19.5.9.10 Guarantee Following Completion

A. Construction Contract (form HUD-92442M) contains guarantees against any defects due to faulty materials or workmanship that appear within one year following substantial completion. See Sec. 19.2.16 for discussion of requirements at Initial Closing.

• B. The Contractor must provide assurance of performance under such guarantee, as follows:

1. Bond. If the Performance Bond-Dual Obligee (form HUD-92452M) was used, no action is required, as it remains in effect for two (2) years from the date on which final payment under the construction contract becomes due. As a part of this assurance, the surety will be required to perform when the General Contractor fails to refund any overpayment to Borrower, a requirement of the Construction Contract (form HUD-92442M) at Article 4.C (Option 1 for Cost Plus Contract).

2. Cash/Letter of Credit Assurance. If the Completion Assurance Agreement (form HUD-92450M, CAA ), was used at Initial Closing, the remaining escrow funds may be released in accordance with its terms, except that any amounts held to protect against latent defects must remain in escrow during the latent defects period, also pursuant to the terms of the CAA.

C. The guarantee funds are to be kept separate from any escrow that may have been provided to assure completion of any incomplete construction items.