From Permanent Lender to Construction Lender
[Salutation]
It is our understanding that you have entered into a Construction Loan Agreement with [borrower], [date] pursuant to which you will make advanced, not to exceed in the aggregate [$ amount] to finance the construction of [describe building] on premises situated on [location], on the terms and conditions set forth in the Construction Loan Agreement, a copy of which is attached hereto marked "Exhibit A" [omitted].
When the final advance has been made, your loan will be evidenced by a promissory note and secured by a first mortgage in the form you have submitted to us. The note and mortgage provide that on transfer and assignment thereof to us, the unpaid principal amount of the loan will not be more than [$ amount], repayable in [number] annual installments of [$ amount] each, beginning on the first day of the [number] month after the transfer and assignment of the note and mortgage to us, which installments will be applied first to interest on the unpaid principal at the rate of [percent] per year and the balance to reduction of the unpaid principal debt. The final payment of the loan will be made [number] years and [number] months after the due date of the first payment.
The borrower has the privilege, exercisable after the transfer of the note and mortgage, of making additional principal payments in multiples of $1,000 on any interest paying date without penalty by giving [number] days written notice, provided not more than [$ amount] is paid in any one year, including scheduled payments of principal and the further privilege to pay the loan in full during and after the [year interval] year of the term of the loan, a term year being calculated from the date of the transfer of the note to us, on any interest paying dates by giving [number] days' written notice and by paying a premium of [percent] of the unpaid principal balance of the loan if paid during the [year interval] year. The said premium shall be reduced by [fraction] of one percent in each successive term year thereafter so that no premium will be payable after the [number] year of the loan.
We have reviewed the proposed form of note and mortgage and title policy to be issued by [insurance company]. A copy of said title policy is attached hereto marked "Exhibit B" [omitted]. We agree to purchase from you for the principal sum of [$ amount] (or for an amount less than the said sum that remains unpaid thereunder at that time), and you agree to sell to us such note and mortgage on the following terms and conditions:
1. The terms and conditions set forth in Exhibit A [omitted] have been complied with and no condition or event that would constitute an event of default as defined in the mortgage or that, after notice or lapse of time or both, would constitute an event of default, exists at the time of the transfer to us.
2. We have received the title policy of [insurance company] insuring our title as Assignee of the mortgage in the sum of [$ amount] (or such lesser sum as may remain unpaid at that time), with only such exceptions to title as are set forth in Exhibit B [omitted].
3. We have received a plat of survey, showing that the exterior walls of the building are within the property lines, and satisfactory proof of compliance with any and all laws, regulations, and zoning requirements applicable to the construction of the building. Proof of compliance shall be considered satisfactory if it is in the form of a certificate of a member of the Architect's Firm that is supervising construction [identify firm], that the building has been completed according to the plans and specifications approved by us, and that all such laws,
regulations, and zoning requirements have been complied with.
4. Copies of such plans and specifications bearing our stamp are delivered to you herewith. The building shall have been completed substantially according to such plans and specifications, shall contain approximately [amount] cubic feet, and shall cost (excluding land, architect fees, and furnishings) not less than [$ amount], and shall have been completely furnished and equipped and in operation prior to [date].
5. We have been furnished with fire insurance policies in an amount not less than [$ amount], with mortgagee clause in favor of this company attached. The fire insurance policies shall be duly incorporated companies authorized to do business in [state] and approved by us.
6. We have received certified copies of the Articles of Incorporation and Bylaws of [borrower], a list of its officers, certified copies of the proceedings by the shareholders, and directors of the corporation authorizing the execution of the note and mortgage, and the opinion of counsel for the corporation that the note is the valid and enforceable obligation of the corporation according to its terms and that the mortgage is a valid and enforceable first lien on the real estate of the corporation, subject only to the exceptions noted on the title policy issued by [insurance company].
7. We have received an assignment of the note and mortgage duly executed by you in recordable form.
8. If the foregoing is acceptable to you, kindly sign and return the enclosed copy of this letter to us. The said letter shall then become a binding agreement between us.
[Signatures, dates]
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