Q: what happens if the lender releases the funds to the contractor without prior approval of the borrower.
draws were released to the contractor by the lender without approval and the last draw was released without a certificate of completion. The contractor stated that the inspections were done but the owner never received any confirmation or request for approval of release or notification of release of any but the first draw
A:
Unfortunately, no attorney here on Justia can review the construction loan agreement with the bank and/or the construction agreement with the contractor as to the terms and conditions and whether the release of the funds was a breach of the agreements. As with many issues relating to construction disputes, the rights, responsibilities, and remedies between the parties are derived in large part from the written documents themselves, are factually complex, and beyond the scope of the general legal guidance that can be provided on Q&A forums.
The prudent course of action is to consult with experienced construction counsel in your local area and the loan officer may be able to address some of these issues.
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