Construction Disbursement Agreement for Canada

Construction Disbursement Agreement Template for Canada

A Construction Disbursement Agreement is a critical legal document used in Canadian construction projects to govern the release of construction financing funds. It establishes the terms, conditions, and procedures for disbursing funds during various stages of construction, ensuring that funds are properly allocated and that the lender's security interest is protected. The agreement complies with Canadian federal and provincial construction laws, including relevant Builder's Lien Acts and the Federal Prompt Payment for Construction Work Act, and includes provisions for construction monitoring, lien protection, and milestone-based payments.

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What is a Construction Disbursement Agreement?

The Construction Disbursement Agreement is essential in Canadian construction financing arrangements where funds are released in stages as construction progresses. This document is typically used when a lender provides construction financing to a developer or property owner and needs to ensure that funds are properly managed and secured throughout the construction process. The agreement details the conditions precedent to each disbursement, required documentation, inspection requirements, and lien protection mechanisms. It incorporates requirements from relevant provincial Builder's Lien Acts and federal construction payment legislation, making it a crucial risk management tool for construction lenders and developers in Canada. The agreement typically works in conjunction with other construction and security documents to create a comprehensive framework for construction project financing.

What sections should be included in a Construction Disbursement Agreement?

1. Parties: Identifies all parties to the agreement including lender, borrower, and any guarantors

2. Background: Sets out the context of the construction project and financing arrangement

3. Definitions and Interpretation: Defines key terms and establishes interpretation rules

4. Construction Project Description: Detailed description of the construction project scope and location

5. Disbursement Conditions: Prerequisites for any disbursement including documentation requirements

6. Disbursement Mechanics: Process and timing for requesting and receiving disbursements

7. Representations and Warranties: Standard and construction-specific representations by the borrower

8. Covenants: Ongoing obligations of the borrower regarding construction and project management

9. Construction Liens and Title: Provisions regarding lien management and title protection

10. Events of Default: Circumstances constituting default and corresponding remedies

11. General Provisions: Standard boilerplate clauses including notices, amendments, governing law

What sections are optional to include in a Construction Disbursement Agreement?

1. Cost Consultant Provisions: Required when a third-party cost consultant is engaged to verify construction progress

2. Environmental Compliance: Detailed section needed for projects with significant environmental impacts

3. Insurance Requirements: Expanded section for projects requiring specific or unusual insurance coverage

4. Security Provisions: Required when additional security beyond standard construction liens is needed

5. Multiple Contractor Provisions: Needed when project involves multiple prime contractors

6. Phased Construction: Required for projects with distinct construction phases

7. Force Majeure: Detailed provisions for projects in areas prone to specific risks or delays

What schedules should be included in a Construction Disbursement Agreement?

1. Schedule A - Project Details: Detailed description of construction project including plans and specifications

2. Schedule B - Budget and Cost Breakdown: Itemized construction budget and cost categories

3. Schedule C - Disbursement Request Form: Standard form for requesting disbursements

4. Schedule D - Construction Schedule: Timeline for construction milestones and completion dates

5. Schedule E - Required Documentation: List of required permits, licenses, and approvals

6. Schedule F - Form of Architect's Certificate: Standard form for architect's confirmation of work completion

7. Schedule G - Lien Waiver Forms: Standard forms for progressive and final lien waivers

8. Schedule H - Insurance Requirements: Detailed insurance specifications and coverage requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Construction

Real Estate Development

Commercial Real Estate

Infrastructure

Banking & Finance

Property Development

Industrial Construction

Residential Development

Relevant Teams

Legal

Construction Finance

Commercial Lending

Risk Management

Project Management

Real Estate Development

Contract Administration

Treasury

Credit Risk

Construction Management

Relevant Roles

Construction Project Manager

Real Estate Development Manager

Construction Loan Officer

Commercial Lending Manager

Construction Risk Manager

Development Director

Chief Financial Officer

Legal Counsel

Contract Administrator

Construction Finance Manager

Project Coordinator

Development Executive

Risk Assessment Officer

Construction Controller

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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