Is the Secured Party obligated to discharge taxes and other encumbrances on the Collateral for Epcon Communities?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
In the Secured Party's discretion (but without obligation), if the Debtor fails to do so, the Secured Party may discharge taxes and other encumbrances at any time levied or placed on any of the Collateral, maintain any of the Collateral, make repairs thereto and pay any necessary filing fees or insurance premiums.
The Debtor agrees to reimburse the Secured Party on demand for all expenditures so made.
The Secured Party shall have no obligation to the Debtor to make any such expenditures, nor shall the making thereof be construed as the waiver or cure of any Event of Default.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, the Secured Party has the discretion, but not the obligation, to discharge taxes and other encumbrances on the collateral if the Debtor (the franchisee) fails to do so. The Secured Party may also maintain the collateral, make repairs, and pay necessary filing fees or insurance premiums.
This means that as an Epcon Communities franchisee, you are primarily responsible for handling taxes and encumbrances on any collateral. However, Epcon Communities, as the Secured Party, has the option to step in and handle these issues to protect their interest in the collateral, but they are not required to do so.
If Epcon Communities does choose to cover these expenses, the franchisee is obligated to reimburse them upon demand. This arrangement protects Epcon Communities' investment while placing the onus of financial responsibility on the franchisee. It is important to note that the Secured Party taking such actions does not constitute a waiver or cure of any default event.
This clause is typical in secured lending arrangements, where the lender wants the option to protect the collateral without being obligated to do so. As an Epcon Communities franchisee, you should ensure you have sufficient financial resources to manage these obligations to avoid potential intervention by the Secured Party and possible financial strain from unexpected reimbursements.