Los Angeles Fix and Flip
CONSTRUCTION FUNDS HOLDBACK AGREEMENT
Date: April ________, 2012 Loan: Borrower: Fix and Flip Borrower Property Address: 539 EAST Hard Money Blvd, City of great Hope, CA 90000
This agreement ("Agreement") is between Fix and Flip Borrower , herein referred to as Borrower and Hard Money Man , herein referred to as LENDER, and Private Lending Company herein referred to as BROKER.
A. Lender has made a loan to Borrower in the principal amount of $150,000.00, the ("Loan"). The Loan is evidenced by that certain Promissory Note Secured by Deed of Trust (the "Note") in the principal amount of the Loan, signed by Borrower and made to the order of Lender. This Construction Funds Holdback Agreement (“Agreement”) is executed in conjunction with the Note and is supplementary thereto.
B. A portion of the loan proceeds are to be used to repair and remodel the security property having the above-referenced address (the "Property").
C. The parties desire to enter into an agreement for the holdback and disbursement of a portion of the Loan proceeds allocated for repair, remodeling, and construction on the Property.
D. Lender is acting only as a Lender in this transaction and is in no way acting as a principal in the matter of the construction of improvements on the Property, and is in no way responsible for any of the construction or improvements.
E. The Property consists of a detached single-family dwelling unit and a detached two unit dwelling on one lot. Borrower intends to rent out each of the units. The property will be held as an investment property. Borrower has no intention of residing in any of the units.
F. Borrower has estimated that the cost to complete the repairs will not exceed $40,000 and will take less than six weeks to complete.
G. Borrower affirms that all of the construction that will be done on the dwelling unit(s) and on the entire property as a whole will be done in a good and workmanship like manner and according to applicable building and safety codes.
H. Borrower affirms that he has past experience in remodeling of rental units and in managing tenants.
I. Borrower understands that the actual costs to remodel the property may exceed the estimated cost, in which case Borrower will use his own funds as necessary to complete the work and make the units ready for occupancy by tenants in timely manner, not to exceed sixty days following close of escrow.
J. Borrower acknowledges that the lender is making the loan in reliance on the statements made herein. Borrower understands that not completing the work and obtaining the certificate(s) of occupancy, if any are required, within sixty days from the date of close escrow will constitute a default in the under the provisions contained in the Deed of Trust, which would allow lender to take action to remedy the default, including, but not limited to, commencing foreclosure proceedings.
K. Borrower represents that as of the date hereof no work has yet begun and no contractors or workmen are owed any money for any labor or materials.
For and in consideration of the approval and granting of the construction loan by Lender to Borrower, the parties to this Agreement hereby agree as follows:
1. Holdback Amount. An express condition of the Loan from Lender is that $40,000 of the Loan proceeds due Borrower at close of escrow (the "Holdback Amount") will be disbursed by escrow on the date of escrow closing into a reserve account (“Reserve Account”) established by the Lender. Interest will accrue to Lender on the entire Loan amount, including the Holdback Amount, from and after the date of the Note at the rate set forth in the Note. The Holdback Amount represents a portion of the Loan proceeds allocated for construction of improvements on the Property and shall be disbursed by Lender in accordance with and subject to the terms of this Agreement. If Borrower is in default under this Agreement and/or the Note, Lender may, at its option, apply all or a portion of the Holdback Amount to pay money towards the balance owed under the Note.
2. Description of Improvements. Borrower hereby agrees that it shall construct the repairs and improvements on the Property substantially in accordance with the itemized list attached hereto.
3. Covenants. Borrower hereby agrees to:
(a) Use and contract with only contractors and subcontractors approved by Lender in its reasonable discretion to do work at the Property.
(b) Keep the Property free from mechanics and materialmen's liens.
(c) Notify Lender and Broker of any mechanics or materialmen's liens that Borrower knows to have been recorded against the Property or has reason to believe will be recorded thereon.
(d) Complete the construction in a good workmanlike manner and in compliance with applicable laws.
(e) Allow access to the Property by Lender, Broker and their respective agents, representatives, employees, inspectors and successors and assigns, and, upon request by such entities or persons, provide such entities or persons with information concerning the Property and the progress and costs of construction, remodeling and repair.
(f) Pay when due the contractor, subcontractors, laborers and materialmen for all services rendered.
(g) Obtain and keep documentary evidence of payment to all contractors, subcontractors, laborers, and materialmen.
(h) Immediately forward to Lender a photocopy of any notice whatsoever received by the Borrower and its agents, representatives, and employees from any contractor, subcontractor, laborer, materialmen, city employee, county employee, or regulatory authority.
4. Scheduled Disbursements. Provided that all of the conditions to disbursement set forth in Section 5 have been satisfied, Lender shall disburse the Holdback Amount to Borrower as follows:
As a precondition to disbursements, Borrower must first obtain permits for the six items on the Repair and Improvements List (the List) that indicate that building permits are required. Additionally, Borrower must obtain permits for the other repairs and improvements as required by law, if any.
Money from the reserve fund shall be released to reimburse Borrower for completing items on the List. Completion means actual completion and sign off by city building inspector.
Upon completion of each item on the Repair and Improvements List, Lender shall release to Borrower, from the reserve fund, the sum specified for such item on the List. Evidence of full payment to contractors and workmen involved in the work on the List item shall be required to be produced to Lender prior to such release of funds.
In the absence of evidence of payment to contractors or workers for any item, Lender may elect to release money directly to contractors(s) as set forth in Section 7 below.
The remainder of the Holdback Amount, including the amount identified as “contingency” shall be disbursed upon passing all final inspections or as otherwise may be agreed upon in writing. All of the work identified on the List is scheduled to be completed within 60 days of close of escrow.
The disbursements will be made upon Lender’s inspection and approval of completion of the above-described work as scheduled and approval of Borrower’s requested disbursement amount. Any inspections conducted by the Lender shall be deemed to have been for its own benefit as mortgagee, and shall in no way be construed to be for the benefit of or on behalf of the Borrower, nor shall the Lender be responsible for obtaining waivers of construction liens.
If the improvements have not been completed as scheduled and progress as described hereinabove has slipped by more than 30 days, Lender may, at its sole discretion and without any obligation to do so, use any remaining funds to complete the remaining repairs and improvements by use of contractors of Lender’s choice or by whatever method it deems is most expedient. Failure to commence or complete the construction in a timely manner shall constitute a default under this Agreement and the Note.
If Borrower or its contractors, subcontractors, agents, and/or employees fail to perform work diligently, or abandon work for a period of 15 or more days, or fail in any way to perform the conditions of this agreement, Lender may, and without prejudice to any other rights it may have, by giving 48 hours written notice of its election to Borrower, take over all work, or any part thereof, and all tools, equipment , construction drawings, engineering drawings, and supplies and finish the work by whatever method it deems is most expedient. Construction Fix N'Flip In California