5.8.6 Early Start of Construction

A. Construction work to be performed after receipt by HUD of the initial application but before initial endorsement constitutes an early start of construction. An early start of construction is prohibited in general but may be allowed only with the prior approval of the Director of the MF Regional Center/Satellite Office on a case-by-case basis.

B. Some work such as clearing, grading, minor demolition, environmental remediation or other minor preliminary work may or may not constitute an early start of construction; (e.g. site improvements or grading on a separate, adjacent site might result in necessary adjustments to surface drainage or grades on a subject site and might be permissible; or utilities serving multiple proximate parcels might require installation of a main across a subject site, and such work might be permissible.) HUD staff must confirm this work during the review stage of the application and the MF Regional Center/Satellite Office Director may approve. No work shall proceed without either a HEROS environmental review or a determination

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that one is not necessary and the Borrower obtaining and evidencing all state or local approvals or permits requisite for that work.

• C. The following are mandatory conditions for approval of an early start of construction:

1. Firm Commitment. There must be a valid outstanding Firm Commitment, including:

   • Site control and/or ownership of the land that will ensure the right to legally access the site for purposes of construction.

• HUD-approved set of contract drawings and specifications on file. See Appendix 5, Section A.5.5 for required Firm Commitment contract drawings and specifications.

• Required construction contract and other construction documents, including, but not limited to:

  • 1. Construction contract, form HUD-92442M;
  • 2. Supplementary conditions of the contract for construction, form HUD-92554M;
  • 3. Applicable Davis-Bacon wage decision (supplied by HUD Labor Standards and Enforcement);

2. Assurance of Completion for Onsite and Off-Site Work . The early start may not hamper the ability of the Borrower to obtain a good and marketable title policy when the loan goes to initial closing.

3. Valid Basis for Early Start. The MF Regional Center/Satellite Office Director must document the file including the reason for granting an early start, after determining the following:

   • An immediate closing is not practical.

• There is reasonable evidence and assurance that closing will occur in the near future.

• There is a compelling need to start construction before the anticipated closing date.

• An early start of construction will not be detrimental to HUD’s interests.

• HUD has no insurance obligation or liability whatsoever for costs incurred during an early start if the project does not reach initial endorsement.

4. The contractor, Borrower and Lender must execute form HUD-92415, Request for Permission to Commence Construction Prior to Initial Endorsement for Mortgage Insurance, without change. The MF Regional Center/Satellite Office Director must sign form HUD-92415.

5. The costs involved for the early start work must be included and reflected as relevant in the line items of the contractor’s cost estimate (form HUD-2328). A table showing the cost breakdown of the early start items separately from the rest of the cost estimate should be attached to form HUD-92415 and be made part of form HUD-92264 Section O, Remarks.

6. Preconstruction conference must be held before the start of any construction (see Chapter 12, Section 12.2).

7. Violations of early start criteria must be referred to the MF Regional Center/Satellite Office Director for a determination as to whether the project may proceed to initial endorsement.

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