BarbriSFCourseDetails
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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Tuesday, June 13, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course 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, budgeting, and construction-draw provisions, as well as best practices for preserving the lender's lien priority and title insurance protection for future advances.

Faculty

Jeffrey R. Escobar
Partner
Troutman Pepper Locke LLP

Mr. Escobar advises lenders, sponsors, investors, project companies, public and private utility companies, private equity funds, joint ventures, institutional owners, and developers across the U.S. and the Americas. He assists clients in deploying capital for debt and tax-equity project financing, M&A, development, and sale-leaseback of large-scale renewable energy and energy transition projects. This includes solar, wind, geothermal, green hydrogen, and alternative energy, as well as battery energy storage, infrastructure, and transportation projects. Mr. Escobar leads complex project financed infrastructure, renewable energy, and energy transition-related projects; guides large commercial real estate development and construction finance, design, engineering, and construction transactions; manages real estate development and construction concerns of energy, infrastructure, transportation, commercial, energy transition, and renewable energy projects; navigates real estate and construction concerns in public-private partnerships; provides project support and claims dispute avoidance; and mitigates real estate and environmental risks.

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Megan H. Shirk
Partner
Kutak Rock LLP

Ms. Shirk’s practice includes commercial real estate lending, with an emphasis on federal and state low-income housing tax credit finance, historic tax credit finance, equity bridge lending and tax-exempt bond financing. Her practice also includes general real estate matters relating to the acquisition, development, leasing, and sale of real estate, including low-income housing tax credit apartment complexes. Ms. Shirk has assisted financial institutions in closing complex construction and permanent loan transactions and equity investments involving multiple layers of financing and grant sources. She has represented financial institutions in conventional commercial real estate lending transactions of all types, including real estate loan workouts and restructurings.

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Description

In construction loans, the lender advances a small portion (or none) of the loan at closing since the proceeds are intended to fund construction costs as incurred. The conditions for advancing funds are often complicated 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 from 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 the completion of the project.

A construction loan is unique for title insurance because disbursements are made post-closing, and 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. Also, the borrower will typically need to obtain lien waivers or lien subordination 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 to obtain at closing.

Outline

  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: new 2021 ALTA/NSPS Standards
  6. Owner's policy

Benefits

The panel will review these and other relevant matters:

  • What are the issues to consider 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?