1. Presented by: Brienne Berscheid Assistant Vice President & Construction Escrow Underwriter Construction Escrow Documentation Requirements

2. Presentation Outline Basic Requirements of Escrow Sworn Statements Partial and Final Lien Waivers

3. Title Company Practices Construction Loan Escrow Who are the parties to the job? – Do we have a general contractor or a construction manager? – Do we have an inspector? What are we building? – Do we need to look for tenant finish work? Is there enough money to pay for the work? Who do we pay? – Owner and lender consent if payment to contractor Consent of lender to title, the mechanics lien endorsement, and the sworn statements

4. Disbursement Procedures Generally Chicago Title receives: – Construction draw package, and – funds from Lender/Owner If insurance to be given, Chicago Title conducts title search – later date may take a couple of days If title search does not disclose new matters, disbursement occurs as set forth in the Agreement Chicago Title issues Endorsement to Lender/Owner

5. Basic Requirements of all Escrows A fully executed agreement Sworn statement from Owner Sworn statement from the General Contract Approval of the draw request by owner or lender Architects’ certification

6. Basic Requirements of all Escrows -Statements, waivers, affidavits, supporting waivers, and releases of lien from such persons and in such form as may be required by CTIC for the purpose of providing the title insurance coverage specified in this Agreement covering the current disbursement.

7. Construction Loan Escrow Practices Title company does not pay out until it is ready to issue its update on title and its new mechanics lien endorsement Title company rights to stop disbursing if – Insufficient funds – New title exception unacceptable to lender – Discrepancy in the documents

8. Sworn Owner’s Statement

10. Not statutory so third parties not protected if statement is false or in error Certification that these are all parties hired by owner, their names and addresses, and their contract status Columns – Names and addresses – Trade – Contract amount – Prior paid – Amount this draw – Balance due or to become due Signature and notarization

11. Sworn GC Statement

13. GC Sworn Statements: Requirements Contractor’s statement – Owner must require and contractor must furnish Section 5 statutory statement Sec. 5 requires certification to state: – Names and addresses – All parties – Balance due or to become due CTT requires certification to also state: – Identity of contractor – Authority of affiant who knows facts – Identity of contract, work and property

14. GC Sworn Statements: Requirements Sworn Statement Requirements Names and Addresses of all subcontractors Contract Amount – Contract amount is not budget or estimated amount. Amount previously paid Amount this draw Balance to or to become due, which includes: – Retention earned – Work done but not billed – Work billed but not paid – Work to be done

15. Lien Waivers & Sworn Statements The standard lien waiver used by Chicago Title consists of two separate documents: – A lien waiver to date, or a final lien waiver as applicable; and – A statutory sworn statement Waiver should identify – affiant – who contract is with – what is being waived and – property

16. Waiver of Lien to Date & Contractor’s Affidavit

18. Illinois Lien Waiver to Date Waives as to lien on land Waives as to funds in the hand of the owner Waiver to date includes waiver of: – Retention – Unbilled work – Billed but not paid – Extras and overruns

19. Lien Waiver to Date What Date? Chicago Title form has two date spaces – Date for lien waiver and date for sworn statement Lien waiver should be dated the invoice cutoff date Affidavit should be dated the date of execution of the affidavit. Lien waiver if dated the date of payment waives out for work not even invoiced

20. Lien Waiver to Date – Sworn Statement Bottom 2/3rds is an expanded Section 5 sworn contractor’s statement or an expanded Section 22 sworn subcontractor’s statement Affidavit that these are all parties, their addresses and their balance due or to become due Date of statement should be current date

21. Common Lien Waiver Questions Lien Waivers to the Extent of Payment are not accepted. – If payment cannot be proven, risk of waivers being held unenforceable The contract value shown in the Section 5 or Section 22 affidavit should be the actual contract value. – Change Orders that have not been approved should not be reflected in the contract amount. – However, every approved change order and extra should be disclosed on the Affidavit in accordance with Section 5 and 22 of the Mechanic’s Lien Act. – A reasonable estimate for the contract price should be provided by the contactor for work done on a time and material basis.

22. Waivers – Final Compared to Partial

23. Partial Material Waiver

24. Subcontractor Material Suppliers The majority of subcontractors have material suppliers, typically in the amount of 30-50% of the subcontractor’s contract amount. These suppliers need to be listed in the affidavit of the Chicago Title lien waiver. All supporting waivers from parties identified in this Contractor Affidavit need be tendered to the Escrowee as a part of the required documentation.

25. Subcontractor Material Suppliers If the subcontractor has no material suppliers, the subcontractor can state the following in its affidavit: All material taken from fully paid stock and delivered to job site in company owned trucks. All labor paid for. Our principal supplier is: ___(complete with the name and address of the supplier)