A.5.1.3 Equipment

A. Equipment included as part of the mortgage security must be acknowledged by the Borrower and Lender to be part of the real estate and:

1. Be essential for successful operation and market acceptance.

2. Have qualities in design, construction, materials and finishes that are not subject to early deterioration or obsolescence.

3. Be appropriate to the location, the design of the building, and the anticipated occupants.

B. Equipment needed for operation and market acceptance, such as ranges and refrigerators, should be included. The equipment should be durable and selected to balance current capital cost against the need to fund future replacements.

1. Replacement is paid for from a reserve for replacements account sized in the CNA prepared in the CNA e-Tool and funded annually from project income.

2. Market-based expectations for Borrower-furnished equipment change over time. If doubts arise as to legal precedent concerning whether an item is chattel or real estate, essential and required items may be covered by a security agreement or chattel mortgage, as well as being covered by the mortgage on the real estate if deemed necessary by the Lender and its attorneys.