# What property restrictions can block an SBA real estate loan?

**Short answer:** A C-PACE loan on the property is barred, and environmental indemnification provisions that run with the land must be removed or waived. Lenders must also weigh deed restrictions and engineering controls. Source: SOP 50 10 8.1, Sec. A, Ch. 3, Para. B; App. 19, Para. A.

Canonical page: https://www.sbaexpress.loans/answers/property-restrictions-that-block-sba-loan/
Last checked: 2026-11-08

In this answer, C-PACE means commercial property assessed clean energy.

Several recorded items can stop or reshape an SBA real estate loan. SOP 50 10 8.1 and 13 CFR Part 120 name them.

## Outright bars

- commercial property assessed clean energy (C-PACE): lenders may not permit a C-PACE loan on a property that has or will have a 7(a) or 504 loan. That applies at origination and as a servicing action (Section A, Ch. 3, Para. B).
- Environmental indemnity: provisions that run with the land are not eligible. They must be removed or waived as to the Federal Government (Appendix 19, Para. A).
- Coastal Barrier Resource System: SBA may not make or guarantee a loan within it (13 CFR § 120.175).

## Items the lender must analyze

The lender must evaluate recorded restrictions for their effect on value and marketability, and document that analysis (Appendix 19, Para. A). The review covers deed restrictions, easements, reversionary interests, subordinations, leases, options and engineering controls.

Some deed restrictions may be acceptable. Examples are environmental limits on residential, day care, school or hospital use (Appendix 15, Para. C.3.c).

## On a 504

The Certified Development Company (CDC) must review title for open-ended non-environmental indemnification provisions. It must try to get a recorded waiver or a capped agreement. If it cannot, it must submit a modification request showing a good faith attempt before closing (Section C, Ch. 1, Para. E.2.a).

## Tenants

The property cannot be leased to a business the borrower knows is engaged in illegal activity (Section A, Ch. 3, Para. C.1).

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. B (p. 53)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, App. 19, Para. A, Adequacy of collateral (p. 404)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [13 CFR § 120.175](https://www.ecfr.gov/current/title-13/section-120.175)
- [SOP 50 10 8.1, App. 15, Para. C.3.c (about pp. 382-383)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. C, Ch. 1, Para. E.2.a (about pp. 251-252)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Sec. A, Ch. 3, Para. C.1 (about p. 56)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)