State government agencies, lending institutions and the construction industry have assigned terms or acronyms that are described below. An understanding of many of the terms and documents used during construction will help in the management of a project. Please contact Ontarget Systems if you need additional information.

Draw Request Form:

The draw request form defines the request as it relates to: the construction budget, suppliers/subcontractors hired and the amount being drawn from each line item budget.

Site Review:

The site review is conducted by Ontarget Systems LLC and is to determine the progress of construction. Ontarget utilizes industry standard formulas to determine project progress. Determining quality or code compliance standards is NOT part of the site review process. For assistance in code compliance questions, please contact your local code enforcement officer.

Reserve:

The reserve is a pre-determined amount of money that is set aside for cost overruns. The reserve is traditionally held until the project is substantially completed, therefore; requiring the borrower to pay for cost overruns during construction and being reimbursed once the lender feels the project has met completion requirements. The use of any reserve amounts during construction must be pre-approved by the lender before the reserve amount is disbursed.

W-9:

A person or company who is required to file an information return with the IRS must obtain the correct taxpayer identification number (TIN) or SSN to report. For example: money paid to builders, subcontractors or suppliers.

Holdbacks

There are three types of holdbacks:

Builders Lien Holdback — this type of holdback is intended to provide homeowners with protection should subcontractors or suppliers place liens against the property to secure payment for work performed, and who may not have been paid by the General Contractor for services performed. This allows a period of time, after the project is substantially completed, for them to make any required claim. At times, the general contractor will arrange for these funds to be held in trust by a lawyer. Where there are no subcontractors or suppliers involved with the project, this requirement will not apply. Note: The Builders Lien Holdback funds cannot be used to correct deficiencies. Each State has its own regulations regarding this type of holdback. Verify with your State or local authority such rules or regulations in your area.

Deficiency Holdback — A project that is substantially complete will often have a number of items that are incomplete and/or will need to be corrected. The standard procedure is to hold back a reasonable amount of money (e.g., cost per item or a percentage of the total cost of the project) to cover the cost for these items. Once these items have been satisfactorily completed, complete payment is forwarded to your contractor.

Seasonal or Delivery Holdback — Depending on the time of the year (season) that your project is carried out, there may be items that cannot be completed (i.e., exterior painting, landscaping, etc.) and/or there may be products/material that are not readily available. In these situations, it is standard procedure to hold back payment(s) equaling the cost of the items remaining to be completed.
Change order
Any alteration of deviation from the above contractual specifications that result in a revision of the contract price will be executed only upon the parties entering into a written change order;

Mechanics Lien

A mechanic’s lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. A mechanics lien, if enforced, permits the party who filed the claim to force a sale of the real estate to pay the claim. The lien exists for both real property and personal property. In the realm of real property, it is called by various names, including, generically, construction lien. It is also called a materialman’s lien or supplier’s lien when referring to those supplying materials, a laborer’s lien when referring to those supplying labor, and a design professional’s lien when referring to architects or designers who contribute to a work of improvement. In the realm of personal property, it is also called an artisan’s lien.