Section 506
| 506.01 | |
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Requirements
You must ensure:
- compliant property insurance coverage is in place beginning on the Construction Activity Start DateConstruction Activity Start DateThe earlier of the date: physical work at the Property commences; or delivery of materials (whether located onsite or offsite) intended to be used in the construction of Improvements occurs. through the Construction Activity Completion DateConstruction Activity Completion DateThe later of the date when: substantial completion is achieved; or any required certificates of occupancy, licenses, or permits required by applicable law following completion of the Construction Activity are issued. ; and
- insurance compliant with Part II, Chapter 5: Property and Liability Insurance is in effect, with no lapse in coverage, following the Construction Activity Completion DateConstruction Activity Completion DateThe later of the date when: substantial completion is achieved; or any required certificates of occupancy, licenses, or permits required by applicable law following completion of the Construction Activity are issued. .
| 506.02 | |
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Requirements
You must ensure builder’s risk insurance:
- is in place if property insurance coverage is excluded or otherwise limited during
- PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). construction,
- renovation, or
- restoration;
- coverage begins on the Construction Activity Start DateConstruction Activity Start DateThe earlier of the date: physical work at the Property commences; or delivery of materials (whether located onsite or offsite) intended to be used in the construction of Improvements occurs. through the Construction Activity Completion DateConstruction Activity Completion DateThe later of the date when: substantial completion is achieved; or any required certificates of occupancy, licenses, or permits required by applicable law following completion of the Construction Activity are issued. ;
- coverage equals at least 100% of the completed value, including:
- the aggregate of all project contracts and materials to complete the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date.; and
- all soft costs (on a non-reporting basis), including, but not limited to
- interest during the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date.,
- taxes,
- architect/engineering fees, and
- other overhead items attributable to delay; and
- maximum deductible does not exceed $50,000.
You must determine which soft costs will reoccur in the event of loss.
| For... | You must ensure coverage is... |
|---|---|
| Reoccurring soft costs | 100%. |
| Non-reoccurring soft costs | at least 10%. |
Requirements
You must ensure the:
- general liability insurance limits are at least:
- $1 million per occurrence; and
- $2 million general aggregate;
- coverage complies with Part II, Chapter 5: Property and Liability Insurance, Section 503.01: Generally;
- BorrowerBorrowerPerson who is the obligor per the Note. is listed as Additional Insured on the general contractor’s policy, unless the BorrowerBorrowerPerson who is the obligor per the Note. is
- licensed,
- qualified, and
- serving as its own general contractor; and
- maximum deductible does not exceed the applicable maximum amount per Part II, Chapter 5: Property and Liability Insurance, Section 503.02: Commercial General Liability Insurance.
The requirements in this Commercial General Liability Insurance section are satisfied if you ensure the:
- BorrowerBorrowerPerson who is the obligor per the Note. obtains program coverage through
- an Owner-Controlled Insurance Program (OCIP), or
- a Contractor-Controlled Insurance Program (CCIP); and
- coverage continues through the applicable statutes of limitation.
Requirements
You must ensure commercial auto liability insurance for any vehicles used in connection with the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date.:
- has the BorrowerBorrowerPerson who is the obligor per the Note. named as an Additional Insured (if BorrowerBorrowerPerson who is the obligor per the Note. is not serving as the general contractor) on all policies covering vehicles used by its general contractor in connection with the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date.;
- includes personal injury protection compliant with any applicable state or local laws;
- has coverage not less than $1 million per occurrence; and
- has a maximum deductible not exceeding $50,000.
Requirements
If architects, engineers, or other licensed design professionals perform services for the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date., you must ensure:
- professional liability coverage is maintained from the date professional services for the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements:
beginning on the Construction Activity Start Date; and
ending on the Construction Activity Completion Date. begin through the later of the:
- completion of all professional services related to the Construction ActivityConstruction ActivityConstruction, renovation, or restoration of Improvements: beginning on the Construction Activity Start Date; and ending on the Construction Activity Completion Date.; or
- Construction Activity Completion DateConstruction Activity Completion DateThe later of the date when: substantial completion is achieved; or any required certificates of occupancy, licenses, or permits required by applicable law following completion of the Construction Activity are issued. ;
- coverage limits are at least
- $1 million per claim or per occurrence, and
- $2 million general aggregate; and
- any Claims-Made Policy includes a retroactive date preceding the Construction Activity Start DateConstruction Activity Start DateThe earlier of the date: physical work at the Property commences; or delivery of materials (whether located onsite or offsite) intended to be used in the construction of Improvements occurs. .
If the BorrowerBorrowerPerson who is the obligor per the Note. changes its coverage from a Claims-Made Policy to an Occurrence-Based Policy, you must ensure the BorrowerBorrowerPerson who is the obligor per the Note. obtains retroactive or tail coverage to ensure past exposures remain protected.
| 506.06 | |
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Requirements
You must:
- comply with Part II, Chapter 5: Property and Liability Insurance, Section 502.03: Flood Insurance; and
- ensure a new Flood Zone Determination (FZD) form is obtained no later than:
- 30 days before the Construction Activity Start DateConstruction Activity Start DateThe earlier of the date: physical work at the Property commences; or delivery of materials (whether located onsite or offsite) intended to be used in the construction of Improvements occurs. ; and
- 60 days after the Construction Activity Completion DateConstruction Activity Completion DateThe later of the date when: substantial completion is achieved; or any required certificates of occupancy, licenses, or permits required by applicable law following completion of the Construction Activity are issued. .