May 23, 2008

Put a stop to late progress payments

The credit crunch has caused a slowdown in sales of new single-family and multifamily homes. Recent decreases in sales volume and prices are likely to depress future prices of new homes now under construction. The prospect of declining future home prices could reduce the overall value of new projects.

Even if a project is on schedule and within budget, a decline in current sale prices for that particular type of housing unit could cause much of the developer's projected equity to evaporate by the end of the project. If a project is behind schedule and/or experiencing cost overruns, the risk increases that declining value coupled with cost overruns could eliminate most, if not all, equity in excess of the construction loan balance.

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Previous columns:

• How fair was the Mike M. Johnson case?, 03-07-2008
• Top 10 ways to avoid disability bias lawsuit, 01-12-2006
• Oral agreement? It can cost you, 10-12-2005
• Contractors face a new liability, 08-29-2003
• New law returns 6-year window on construction lawsuits, 06-20-2003
• The changing face of subcontract forms, 04-11-2003
• Contractors need to know nonpayment lien rights, 02-28-2003
• Rules changing on temporary construction labor, 01-31-2003