Financial Information and Authorization Documentation. Financial and background information on the borrower to substantiate the expertise and financial strength of the borrower to complete the project.
Construction Loan Agreement. The construction loan agreement sets forth the rights and obligations of the lender and borrower, conditions for advancing funds, and events of default. The loan agreement should specify the performance of each party during the entire course of construction. Any changes to the borrower’s plans should be approved both by the construction lender and the take-out lender because changes can increase the cost of construction without necessarily increasing the sale price of the completed project. A sample Commercial Construction Loan Agreement is located at the end of Chapter 11.
Promissory Note. See the sample form Commercial Construction Note for Residential Subdivision Project located at the end of this Chapter.
Deed of Trust. A recorded mortgage or deed of trust that can be used to foreclose and to obtain title to the collateral.
Guaranty. An appropriate guaranty of each guarantor should be executed and delivered. See Chapter 17, “Guaranties.”
Survey, Title Commitment and Title Insurance. See Chapter 4. The policy should be updated with each advance of funds, if such additional protection is available.
Comprehensive Liability Insurance. Insurance policies and a proof of premium payment as evidence that the builder has adequate and enforceable coverage, including: liability, fire and builder’s special risks.
Flood Determination (and additional flood documents, where appropriate). See Chapter 6, “Flood Insurance.”
Appraisal. An appropriate appraisal or evaluation showing the market value of the property on an “as is” and “as completed” basis. See Chapter 3 for a detailed discussion of appraisals, and those circumstances where the Bank may use an evaluation in lieu of an appraisal.
Plans and Specifications. Project plans, feasibility study, and construction budget showing the development plans, project costs, marketing plans, and equity contributions. The documentation should include a detailed cost breakdown for the land and “hard” construction costs, as well as the indirect or “soft” costs for the project, such as administrative costs, and architectural, engineering, and legal fees. If internal expertise is not available, the Bank may need to retain an independent construction expert to review these documents to assess the reasonableness and appropriateness of the construction plans and costs.
Payment or Performance Bond. A completion of performance bond written by an insurance company.
Evidence of Taxes. Evidence that property taxes have been paid to date.
Environmental Assessment. An environmental surveys deemed necessary given the location and type of project including a soil test. See Chapter 5, “Environmental Issues.”
UCC-1 Financing Statement on equipment which may become fixtures.
Construction Contract.
General Contractor’s Consent and Acknowledgement.
Architect’s Agreement.
Architect’s Consent and Acknowledgement.
Disbursement Schedule. See the forms Construction Disbursement Schedule Voucher Plan and Construction Disbursement Schedule Progress Plan located at the end of Chapter 11.
Subcontractor Subordination Agreement. Consider requesting them from electrical, plumbing, foundation and framing subcontractors.
Evidence of Utilities, such water, sanitary sewer, drainage, and electricity, if appropriate. If the loan finances infrastructure, the Bank should monitor the installation closely.
Building and Other Required Permits together with evidence of compliance with all city codes and state and federal handicap regulations.
Affidavit of Commencement. [TPC § 53.124] filed by the owner and general contractor in the county clerk’s office not later than 30 days after the commencement of construction or delivery of materials.
Appointment of independent supervising architect, selected and retained by the Bank at borrower’s expense to make inspections.
Affidavit of All Bills Paid.
Affidavit of Completion.