Commitment No. [number]
[date]
To: [name]
This constitutes a commitment of [name of construction lending institution] (Construction Lender) to make a construction mortgage loan to the Borrower subject to the specific terms hereinafter set forth, to the General Conditions of Construction Loan, and to the Specific Conditions of Construction Loan annexed hereto and made a part hereof [omitted].
Borrower(s): [specify conditions].
Property and Improvements: [specify conditions].
Qualified Loan Amount: The amount qualified for disbursement under the permanent loan commitment, but in no event greater than the Maximum Loan Amount.
Maximum Loan Amount: [$ amount]
Permanent Loan Commitment: Commitment No. [number] dated: [date]
Permanent Lender: [name]
Variable Interest Rate: [$ amount]
Maturity Date: [date]
Guarantor(s): [name]
Nonrefundable Commitment Fee: [$ amount]
Inspecting Architect: [name]
Construction Lender's Counsel: [name]
Loan Officer: [name]
This Commitment shall be considered null and void unless you indicate your acceptance by signing and returning the attached copy of this Commitment to us together with the Nonrefundable Commitment Fee in care of the Loan Officer by no later than [date].
By: [Construction Lender]
AGREED TO AND ACCEPTED
[Signatures, dates]
GENERAL CONDITIONS OF CONSTRUCTION LOAN
Commitment No. [number] [date]
1. First Lien. The Construction Mortgage Loan contemplated by this Commitment to the Borrower shall be secured at all times by a first lien on the Property and Improvements shall be in an amount not to exceed the Qualified Loan Amount.
2. Compliance With Permanent Loan Commitment. This Commitment and our obligation to make advances under the Loan are subject to satisfaction of the terms hereof and to the Permanent Loan Commitment being in full force and effect at all times throughout the term of our Loan.
3. Loan Documents. The Loan is to be evidenced by the Borrower's Promissory Note for the Maximum Loan Amount, which shall bear a variable Interest Rate payable monthly and be due and payable in full at the Maturity Date, and is to be secured by a mortgage that shall be a first lien on the fee simple title to the security with any ground lease or leases expressly subordinated, and additionally secured by (1) security agreements and financing statements creating a first lien covering all supplies delivered and to be used in the construction of the Improvements to be financed hereby as well as all equipment and furnishings actually installed in the Improvements (it is understood and agreed that the inclusion of any and all nonfixture items is solely for the purpose of ensuring completion of construction and compliance with the Permanent Loan Commitment and not for the purposes of producing income or return on investment); (2) an assignment of rents and leases free of any prior interest in said rents and leases; (3) a building loan agreement; (4) the unconditional joint and several guaranty by the Guarantors of completion of construction and of repayment of the indebtedness; and (5) such other documents as are designated by Construction Lender's Counsel (all hereinafter collectively referred to as the "Loan Documents"). The Loan Documents are to be satisfactory to us and our counsel both as to form and content.
4. Documents Required by Initial Closing. The Improvements shall be constructed and the Loan advanced in accordance with the terms of the Building Loan Agreement, which, among other things, shall require the inspection of construction and approval of advances (to be made not more frequently than once monthly) by the Inspecting Architect and the receipt and approval by us and our Counsel both as to form and content prior to the first advance (the initial closing) of the following:
a. An appraisal, also to be approved by the Permanent Lender, prepared without cost to us by an appraiser acceptable to us and the Permanent Lender. The Qualified Loan Amount shall in no event exceed 75 percent of the value established by such appraisal;
b. The undertakings of the general contractor, architect, and engineer, if any, to continue performance on our behalf without additional cost in the event of a default under any of the Loan documents;
c. One set of final, detailed plans and specifications for all construction, including borings and soil reports, and evidence of permanent lender's acceptance thereof, designating the manufacturer and model number of all equipment. i. With the Approval of the Borrower, Guarantors, Permanent Lender, and Inspecting Architect noted thereon.
ii. Bearing an endorsement by the appraiser that he has examined said plans and specifications and finds them to be in keeping with the basis on which he appraised the Property for us.
iii. Accompanied by a certification by an architect acceptable to us that the plans and specifications meet all applicable local zoning, building, and other pertinent requirements of the public authorities having jurisdiction, including, but not limited to, compliance with the National Environmental Policy Act (NEPA) and any other applicable federal, state, municipal, or local environmental impact or energy laws or regulations, and that the construction covered thereby is sound, of good design, and satisfactory for the purposes intended.
iv. Accompanied by a certification by a qualified professional engineer acceptable to us certifying on a basis of personal inspection, with supporting data (borings, soil reports, etc.), that what is planned and specified will be adequate.
v. Showing that the parking facilities will be constructed as required within the security. Any and all changes from the approved plans and specifications must be approved by us.
d. The Loan Documents executed by all parties necessary to create the rights and duties respectively set out in each document.
e. A detailed cost breakdown showing all costs of the proposed construction with the approval of the Inspecting Architect that the cost breakdown is reasonable and accurate being noted thereon.
f. Current financial statements for the Borrower, Guarantors, general contractor, and major subcontractors.
g. Evidence that the Property is free and clear of all restrictions and encumbrances unless approved by us.
h. Architects', contractors', subcontractors', and engineers' contracts relating to construction of the Improvements with parties acceptable to us and assignments of said contracts to us.
i. Borrower's affidavit and opinion of Borrower's Counsel.
