Pre-Construction Activities

Brought to you by: Capital Impact Partners’ The Answer Key

While you are finalizing the design of your new facility, start working on pre-construction activities that will lead you to the launch of construction.

How to Gain Site Control

A key benchmark is site acquisition, defined as acquiring the site and obtaining site control. Why? Most financing sources cannot release funds until you have site control. Delays in obtaining site control may delay the project’s financing and construction.

Site control requires a legally binding agreement. This can be an executed sales contract, a letter of intent (often accompanied by a small deposit toward a future lease or purchase), a signed lease, or any other legally binding agreement. For a site purchase (not a lease), site control requires three steps: (1) obtaining a title report (and title insurance) from a title company, (2) surveying the property, and (3) conducting a Phase I Environmental Site Assessment on the property (a report that identifies potential environmental contamination liabilities). These activities are required before a loan can be finalized, so your lender may need to be involved. Your architect or civil engineer can also assist in securing a survey.

A title company runs the title report and provides title insurance to you, the property owner. The title report details who currently owns the site and what type of encumbrances, if any, are placed on the property. Encumbrances may include mortgages, mechanic’s liens, easements, rights of way, unpaid taxes, and other property use restrictions.

This report is created by an independent third party to verify and supplement information that the seller provides about the property. Title insurance gives you “clear title” to (or ownership of) the property and protects you against ownership claims by other parties.

The property survey shows exact legal boundaries, the location of all utilities, easements, and rights of way. A topographic survey will illustrate the slopes and other physical features of the site. Your architect and engineers will rely on this information to prepare the final building design. Your lender will require the title report, title insurance, and a copy of the property survey prior to loan closing. The title company will need a copy of the survey, as well, for preparation of the title report.

How to Obtain Project Financing

Before starting construction, all project financing must be in place. But what exactly is meant by “in place”? While every dollar may not be immediately available (or even necessary) at this stage, all sources of financing should be identified and supported by formal funding commitments.

Many banks offer both construction and permanent financing for a single project. This will ease your process and avoid a chicken-and-egg scenario. In this case, the construction loan converts to a permanent mortgage at construction completion. Without using the same entity for both construction and permanent financing, you may face a construction lender who wants to see a permanent mortgage finance commitment or, conversely, a permanent lender who wants assurance you can complete the construction project.

As noted earlier, the events leading up to actual construction are not necessarily sequential. The permanent financing commitment may be “soft” (e.g., contain contingencies such as getting a construction loan), but it is often needed to get other critical players on board. Your team will be working on multiple fronts simultaneously, including identifying sources of funding for predevelopment and/or acquisition costs, identifying potential construction lenders, and exploring permanent financing options such as a conventional mortgage or tax-exempt bonds.

Obtaining a commitment from a construction lender and closing the loan is usually the “trigger” enabling you to commence construction. Your construction lender will require numerous assurances, representations, and reviews of documents to reduce risk during construction. Your permanent lender will also need many of these same documents and require that those documents be assigned to them. This process normally runs parallel to the design and pre-construction phase. In order to avoid lien-related issues, do not begin any construction prior to closing your loans.  

How to Obtain Entitlements

Obtaining third-party approvals is crucial, as you cannot start construction without them. Approvals for your project will be needed from numerous third parties, and they are usually obtained by the GC and/or architect. The approvals may deter your project progress or require alternative designs. Educate yourself early in the process about what types of approvals you need and the time it takes to obtain them so as not to delay your project scheduling. Normally there are at least three major entities that will review your project.

Planning and Zoning

The zoning authority (or board) regulates property use and is usually operated at a municipal or county level. The three most common zoning designations are residential, commercial, and industrial. Local planning and zoning codes typically regulate lot size, site layout, building height restrictions, land use, setbacks (from the street and adjacent properties), parking, historical landmarks, landscaping, open spaces, and the ratio of building size to lot/site size.

Planning and zoning boards will care how a project affects public space or the “look and feel” of the neighborhood. Larger cities may require a review of the design, in addition to planning and zoning, to consider the project’s aesthetic appeal. There are usually questions about a building’s impact on traffic patterns, noise and air pollution levels, and site drainage systems. These may require environmental impact studies, which will increase your project costs and must be properly budgeted for ahead of time.

