1. Ensure that you as the lender will have a clause that will allow you the “Right to Inspect” the property at any time you choose, upon sufficient notification to the builder/borrower.
2. Agree with the contractor/builder that all parties entering the property for work shall provide insurance coverage or sign a waiver for your protection.
3. Require that your borrower’s contractor be provided an attachment to the construction contract detailing the proper progress payment submittal requirements that are to be followed.
4. Consider an acceleration clause offering a daily benefit for an early finish of the project, conversely consider a late fine as well for delays beyond the proposed completion date.
5. Don’t let price be your guide, the low bidder is probably not the most effective craftsmen and business person.
6. Put it ALL in writing, a favorite saying is “If It’s Gray You Pay” meaning you want to get it all in black and white. All of it...
7. Identify, prevent and mitigate potential risks that arise before breaking ground, it will save all parties both time and money.
8. The level of risk that is being implemented and monitored effectively is directly proportionate to the amount of paperwork involved in the project. Minimal paperwork, major risk exposure.
9. Have the “Right to Terminate” the entire deal when you want to if it is not going how you thought it would.
10. Use a qualified and competent third party consultant to be your logic and common sense in construction matters.
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