The Local Government Code authorizes municipalities and counties to regulate land use and structures within their jurisdictions. A city or county, has the right to approve plats, implement zoning laws, enforce private deed restrictions, inspect structures and enforce compliance with local building codes. Each county or city has local ordinances and rules governing building permits for construction of the structure, septic systems, sewer systems, wells or other water supply resources.
The Bank should require a building permit and provide in the loan documents that the contractor will comply with all building requirements of the appropriate governmental entity. Properties subjected to deed restrictions are sometimes subject to inspection and approval of the plans and specifications by an architectural control committee created by the deed of restrictions. Deed restrictions should be reviewed and the Bank should assure compliance with the committee’s requirements, if any.
Many municipalities require that they inspect various stages of the construction before a contractor can continue with the construction, i.e., foundation, framing, plumbing and electrical work. These vary by city. The Bank should require representations and warranties in the loan agreement regarding these matters and rely upon the Bank’s inspector to keep it informed as to these issues.
Upon completion the Bank should require a copy of the septic and/or well approval issued by the appropriate governmental authority, and a final certificate of occupancy, if available. Certificates of occupancy are not always available, particularly for properties located outside a city’s limit.
Properties located in counties designated by the Texas Windstorm Insurance Association as being in a catastrophe area or in an inadequate fire insurance area are subject to special building codes and inspections in order for the improvements to be eligible for insurance coverage.