The struggle of today’s economy is causing a greater amount of uncertainty with construction projects and their related risks, especially in terms of delays and financial risks as a result of lending organizations.
Though issues with lenders have always been a concern and a consideration of brokers, newly implemented conditions complying with government agency and private lender regulations have made borrowing a greater challenge. As a result, many construction projects are now finding it difficult to obtain the financing required to get started, while others have had to halt their progress after already starting construction.
This has led brokers to work with a combination of insurance and risk management strategies and techniques so that they may offer their clients protection against the risks associated with such delays.
Among them, one of the most commonly utilized is the addition of coverage for delay of completion and soft costs. This is often an endorsement to the risk policy of the builder, which offers protection to the clients should there be a “critical path” disruption or delay in terms of the commercial turnover date.
While it is important to obtain the appropriate amount of coverage, it is equally critical to employ proper risk management.
As long as the economy continues to remain uncertain, and while the construction and real estate marketplaces maintain their emaciated state, projects will persist in running a significant risk of delays as a result of struggles to obtain financing from lending institutions. Brokers will therefore need to keep up their vigilance to protect their clients should the “critical paths” of their projects be derailed.