When a developer has a dispute with the lender, it can be crippling for the project under development. If you are a developer in the middle of a dispute with a lender, it is helpful to know how the lender process and lender draws work so that you get the process back on track to fund the project and bring it to fruition.
What you can do when lender draws are held up
At the beginning of a project, a detailed draw schedule with the lender will be established that will outline a detailed payment plan for the construction project. It will be based on various phases and milestones for the project.
After the draw schedule is in place, the owner or project manager will submit a detailed report of the work completed at certain project milestones. The process begins when the payment is submitted. After the owner or the project manager reviews the pay application, it will be submitted as a draw request to the lender.
Accompanying the draw request are several different documents that will substantiate the work that has been performed. These documents essentially provide proof that the work has been completed and payment is due.
Although common, this process can be complicated by change orders. Invoices and receipts, an updated schedule of values, an overview of the progress made on the project and lien waivers should also be submitted.
When a lender is holding up the project, it may be for a variety of reasons including if they are complaining, incomplete or missing paperwork. It may also be a situation that results in a contract dispute.
For that reason, it is important for developers to understand how real estate law legal resources can help and how trained guidance may be able to get the funding flowing once again.