7.13.7 Contingency Reserves

A. To address unanticipated costs inherent in the rehabilitation of older structures, there will normally be included in the mortgage amount a reserve for contingencies based on the percentage of estimated rehabilitation cost without fees. This percent may range between 10 and 15 percent, depending upon the scope and type of rehabilitation and the experience and financial ability of the Sponsor, the Borrower, and contractor, and on whether the contractor’s bid already contains a reserve for contingencies. This percentage, determined by the cost analyst, must be included as a separate line item in the estimate of replacement cost on form HUD-92264.