chapter 14 real estate development

Bonding

A guarantee of completion or performance, typically issued by an insurance company that will back up the bonded party in any lawsuit . In real estate, contractors, for example, are often bonded as assurance that they will complete the work

CERCLA (comprehensive environmental response, compensation, and Liability Act of 1980)

Legislation adopted to provide partial funding for the cleanup of environmen tally contaminated sites by requiring the party responsible for the contamination to undertake cleanup efforts or provide compensa tion for cleanup costs; also known as the Superfund law

Commitment letter

A written agreement by a lender to loan a specific amount of money at a specified interest rate within a particular period of time

Construction loan

A loan made, usually by a commercial bank, to a builder to be used for the construction of improvements on real estate and typically running for six months to two years

Mezzanine financing

a hybrid financing tool bridging the gap between senior debt (mortgage) and equity, allowing borrowers to increase leverage without providing100% of the equity

Entitlements

legal approvals from local governments (zoning, site plans, permits) that grant developers the right to construct or change the use of land

Retainage

A portion of the amount due under a construction contract that the owner withholds until the job is completed in accordance with plans and specifications; usually a percentage of the total contract price

Completion bond

ensures that the project will be completed, notwithstanding the default or bankruptcy of the contractor. a three-party surety agreement guaranteeing that a construction project will be completed on time, on budget, and free of liens, protecting lenders and developers from financial loss. It ensures that if a contractor defaults, funds will be available to finish the project

Development agreement

a legally binding contract, typically between a property owner (or developer) and a local government entity, setting the terms, conditions, and regulations for a development project.