Construction Loan Funding and Title Insurance: Best Practices in Disbursement and Documentation

Drafting Effective Future Advance, Budgeting and Draw Provisions; Lien Waivers, Title Updates and Endorsements

A live 90-minute CLE webinar with interactive Q&A

Tuesday, September 12, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT

This CLE webinar will examine the mechanics of construction loan funding and the interplay of construction advances with title insurance through the life of a construction loan. The panel will discuss drafting of budgeting and construction draw provisions, and best practices for preserving the lender's lien priority and title insurance protection for future advances.


In construction loans, the lender advances a small portion (or none) of the loan at closing, since the proceeds are intended to fund the costs of construction as they are incurred. The conditions for advancing funds are often complex, in part because there are three participants—the lender, the borrower and the contractor—and in part because actual costs may vary from the construction budget.

Most construction loan agreements provide for shifting cost savings for one item to another item in the budget. Construction budgets will usually incorporate “contingency” to be applied by the borrower to pay for cost overruns for items in the budget, subject to certain conditions. Documents must provide for retainage for unforeseen costs to ensure completion of the project.

A construction loan is unique for title insurance purposes because disbursements are made post-closing, and a property increases in value with each disbursement. Title insurance must be in place to cover the loan amount as it is funded.

Counsel to the lender must structure the loan to ensure the priority of advances and procure title insurance (including appropriate endorsements at closing) consistent with that priority. In addition, the borrower will typically need to obtain lien waivers or lien subordinations as disbursements are made.

Listen as our authoritative panel discusses the construction loan funding process and the need for increasing title insurance coverage as funds are disbursed. The panel will discuss budgeting and construction draw provisions in loan agreements, future advance clauses and other practices for preserving the senior position of the mortgage over mechanic’s liens, and the title endorsements that should be obtained at closing.


  1. Construction loans
    1. Budgeting—adjustments, retainage
    2. Draw procedures
  2. Mechanics liens—lien waivers, lien subordinations
  3. Title coverage and construction endorsements
  4. Future advance clause, title updates
  5. Survey coverage
  6. Owner’s policy


The panel will review these and other key issues:

  • What issues must be considered in drafting construction draw provisions?
  • How do construction draw provisions address variations from the construction budget?
  • How does title insurance for a construction loan differ from title insurance for a permanent loan?
  • What is the purpose of lien waivers or subordinations required with construction draws, and what are the standard forms?


Peter G. Freeman, Partner
Pillsbury Winthrop Shaw Pittman, Washington, D.C. & New York

Mr. Freeman represents lenders, developers, private equity funds and real estate investment trusts (REITs) in connection with the financing, acquisition, construction, disposition, leasing and asset management of commercial properties. He has closed many complex transactions involving multifamily, retail, hotel, entertainment, industrial and office properties. He also advises on commercial and residential bulk loan sales, distressed asset dispositions, joint ventures, restructurings and mortgage servicing rights transfers. Further, he provides pro bono transactional counsel to Washington-area nonprofits.

Euchung Ung, Partner
Kleinberg Kaplan Wolff & Cohen, New York

Mr. Ung primarily represents real estate investors, owners and lenders in partnership, LLC and joint venture transactions (including real estate fund formation), bond, mortgage and mezzanine financing transactions, and transactions involving the acquisition, disposition, development, management, and leasing of office, retail, commercial, mixed-use and hotel properties. He also advises hedge funds and private equity funds on the purchase and sale of real estate mortgage and mezzanine debt, and the negotiating and structuring of complex workout arrangements in connection with the ownership or foreclosure of real property assets.

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University of Washington

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Real Estate Law Advisory Board

David A. Barksdale


Ballard Spahr

Jacob Bart


Stroock & Stroock & Lavan

Brian W. Blaesser


Robinson & Cole

Ronald B. Grais


Sugar Felsenthal Grais & Hammer

Ren R. Hayhurst


Bryan Cave

Thomas C. Homburger

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Susan C. Tarnower


Kilpatrick Townsend & Stockton

Clark T. Thiel


Pillsbury Winthrop Shaw Pittman

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