The "Add Borrower Construction Language" adds construction completion language for the Borrower into the loan agreement for otherwise non-construction loans.
The “Add Borrower Construction Language” is a functionality that only includes new language when selected as "Yes". There is no change to the documents if "No" is selected.
Selecting "Yes" adds construction completion language for the Borrower into the loan agreement for otherwise non-construction loans. For customers that do not need a full construction loan package, this brings in Construction or Repair of Improvements for the Mortgaged Property provisions such as requirements, funds, completion, inspection, security, etc.
This feature is intended for borrowers who often perform construction or repair work on the collateral property that is not funded by the loan proceeds. This feature can also be selected when lenders want to have a guarantee from the borrower that the work will be performed in a quality manner, fully paid for by the borrower without loan funds, and the project will be lien-free.
D.X. Construction or Repair of Improvements for the Mortgaged Property. Borrower shall not commence the construction or repair of any Improvements for the Mortgaged Property (the “Project Improvements”) unless and until (1) Lender shall have reviewed and approved the plans and specifications for the Project Improvements in Lender’s reasonable discretion (the “Project Plans”); (2) Lender shall have reviewed and approved the budget for the Project Improvements in Lender’s reasonable discretion (the “Project Budget”); (3) Borrower shall have provided Lender with evidence satisfactory to Lender in its reasonable discretion that Borrower has sufficient funds to complete the Project Improvements; (4) Borrower shall have provided Lender with a schedule for the completion of the Project Improvements satisfactory to Lender in its reasonable discretion (but in no event shall Borrower be permitted to complete the Project Improvements on a date later than the Maturity Date) (the “Project Schedule”); and (5) Lender shall have reviewed and approved any general contract agreement and all required subcontracts for the completion of the Project Improvements in Lender’s reasonable discretion.
(a) Construction Requirements. In addition, and not by way of limitation, Borrower agrees that the Project Improvements shall be constructed and completed in compliance with the following requirements (collectively with items (1) through (5) of section D.16, the “Construction Requirements”):
(i) The Project Improvements shall be fully completed as provided under the Project Schedule to the satisfaction of Lender, including evidence that: (i) all construction costs have been paid in full with Borrower’s own funds and not with any Loan funds, (ii) a valid Notice of Completion (or its equivalent if designated differently in the Property Jurisdiction) for the Project Improvements has been recorded and given as provided by law, and (iii) the lien period has expired with no mechanic's or materialmen's liens appearing of record, and Lender shall have received no stop notices that have not been released, together with full lien waivers or releases (unconditional, as to work previously paid for, and either unconditional, or conditional upon payment, for payments covered by the final Disbursement Request) from the contractor(s).
(ii) Lender shall have obtained, at Borrower's expense, an endorsement or endorsements to Lender's Title Policy insuring the lien-free completion of the Project Improvements, and copies of all necessary final inspection reports, certificates, acceptances, approvals or occupancy permits for the Project Improvements.
(iii) If required by Lender, copies of all guaranties for workmanship, and all warranties and maintenance agreements, relating to the completed Project Improvements.(b) Deposit of Funds by Borrower. If Lender at any time determines that the amount of Borrower's funds for the purpose of paying the costs of the Project Improvements may not be sufficient to fully pay for all costs of completing the Project Improvements in conformance with the Construction Requirements, whether such deficiency is attributable to changes in the work of construction, cost overruns, the Borrower’s funds allocated in the Project Budget for a contingency reserve (if any) having been utilized to fund a different line item amount, or to any other cause, then Lender may at its election make written demand on Borrower to deposit with Lender non-interest-bearing funds equal to the amount of the shortage determined by Lender in its discretion. Borrower shall deposit the required funds with Lender within ten (10) days after the date of Lender's written demand. Lender shall make disbursements of such deposited funds only as may be required to complete the construction of the Project Improvements as determined by Lender in is reasonable discretion.
(c) Completion of Construction. Construction of the Project Improvements must be completed in a good and workmanlike manner and in accordance with the Lender-approved Project Plans, Project Budget, Project Schedule and all other Construction Requirements. Borrower shall, forthwith upon completion of the Project Improvements, cause the same to be inspected by the appropriate governmental bodies, shall correct any defects and deficiencies which may be disclosed by any such inspection, and to cause to be duly issued all occupancy certificates and other licenses, permits, and authorizations necessary or desirable for the operation and/or occupancy of the Improvements.
