In connection with the issuance of any title insurance commitment or policy covering land upon which is built a hospital, medical facility, health research facility, teaching facility for health related fields, mental retardation facility, medical or nursing school, it is necessary to determine if the holding institution has been the recipient of funds arising from any grant, loan, or guarantee under any of the following public laws:
42 U.S.C.A. Section 291 et seq. (The Hill-Burton Act) - “Construction and Modernization of Hospital and Other Medical Facilities”
42 U.S.C.A. Section 292 et seq. - “Health Research and Teaching Facilities, and Training of Professional Health Personnel Facilities”
42 U.S.C.A. Section 293 et seq. - “Construction of Teaching Facilities for Medical, Dental and Other Health Personnel”
42 U.S.C.A. Section 295(f) et seq. - “Improvement of the Quality of Schools of Medicine, Osteopathy, Dentistry, Public Health, Veterinary, Medical, Optometry, Pharmacy and Podiatry”
42 U.S.C.A. Section 296 et seq. - “Nurse Training”
42 U.S.C.A. Section 300(k) et seq. - “Family Planning Services”
42 U.S.C.A. Section 6001 et seq. - “Developmentally Disabled Assistance”
All of the above statutes recognize, in one form or another and during certain prescribed conditions, the right of the United States to recover from the owner, a transferor, or a transferee of the facility, the funds advanced pursuant to statutory provisions.
The conditions for the recovery may relate to:
- The completion of improvements for the facilities.
- The period of recovery to be within ten years after completion of the improvements (in some cases).
- The period of recovery to be within twenty years after completion of the improvements (in other cases).
- The facilities not being used for the purposes set forth in the particular act.
- The owner or transferee of the property not continuing to qualify under the particular act.
- The facilities, in certain cases, being used for sectarian instruction or as a place of religious worship.
The United States Right of Recovery Does Not Constitute a Lien on Real Property Prior to Judgment
The right of the United States is limited to the recovery of a sum of money from the owner, transferor, or transferee of the real estate; however, it does not constitute a lien of the facility prior to the entering of a judgment.
Title 42 U.S.C.A. Sections 291(i) and 6004 specifically state that “the right of recovery shall not constitute a lien prior to judgment”. The other acts are silent on whether the right of recovery constitutes a lien.
Notwithstanding the above, any advance of funds made under any of these acts, although not creating a lien, does seem to impose either a covenant running with the land or a restriction on the alienation of the facility.
Consequently, unless the Company is furnished with satisfactory proof prior to closing that no funds have ever been advanced under any of these acts, any title insurance policy when issued must contain an appropriate exception in regard to the “right of recovery of the United States”. You may rely on the information from the Health and Human Services Administration website as proof of no funds being advanced:
For more information, please see http://www.hrsa.dhhs.gov/osp/dfcr/obtain/hbstates.htm on the Internet.