Construction Lending: Key Issues for Negotiation and Documentation

Construction Draws, Loan Balancing, Retainage, Payment and Completion Guaranties, HVCRE Equity Requirements

An encore presentation featuring live Q&A

A 90-minute CLE webinar with interactive Q&A


Wednesday, August 8, 2018

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE webinar will provide lender’s counsel with guidance in the negotiating and documenting of construction loans, including provisions for making loan advances, budgeting and loan balancing, payment and completion guaranties, pre-leasing requirements, retainage and project completion. The panel shall also discuss best due diligence practices and how to document certain construction loans for exemption from High Volatility Commercial Real Estate (“HVCRE”) classification.

Description

Construction loans are inherently more fraught with risk than standard property loans. Additional risks include design defects by architects and engineers, inaccurate budgeting, unanticipated costs and delays, misapplication of construction draws, contractor liens, labor and contract disputes, force majeure, and the failure of contractors and subcontractors to complete the project on time and in accordance with the lender’s approved plans and specifications. Lender’s counsel must negotiate and document construction loans which address these risks.

Construction loan documents should provide detailed conditions for making loan advances, budgeting and loan balancing, payment and completion guaranties, pre-leasing requirements, retainage of funds pending project completion, and more. Due diligence is essential to the construction loan process because plans and specs, budgets, and the construction schedule will loom large in the construction loan agreement.

Payment and completion guaranties are critical components of a construction loan agreement and will likely be heavily negotiated by the borrower as to the limitation of liability, calculation of damages and other matters. Lenders will also be concerned with the treatment of the construction loan as an HVCRE asset, and if possible will want to document that the borrower has met the equity funding requirements for exemption from HVCRE treatment.

Listen as our authoritative panel examines the key provisions in the construction loan agreement, payment and completion guaranties, and other loan documents, with a focus on those items most frequently subject to negotiation. The panel will also discuss construction loan due diligence and how some loans may be adequately documented to avoid or limit the period of HVCRE classification. Counsel should not overlook the protections which may be provided by appropriate escrow instructions and title insurance coverage – two protections which will not be discussed by the panel.

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Outline

  1. Parties involved in a construction loan
  2. Construction loan risks
  3. Due diligence
  4. Construction loan documents
  5. Other crucial issues

Benefits

The panel will review these and other critical issues:

  • What additional risks and concerns arise in construction lending as opposed standard commercial property loans?
  • What are the contentious provisions in construction loan documents and the points of negotiation?
  • How do plans and specs, budgeting, and retainage figure into the loan funding process?
  • How do payment and completion guaranties address construction risks and how do they vary?

An encore presentation with live Q&A.

Faculty

Weissmann, David
David A. Weissmann

Partner
Weissmann Zucker Euster Morochnik & Garber

Mr. Weissmann has represented real estate developers, managers and lenders in a variety of transactions and...  |  Read More

Goldstein, Jason
Jason E. Goldstein

Shareholder, Chairman of the Firm’s Mortgage Banking Group
Buchalter

Mr. Goldstein is Chairman of the Firm’s Mortgage Banking Group and specializes in real property related...  |  Read More

Hosack, John
John L. Hosack

Shareholder
Buchalter

Mr. Hosack focuses his transactional practice on commercial real property loan documentation, loan workouts, REO sales...  |  Read More

Rodriguez, Enrique
Enrique (Rick) Rodriguez, Jr.

Founder and Principal
Rodriguez & Associates

Mr. Rodriguez is a qualified expert in banking and real estate matters and for the past 17 years has provided a wide...  |  Read More

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