(d) Inspection: Right to Stop Work. Lender and its agents and representatives shall each have the right at any time and from time to time to enter the Mortgaged Property and inspect the work of construction and all materials, plans, specifications and other matters relating to the construction of the Project Improvements. If Lender in good faith determines that any work or materials do not conform to any approved Project Plans or sound building practice, or otherwise depart from any of the requirements of this Agreement, Lender may require the work to be stopped until the matter is corrected. In such event, Borrower shall promptly correct the work to Lender's satisfaction. No such action by Lender shall affect Borrower's obligation to complete the Project Improvements as provided under the Construction Requirements. Lender is under no duty to supervise or inspect construction or examine any books and records. Any inspection or examination by Lender is for the sole purpose of protecting Lender's security and preserving Lender's rights under this agreement. No default of Borrower shall be waived by any inspection by Lender. In no event shall any inspection by Lender be a representation that there has been or shall be compliance with any Project Plans or that the construction is free from defective materials or workmanship.
(e) Security. As additional security for the performance of Borrower's obligations under this Agreement, the Note and other Loan Documents, Borrower irrevocably assigns to Lender and grants to Lender a security interest in its interest in all governmental permits obtained for the lawful construction of the Project Improvements, all tentative and final subdivision maps and parcel maps respecting the Land, all preliminary and/or final subdivision public reports respecting the Land, all "shall serve" letters from utility providers, all other governmental approvals or entitlements, and all reserves, deferred payments, deposits, refunds, cost savings, and payments of any kind relating to the construction of the Project Improvements. If an Event of Default has occurred which, if it is amenable to cure, has not been timely cured, Lender shall have, in addition to all of the remedies provided in the Loan Documents, all of the rights of a secured creditor under the Uniform Commercial Code and under applicable law or in equity, and may use any funds then held by Lender and any of the items described herein for any purpose for which Borrower could have used them with respect to the construction or financing of the Project Improvements.
(f) Purchase of Materials; Conditional Sales Contracts. No materials, equipment, fixtures or articles or personal property of Borrower placed in the Project Improvements shall be purchased or installed under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the work of construction, unless authorized by Lender in writing. All personal property or construction material for which Lender advances Loan proceeds is to be stored at the Project and must be reasonably secure from damage and theft and fully insured at all times.
(g) Protection Against Lien Claims. Borrower shall promptly pay and discharge all claims and liens for labor done and materials and services furnished in connection with the construction of the Project Improvements, and shall promptly record all notices of completion and/or notice of cessation when appropriate. Borrower shall have the right to contest in good faith any claim or lien, provided that it does so diligently and without prejudice to Lender. Borrower shall promptly notify Lender in writing of any such contest. Upon Lender's request, Borrower shall provide a bond, cash deposit or other security reasonably satisfactory to Lender to protect Lender's interest and security as well as an appropriate title endorsement as required by Lender.
(h) Cooperation. Borrower shall cooperate at all times with Lender and all contractors, inspecting agencies, and other persons, in bringing about the timely completion of the Project Improvements, and Borrower shall resolve all disputes arising during the work of construction in a manner which shall allow work to proceed expeditiously.
(i) Indemnity. Borrower shall defend, protect, indemnify and hold Lender harmless from and against all liabilities claims, demands, actions, causes of action, damages, costs and expenses (including but not limited to legal fees and disbursements) arising out of, resulting from, or in any way connected with the construction of the Project Improvements, including but not limited to, any defective workmanship or materials occurring in the construction of the Project Improvements, and any bodily injury or death occurring on or about the Mortgaged Property or in any way related to the construction of the Project Improvements. Upon demand by Lender, Borrower shall defend any action or proceeding brought against Lender with counsel selected by Lender, or Lender may elect to conduct its own defense at the expense of Borrower. The provisions of this section shall survive the termination of this agreement and the repayment of the Loan.
(j) Authority to File Notices. Borrower irrevocably appoints Lender as its attorney-in-fact, with full power of substitution, to file or record, at Borrower's cost and expense in Borrower's name, any notices of completion, notices of cessation of labor, or any other notices that Lender considers necessary or desirable to protect its security, and for all other purposes described in this agreement, pursuant to the foregoing durable power of attorney.(k) Insurance Requirements During Construction. Borrower shall comply with any additional insurance requirements relating to the construction and completion of the Project Improvements as may be required by Lender in its sole discretion.
GoDocs has additional functionality for completion language to apply to the Guarantor separately as well. Please contact the Customer Support Team for assistance in activating or deactivating this feature.