whether they are for use on-site or off-site. However, where the estimated economic life of the structures for the use for which they are requested is greater than 5 years, the period of limitations on the use of the structures shall be equal to their estimated economic life.

(d) Transferees by obtaining the consent of the Department may obtain abrogation of the restrictions set forth in the transfer terms, for all or any portion of the property, upon payment to the Department in accordance with the following:

(1) If the abrogation is requested by the institution for the purpose of serving the needs or purposes of a third party, payment shall be based upon the cur

rent fair market value of the conveyed property, as of the date of the request for abrogation, less amortized credit based on the original sale price of the property. (2) If the abrogation is requested by the institution for the purpose of using the property as security for new construction, for acquiring substitute or better facilities, or for relocating elsewhere, all for the purpose of further advancing or promoting the program for which the property was originally conveyed, payment shall be based upon the original sale price as of the date of the deed, less amortization credit. Such abrogation shall be conditioned upon the requirement that all proceeds of sale obtained by the transferee in disposing of the property in excess of the amount paid the Department to obtain abrogation will be devoted to such program use. To assure this, appropriate agreements, supported by Surety Bond, or other security that may be deemed by the Department to be necessary or advisable, will be obtained from the grantee.

(3) The Government's right of recapture for use during a period of emergency will not be released unless there are exceptional circumstances.

(e) Related personal property shall be transferred as a part of the realty and in accordance with real property procedures and forms. It will be subject to the same public benefit allowance granted for the real property. Where related personal property is involved in an on-site transaction, the related personal property may be transferred by a bill of sale imposing restrictions for a period not to exceed 5 years from the date of transfer, other terms and conditions to be the same as, and made a part of the real property transaction.

§ 12.10

Deferred use, disposal terms and conditions.

(a) Surplus real property disposals under this section shall be limited to transfers of land to States and their political subdivisions and instrumentalities and tax-supported educational or public health institutions for use as sites for school or public health facilities to be constructed thereon within a maximum period of 8 years from date of transfer.

(b) Transfers under this section shall be subject to all of the general terms and conditions set forth in § 12.9 (b) and (c) (1), (2), (3), (4), (5), (6), and (8) and,

in addition, the following special terms and conditions shall apply:

(1) Transferee shall be obligated to use the property continuously, including the proposed facilities constructed thereon, in conformance with its approved plan, for a period of thirty (30) years from the date of transfer.

(2) The transferee shall be obligated to construct the proposed facilities and commence utilization of the conveyed property for educational or public health purposes in conformance with the approved plan no later than eight (8) years from the date of transfer. The Department may, in its discretion, effect transfer upon the requirement that construction be completed and utilization be commenced within a period of time less than eight (8) years from the date of transfer.

(3) The transfer shall be made in consideration of payments and public benefits inuring to the United States equal to the sale price of the property as follows: Until such time as the facilities contemplated in the transferee's approved plan have been constructed and placed in use in conformance therewith, the transferee shail pay to the United States within 1 year from the date of transfer and annually thereafter on the anniversary date thereof an amount equal to three and one-third (3%) percent of the fair value of the property, together with interest at the prevailing rate as determined by the Department for the disposals of government real property upon the upaid balance of the sale price of the property. At such time as the facilities last mentioned shall have been constructed and placed in use, which may be prior to but not later than the maximum time fixed by the Department and specified in the instrument of transfer, the transferee shall be entitled to a public benefit allowance, to be applied against the unpaid balance of the sale price computed upon the basis of the benefit which has accrued or may accrue to the United States from the use of such property for educational or health purposes In the case of a transfer of less than 100 percent public benefit aliowance, the public benefit allowance shall be computed on and applied against the balance of the sale price remaining unpaid at the time of commencement of utilization in accordance with this section. The transferee shall, at such time, make full pavment in cash

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of any balance of the sale price remaining after application of such public benefit allowance.

(c) Prior to the transfer of any land under this section, the transferee shall submit to the Department, together with its application, an opinion of the highest legal officer of the State as to the authority of the transferee to enter into the proposed transaction, accept the property subject to the foregoing terms and conditions and undertake the obligations provided for thereunder.

(d) After the facilities have been constructed and the property has been placed into required use in conformance with the approved plan, a transferee, by obtaining the consent of the Department, may secure abrogation of the restrictions set forth in the transfer terms, consistent with the requirements of § 12.9(d).

(e) Any installments, interest, or other payments against the sale price of property transferred under this section shall, upon a forfeiture of title to the property for breach of condition, be forfeited.

(f) If at any time it is determined that the transferee is unable to construct the facilities contemplated in the approved plan because of circumstances beyond its control, the Department may permit the transferee to obtain abrogation of all restrictions set forth in the transfer terms upon payment to the Department of (1) the current fair market value of the property, or (2) the sale price as of the date of the deed, whichever is greater, less all payments of principal made during the term of deferred use. Payments of interest and any reimbursement for administrative costs shall be forfeited.

§ 12.11 Special terms and conditions.

(a) In the case of on-site disposals, applicants shall be required to pay all external administrative costs which shall include, but not be limited to, taxes, surveys, appraisa.is, inventorying costs, legal fees, title search, certificate or abstract expenses, decontamination costs, government moving costs, closing fees in connection with the transaction and service charges, if any, made by State Agencies for Surplus Property under the terms of a cooperative agreement with the Department.

(b) In the case of off-site property, applicants will be required to post performance bonds, make performance guarantee deposits, or give such other