j. Form lease to be used for all tenants.
k. A policy of Mortgagee's title insurance written by a title company or companies acceptable to us on the American Land Title Association 1970 Loan Policy form assignable to a permanent mortgagee.
l. A current survey certified to us and the title insurer; a foundation survey will also be required when the foundation is completed and we reserve the right to call for interim surveys locating the Improvements as construction progresses.
m. Evidence of compliance with all laws, ordinances, rules, regulations, and restrictions affecting the Premises, the construction of the Improvements, and the consummation of the transaction, including, but not limited to, zoning, issuance of all building permits and licenses, and availability of utility and municipal services.
n. Such policies of builder's risk, liability, workers' compensation, and other insurance as we may require in forms, companies, and amounts acceptable to us, including, but not limited to, collapse insurance.
o. Evidence that sufficient funds have been made available by the Borrower in a manner satisfactory to us for the purpose of completing the Improvements heretofore described.
p. Evidence that the Borrower has purchased the land herein referred to and has fully paid for it.
q. An assignment of the Borrower's rights under the Permanent Loan Commitment, with such assignment approved by the Permanent Lender.
r. Evidence that all requirements of the Permanent Loan Commitment that can be satisfied prior to the initial closing have been compiled with to the satisfaction of the Permanent Lender, including, but not limited to, approval by the Permanent Lender of the state of title and survey; that the Permanent Loan Commitment is in full force and effect, without modification, except as we may have approved in writing, and that the Permanent Lender has agreed to accept the certificate of the Inspecting Architect in satisfaction of any conditions of the Permanent Loan Commitment requiring certification as to performance of construction and completion of Improvements in accordance with the plans and specifications.
s. Evidence as to the Borrower's capacity and authority to take the Loan and to execute the Loan Documents.
t. Such other documents, instruments, opinions, and assurances as we may require including, but not limited to, 100 percent labor and material payment and performance bonds covering the general contractor and/or subcontractors in amounts and issued by companies satisfactory to us, in which we are to be named as dual obligee, assignments of specified leases and, at our option, an agreement by the Permanent Lender for the purchase of the Note and Mortgage.
5. Loan Costs and Fees. The Loan shall be made without cost to us. The fees of our Counsel, the appraiser, the Inspecting Architect, title insurance premiums and charges, survey charges, mortgage and documentary stamp taxes, if any, recording charges, brokerage commissions, and any other connected costs shall be payable by the Borrower and the Guarantors, and the Borrower and the Guarantors hereby jointly and severally agree to pay such fees and to indemnify us against claims of brokers arising in connection with the execution of this commitment by us or the consummation of the Loan contemplated hereby, all regardless of whether the Loan contemplated hereby closes.
6. Loan Not Usurious. Our Counsel shall be satisfied that all fees and charges respecting the making of the Loan will result in no exceeding of any applicable interest limitation of the jurisdiction in which the property securing the Loan is located. The Loan and our making of it shall be in all respects legal and shall not violate any applicable law or other requirement of any governmental authority.
7. Completion and Improvements. The Improvements are to be constructed in accordance with the approved appraisal and final plans and specifications, and are to be completed, free of all liens, other than the lien of the construction mortgage contemplated hereby, not less than thirty days in advance of the Maturity Date of the Note.
8. Disbursement of Funds. The proceeds of the Loan shall be advanced as follows: a. As construction progresses, but not more frequently than once a month, in amounts which at our election shall be 90 percent of either: i. The amount of the qualified loan multiplied by the percentage of completion of construction then attained; or
ii. The estimated total cost of construction of the Improvements as determined at the time of each advance by the Inspecting Architect, (and/or, at our option, by our in-house architect) multiplied by the percentage of completion of construction then attained, less the difference between said estimated total cost of construction and the amount of the qualified loan; less in each case, amounts theretofore advanced; and
b. In no event in an amount greater than the Qualified Loan Amount Funds will be advanced for materials stored on-site only at our option.
9. Draw Requests. Each request for funds from the Borrower shall be on Construction Lender's forms, duly approved for payment by the Contractor, Inspecting Architect, and Borrower and accompanied by all documentation deemed necessary by us to substantiate the requested payment. Draw requests are to be sent to the Loan Officer in sufficient time to allow five (5) business days for processing and writing of funds.
10. Publicity. By accepting this Commitment, the Borrower agrees, at our request, to affix a sign approved by us, at a location on the Premises satisfactory to us, which shall recite, among other things, that Construction Lender is financing the construction.
11. No Material Changes. This Commitment assumes the accuracy of all information, representations, exhibits, and other matter submitted to us and presupposes no material adverse change in the state of facts indicated therein prior to any disbursement of funds hereunder.
12. Amendment: Assignment. This Commitment may be amended only by a writing executed by us and is not assignable without our prior written consent.
13. Borrower to Contact Lender's Counsel. After accepting this Commitment, the Borrower is requested to promptly get in touch with our Counsel for the purpose of arranging for the preparation of the Loan Documents and other items necessary for the initial closing.
14. Closing Date. The initial closing shall be held on a date within forty-five days from the date of the acceptance of this commitment, upon not less than five days' written notice to us, care of the Loan Officer. No such notice shall be effective to establish a closing date unless we shall have previously received and approved a current report of title and the requisite survey. Unless the initial closing is held within such forty-five-day period, our obligation hereunder will, at our option, terminate.
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