1. Both the builder and the lender have been required to give an initial disclosure to an owner/borrower on a construction or home improvement loan. Language in the disclosure has been changed effective September 1, 1999. The Davis Law Firm, P.C. has been including the disclosure form as part of the loan package. The existing disclosure has been modified to meet the requirements of the new statute, House Bill 2054. A copy of the new disclosure is attached.
   
   Please note that one of the language changes appears to make the statutory ten percent retainage requirement optional with the owner. The language used to read, "If you fail to withhold..."; now, it reads, "If you choose not to withhold..." But Section 53.101 of the Property Code, which requires all owners undertaking construction to withhold ten percent, did not change. As before, the law requires the owner to withhold ten percent, but there is no statutory penalty for failing to do so. Thus, the lender may either require the retainage or not. We suggest that if you waive the requirement, you request that we include our retainage waiver hold harmless form in the loan package.
   
   
2. After House Bill 740 was passed, Section 53.258 of the Property Code required the lender, prior to funding a draw, to obtain from the builder a disbursement statement itemizing who was to be paid from the loan draw. The law effective September 1, 1999 requires that the disbursement statement only disclose which subcontractors and suppliers the builder intends to pay out of the draw. Some lenders have required builders to use lender forms for this statement. These forms should be altered to include only a place for a list of names of persons to be paid from proceeds of the draw.
   
   
3. Under House Bill 740, builders were required to disclose to the owner the names, addresses, and phone numbers for its subcontractors and suppliers to the used on the project. Builders were also required to update this information. The builder may now get the owner to waive the right to a list of the subcontractors and suppliers. The builder may also get the owner to waive the requirement to update the list. Both of these waivers must be written; presumably, the waivers would be contained in the construction contract. Lenders will not be required to make any changes because of this waiver right. If, however, you have been requiring a list for your own due diligence purposes, it may be more difficult to get the builder to continue to provide this information.