CONSTRUCTION FINANCING

1. INTRODUCTION 1
   1. CONTRACTOR/LENDER AGREEMENTS 1
      1. Obligation to Complete 1
      2. Notice of Payment Defaults 3
      3. Approval of Change Orders 3
      4. Lien Subordination 4
      5. Commencement of Construction/Inception of Lien Warranties 5
      6. Lender Liability 6
      7. Miscellaneous 7
   2. CONSTRUCTION CONTRACT RECEIVABLES AS LOAN COLLATERAL 7
      1. Construction Contract Receivables -- In General 7
      2. Anti-Assignment Provisions 8
      3. Perfection of Security Interest in Contract Receivables 8
      4. Assignment of Contract Receivable on Federal Contracts 8
      5. Lender Versus Lien Claimants 9

   APPENDIX "A"
   LENDER' S VERSION - CONTRACTOR/LENDER AGREEMENT 11

   APPENDIX "B"
   CONTRACTOR'S VERSION - CONTRACTOR/LENDER AGREEMENT 13

   APPENDIX "C"
   ASSIGNMENT 15

   APPENDIX "D"
   FORM NOTICE OF ASSIGNMENT 17

Abstract

This paper addresses some of the primary issues arising in the two basic scenarios in construction financing. The first involves the owner obtaining a loan to finance construction of a project. The second involves lending to contractors and using their contract receivables as collateral.

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