Neighborhood opposition to or concerns about your project are usually channeled through a local planning or zoning board. In these instances, the charter school’s board may need to develop a plan to counter local community and/or political concerns. At minimum, you will need a building permit to construct your project and/or a demolition permit if you are knocking down a building to replace it. You may also need a zoning variance or other special-use permit (or conditional-use permit), usually obtained at formal public hearings.

Building and Life Safety Codes

Building and life safety codes regulate structural and foundation matters, construction materials, fireproofing, fire exits, HVAC systems, plumbing fixtures and installation, and electrical installation. Typically, there are minimum standards for methods of construction, life safety, accessibility, emergency lighting, services and emergency vehicle access, parking, and requirements for special needs populations (e.g., ADA). Your project must comply with local building codes in order to receive a certificate of occupancy (CO, or C of O, also referred to as a use and occupancy permit, or U & O) so you can legally occupy and operate the facility.


This commission (or authority) regulates health and safety issues, and may be established by local, state, and/or federal regulatory authorities. Depending on the size and nature of your project, it may require varying levels of approvals if, for example, you intend to provide food services on-site or if your school plans to partner with any health and human services organizations to offer health-related services on-site.

It may be desirable to retain specialized consultants, such as a zoning attorney or a permit expeditor, to streamline or fast-track the approval process.

Strategies for Obtaining Entitlements

  • Educate yourself about local charter school facilities in your area and learn from their experiences.
  • Start early and allow for sufficient time during the development process.
  • Identify regulators at all levels who will approve the proposed project and plans.
  • Know what is important to regulators and how to address their concerns.
  • Pick your battles. Give in on items that are not critical to the project and use “muscle” on issues that are.
  • Build a broad coalition of support for your project.
  • Use consultants wisely. Your architect, GC, or project manager should be intimately involved in the process. Consider hiring a permit expeditor to fast-track certain key third-party approvals, such as building permits or zoning variances.

Furniture, Fixtures, and Equipment Planning

Even though the project’s major focus at this point is on starting construction, you must also consider what goes into the building once it is completed. These furniture, fixtures, and equipment (FF&E) items often must be ordered months in advance of the desired delivery date. Therefore, make arrangements now for these FF&E needs.

Any movable or attachable item — such as furniture, office equipment, computers, and telephone and security systems — falls under this category. Signage (both interior and exterior) may or may not be included in the architect’s and GC’s scopes of work, and if not, must be designed and procured. Think about accessibility options when you order furniture and equipment, such as standing desks and desks with variable heights, and furniture with wheels. Also consider including stakeholders with diverse abilities in your planning.

Rigorous planning, attention to details, and coordination with your GC will go a long way to ensuring that you will be ready to commence operations once construction is completed. The role of the project manager is especially important, since many tasks related to FF&E planning fall outside the purview of the development team’s major players.

For example, your architect will not be involved in furniture selection under a standard architectural services contract, unless this task is contracted separately. An electrical engineer will design the locations of telephone and cable connections, but he or she is not typically involved in the selection of a particular telephone system or computer network, or its specifications.

Your project manager will identify professionals who can help make decisions and manage the planning process. For example, you may draw on the expertise of vendors who are often very willing to visit your site, demonstrate a particular system’s features, and make recommendations about type, size, and specifications for current and anticipated growth. You may want other consultants such as an interior designer who can advise you on furniture selection and finishes.

Upon completion of this design and pre-construction phase, your project is well under way. You will have drawings to share with your school community, allowing them to visualize their new school. In addition, your funding should be finalized, and you will have accomplished many of the major tasks needed to build your school.

Let the construction begin!

Legal Disclaimer:

Nothing in this material should be construed as investment, financial, brokerage, or legal advice. Moreover, the facts and circumstances relating to your particular project may result in material changes in the processes, outcomes, and expenses described herein. Consult with your own professional advisors, including your financial advisors, accountants, and attorneys, before attempting to consummate any transaction described in this material.