Funding for each SBA 504 project is provided by a certified development company such as HCDC and a Third Party Lender. In most cases, the third party is a financial institution that provides the third-party loan, which usually accounts for 50% of the total cost of the project. However, the SBA does not require the third-party lender to be a financial institution. The SBA defines third-party lending as „a loan from a commercial or private lender, investor or federal (non-SBA) source, state or local government that is part of the project financing.“ Although rare, the third-party loan could come from an individual or a government source. A tripartite construction credit agreement generally lists the rights and remedies of the three parties from the perspective of the borrower, the lender and the developer. It describes the phases or phases of construction, the final sale price, the date of holding as well as the interest rate and the payment plan of the loan. It also defines the legal procedure known as the transfer of receivables and determines who, how and when different securities are transferred in the property between the parties. The court may be critical of a party who suddenly claims that a loan must be repaid to his or her parents, suspect shortly after separation, or whether it can be proven that the alleged loan is a „deception“ to defeat the other party`s claim to fair and equitable ownership. Even if the Court is satisfied that pre-antinating funds are considered loans, it may nevertheless decide to discount or disregard the value of the uninsured loan, which is „vague or uncertain whether it is unlikely to be applied if it was improperly realized.“ [ii] The SBA lays down certain provisions on interim financing, which provide that funding cannot be deducted either directly or indirectly from an SBA programme. The interim financing conditions must be acceptable to the SBA and the source must not be the borrower or a partner of the borrower. If it is a construction project, the interim lender must have the necessary experience and qualifications to properly control all construction operations and project progress. In the absence of the intermediate source of funding for such qualifications, the SBA may allow the intermediate loan to be managed by a third party, such as a bank or a professional site manager.
In particular, three-party mortgage contracts become necessary if the money is lent for real estate that has not yet been built or improved. Agreements resolve potentially conflicting claims about the property if the borrower – usually the future owner – is late or perhaps even dying during construction. For example, to ensure timely planning of work and quality transformation, the borrower does not wish to pay the client until the work is completed. But the client may not be paid once the work is completed, while he himself owes money to subcontractors such as plumbers and electricians. In this case, a developer may assert what is known as a construction deposit right on the property; That is, the right to forfeiture if they are not paid. In the meantime, the bank also maintains a right to the property if the borrower is late in the credit. External credit intermediaries are experts in credit management. The COVID 19 Agreement (Rev. May 2020) contains certifications and agreements from all parties regarding, among other things, the corrective measures that need to be taken to remedy the major negative change of the borrower resulting from the COVID 19 emergency, including the necessary carry-overs of the 504 loan and the third-party loan, which will allow the borrower (and the operating company, where appropriate) improve cash flow. In some cases, tripartite agreements may cover the owner, architect or designer and contractor.
These agreements are essentially „no fault“ agreements, in which all parties agree to remedy their own errors or negligence and not to hold the other parties liable for any omission or error in good faith. . . .