| a. | Authorized Parties. Borrowers who anticipate undertaking rehabilitation or new construction must submit detailed plans and specifications to the lender for review. |
| 1. | Plans and specifications for new construction must be developed by an architect and/or the proposed general contractor. The lender and/or Program ONAP may require that the architect be state certified or that the plans and specifications be stamped by an architect with such certification. |
| 2. | Plans and specifications for rehabilitation may be developed by an architect or by a contractor or inspector, depending upon the nature of the work. |
| 3. | Lenders must ensure that anyone developing work plans and specifications has sufficient expertise to effectively undertake that effort. |
| b. | Minimum Requirements. The property plans and specifications and other architectural exhibits must be of sufficient detail to allow lenders, appraisers, and HUD to readily review the scope of work and analyze costs. The architectural exhibits must include: |
| 1. | A detailed plan and specifications. This should be divided by topic area (e.g., mechanical systems, exterior repairs) and must explain exactly what the contractor proposes to do. Appendix 4 contains a sample specification of work. It should also state model types or specifications for exactly the materials or processes to be used. The plans should show elevations and include a floor plan. |
| 2. | A cost estimate. This estimate must be the architect’s and/or contractor’s best estimate of the cost to complete the project. The cost estimate may not be developed by the borrower unless the borrower is a certified licensed contractor and/or architect. Cost estimates must include labor and materials sufficient to complete the work by a contractor. Homebuyers doing their own work cannot eliminate the cost estimate for labor, because if they cannot complete the work there must be sufficient money in the escrow account to get a subcontractor to do the work. This estimate should be firm and final. Borrower-, contractor-, or architect-directed additions or subtractions to this cost estimate will be accomplished only via an approved change order during the construction period. See Paragraph 7.5b for more information about change orders. |
| 3. | A site map and legal description of the property. On tribal trust land, this will generally be obtained from the tribe. In addition, BIA may be involved with any required property survey or mapping. However, circumstances may require the borrower to determine the legal description, at his/her cost, by having a survey of the exterior boundaries of the property to be leased be performed by a licensed land surveyor and a plot submitted to BIA for approval. |
On allotted trust land, lenders and borrowers may contact BIA and/or the tribe to solicit assistance with site maps and legal surveys. As noted above, it is possible that the borrower may be required to pay for a legal survey of the property if one does not exist.
On fee simple land, borrowers and lenders must use a private title company to obtain information about the property’s legal description and map. The borrower may be required to pay for a property survey.
| 4. | A plot plan showing the location of the structure with set backs, driveways, water/sewer lines and other relevant detail. This plan should include the finished grade elevations at the property corners and building corners. The plan should, where feasible, indicate the required flood elevation. |
| 5. | Name/Address/Phone of the Builder, as approved by the lender. It is recommended that a general contractor, who is licensed or registered in the state and who has appropriate experience and qualifications, perform all work. See paragraph 4.9 for more information about the selection of contractors. Although owner/builders are not prohibited, it is the responsibility of the approved lender to document sufficient managerial skill and available time to ensure the timely completion of a decent, safe and sanitary property that will pass final inspection by a licensed third party inspector or appraiser. The owner/builder will be required to submit bids and use licensed subcontractors who will provide minimum one year warranties for plumbing, heating, electrical work and the home foundation. |
| 6. | Proposed homeowner/contractor agreement between the borrower and the contractor specifying the terms of the construction contract and incorporating the architectural exhibits into the contract. At a minimum, this agreement should: (1) describe the work to be performed; (2) state when work will start and be completed; (3) make provision for binding arbitration on disputes; (4) state the total amount to be paid to the contractor and terms of payment; (5) provide a one-year warranty on all work completed by the Contractor. A sample Homeowner/Contractor Agreement is contained in Appendix 4. Where the lender has determined that the borrower has sufficient experience to do the work or act as the general contractor, the lender should obtain a Self-Help Agreement from the borrower. A sample Self-Help Agreement is contained in Appendix 4. |
| 7. | Builder’s Certification, HUD-92541signed and completed by the builder. |
| 8. | Schedule of Amounts for Contract Payments, form HUD-51000. Shows construction loan breakdown by the contractor in sufficient detail to guide construction draw downs by the lender. It may be convenient to use columns (1) Item Number and (2) Description of Item in the Period Estimate for Partial Payment, Form HUD-51001 or a draw request form, which would be the basis for construction draws. It is important that the lender analyze the breakdown in order to avoid "front loading" of draws. (In some instances, lenders may request supporting bids from subcontractors and suppliers.) In addition a sample draw form is contained in Appendix 4. If the lender’s construction department has a similar draw form currently in use, this would also be acceptable to HUD. |
Once lenders receive the above-noted materials, they will order an appraisal and will have the plans and specifications reviewed to determine whether the costs are reasonable and whether the plans are appropriate.
