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Construction Law

TRID: The 4 letter word you better understand

commercial constructionTRID stands for the TILA-RESPA Integrated Disclosure. TILA is the Truth in Lending Act and RESPA is Real Estate Settlement Procedures Act. Both TILA and RESPA were consumer protection regulations, originally designed to protect home buyers from predatory lending practices.

TRID is the newest consumer real estate regulation that has created some shifts (not too seismic) in both the commercial and residential real estate business, mostly affecting closing procedures. Simply put, TRID allows far less “wiggle room” between the signing of pre-closing documents and what actually occurs at closing. Whereas before TRID, the HUD-1 Settlement form included a good faith estimate of many components of the closing costs, the closing costs must now be disclosed a week prior to closing and changes cannot be made to them without having to potentially change the date of closing.

So what role does TRID play in commercial real estate transactions?

It depends.

One of the issues that commercial builders are discovering is that construction loans  may also be subject to TRID requirements with some exceptions, like those loans that are open-end transactions.

In addition, all interested parties including builders, investors, buyers and sellers need to be clear as to what constitutes the construction loan and what is part of the permanent loan for the building (the subject of a potential mortgage). These two financial items can be part of one loan or multiple loans. The disposition of these as phases may or may not trigger TRID regulations.

During times of changing regulations, it is important to have specialists in real estate law counseling you prior to signing any documents or concluding any negotiations.