Ground Up Construction - Guard that G702 like a Dog with its Bone
Expansion is an exciting term unless you are the one tasked with management of the project. Then, your relationship with said term is much more complicated.
When embarking upon a ground up construction project of any nature, your top priority should be to choose an Architect and a General Contractor that have experience in your industry or a similar one. Do they understand the free flow of your physical space? Can they provide references on past similar projects? And most importantly, if you are financing the project, have they successfully worked with your chosen bank of choice in the past?
The last question is important as there are terms such as Retainage or Retention which can vary by bank and which will become very important to your budgeting process. And, ultimately, if your bank and general contractor do not understand one another’s policies, ultimately you, as the project owner, may be expected to step in financially to bridge that dollar amount gap or negotiate a stale mate.
Another key consultant in any expansion is your chosen attorney. They really must have experience in commercial construction loans in the state where your expansion is occurring. Certain states, such as New York, have very specific requirements and trying to use a cheaper lawyer whose experience is solely in closing residential mortgage loans can be a recipe for a disaster. You only want to build it once and you want to build it right, make sure you have experienced consultants to help you.
When in doubt about any of your consultants expertise, ask them how comfortable they are completing or reading the G702, and if possible, ask for a copy they recently completed or reviewed on a project without the owner’s name or information on it. The AIA® contractor form G702 Application & Certificate for Payment is the form that the contractor uses to invoice a project when AIA® forms are required. The AIA® Document G702–1992 is both the contractor’s request for payment as well as the architect’s certification, which is mandatory from a bank’s perspective, and will determine whether or not your draw is paid. Arguably, the most important form in your construction process.
You only want to build your project once. To ensure it flows as smoothly as possible, try to avoid property in flood zones, inexperienced contractors and attorneys experienced only in residential real estate, and spend some time researching G702s online. The more you understand the financial details of your project, the less chance the project goes off course.
Think of your project G702 as your dog’s bone and never lose sight of it. Guard a properly completed one as if the project success depends on it, because from a bank’s perspective, it does.
