Introducing the Property Improvement Alterations Rider
December 17, 2013
Periodically we revise our loan documents based on your feedback and the trends in the properties that are financed. Today we are introducing the Property Improvement Alterations Rider for Commitments and Early Rate Lock Applications (ERLAs) prepared on or after December 17, 2013.
Property Improvement Alterations Provision
Borrowers often request the ability to make non-structural improvements and renovations to the property during the term of the loan. To better serve you and the borrower over the life of the loan, we are adding a Property Improvement Alterations provision to the Loan Agreement. This new provision will allow all borrowers to make non-structural improvements and upgrades to the existing improvements at the property. This new provision will be applicable to all types of mortgages, provided that any property improvement alterations done on Seniors Housing properties don’t alter the intended use of the property, unless otherwise approved in the Loan Agreement.
The following conditions will be included in this new provision:
- The cost of all property improvement alterations throughout the term of the mortgage must not exceed a set maximum cost (the lesser of 25% of the loan and $5,000,000).
- The borrower must maintain a minimum occupancy requirement, usually 90 percent, while the property improvement alterations are ongoing.
- The guaranty will provide that the guarantor will be responsible for the payment and the completion of all property improvement alterations, which the borrower elects to perform, but does not complete.
Until this new provision has been incorporated into the Loan Agreement, the Commitment or Early Rate Lock Application (ERLA) will provide that the Property Improvement Alterations Rider will be attached to all Loan Agreements.
Resources and Questions
We notified each Seller/Servicer’s legal counsel about the changes to the ERLA and the Property Improvement Alterations Rider. The Property Improvement Alterations Rider can be found on the Multifamily Loan Documents web page.
Please contact your legal counsel or your Freddie Mac Producer or Underwriter with any questions about these legal document changes.