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Construction Firms Seek Notification When Funding is Pulled from Projects

A fight is brewing in Austin between bankers and the construction industry. The Texas Construction Association and the Associated General Contractors Texas Building Branch are pushing lawmakers at the state capitol to require that lenders notify construction firms when a decision is made to discontinue funding for a project.

Some projects get their funding pulled in the middle of building, and in some cases, the construction firms are essentially hung out to dry. In the event a bank decides it will stop the flow of money to a project, that same bank can also later foreclose on the project.  "When they foreclose on the project, they wipe out any of our liens," TCA President and CEO Raymond Risk said. "They've gotten all this work done by us."

Two bills have been filed to address the issue:

Risk said some TCA members have been hurt significantly when this happened. "Off the top of my head I can think of two," he said, pointing to one example where a construction firm lost about $700,000 and another lost closer to $900,000. "We're not asking for anything that seems extraordinarily difficult," Risk said.

People in the negotiations did not want to provide details of their meetings, but a representative for the bankers said, "we are not close" to a deal. A representative for the AGC said even though they're not all on the same page just yet, they felt the bankers were moving closer to the construction industry's position.

We'll monitor this issue and bring you more updates from the capitol.

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