The Lender’s AIA Guide
G702s, Modifications, and the Loan Gap
Guest:
Luke Diorio,
SVP of Partnerships and Strategy
AIA Contract Documents
Episode 53 | The Construction Lending Podcast
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The construction agreement between your borrower and their general contractor was negotiated and signed before your institution ever saw it — and the documents driving your draw process, like the G702 and G703 payment applications, trace back to a standardization effort that began in the late 1800s. Luke Diorio, SVP of Partnerships and Strategy at AIA Contract Documents, explains how standardized construction documents, refined through decades of case law, became a familiar starting point across the industry — and why most executed agreements have been modified from that starting point, making the review of those deviations a core piece of lender due diligence. The conversation lands on the question construction lenders feel most: the standard document set defines the owner–contractor relationship, but nothing in it acknowledges the loan — the draw process, lien waivers, inspections, or the lender’s rights on default.
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Questions Answered
A library of standardized construction documents maintained by AIA Contract Documents, dating to the late 1800s. It includes agreements — the signed contracts between project parties, commonly just called the construction contract, like the A101 owner–contractor agreement and A201 general conditions — and forms, like payment applications, change orders, and lien waivers, used to administer a project after the agreement is signed.
Agreements establish the legal relationship between project parties (owner–contractor, owner–architect, contractor–subcontractor). Forms handle project administration under those agreements: applying for payment, documenting changes, and waiving lien rights. Lenders typically interact far more with the forms.
Most commonly in the draw process — the G702 payment application and G703 continuation sheet — plus change orders and lien waivers, and in due diligence when reviewing the borrower’s owner–contractor agreement, which may be built on a standard template such as a fixed-price, cost-plus, or guaranteed maximum price (GMP) variant.
The G702 is the contractor’s application and certificate for payment; the G703 is the continuation sheet breaking the contract sum down by line item. Together they document how much work is complete and how much payment is being requested — core inputs to a lender’s draw review.
A known baseline makes deviations visible. Decades of litigation — cataloged in a dedicated legal reference, the AIA Contract Documents Legal Citator — have tested the standard language, so a lender’s counsel and credit team can focus their review on what changed rather than deciphering unfamiliar paper from scratch.
Yes, most executed agreements have been changed from the template to fit the project’s risk profile. That’s why reviewing where the borrower’s owner–contractor agreement deviates from the standard language is a core piece of construction loan due diligence.
No. The standard document set defines the owner–contractor relationship; it does not acknowledge the lender’s construction loan agreement, the draw process, inspection rights, property access, or the assignment of plans and specs on default. Aligning the construction agreement with the loan remains the lender’s due diligence responsibility.
A proposed standardized form in which the owner and general contractor acknowledge the lender’s construction loan requirements — draw procedures, lien waiver processes, inspections, access, and default provisions. This would mean that a standardized, industry-recognized version would close the persistent gap between the construction agreement and the loan.
The keystone documents — the A101 owner–contractor agreement, A201 general conditions, and B101 owner–architect agreement — are revised on a 10-year cycle, with 2027 the next release year. The long cadence is deliberate: documents must flow through case law before revision.
Episode Recap
Battle-Tested Paper: What Standardized Construction Documents Mean for Your Loan File
By the time a construction lender is involved, the construction agreement between the borrower and their general contractor has usually been drafted, negotiated, and signed. This episode goes upstream: Luke Diorio, SVP of Partnerships and Strategy at AIA Contract Documents, explains where the standardized documents in construction files come from, what they do and don’t cover, and the gap lenders know well: the construction agreement doesn’t know the loan exists.
Agreements and Forms: Two Kinds of Documents
The standardization effort dates to the late 1800s — and the first standardized document was, fittingly, an owner–contractor agreement. Today the library spans two categories lenders should distinguish: agreements — the signed contracts between project parties, commonly just called the construction contract — and forms, which administer the project after signing. For lenders, the forms are the daily touchpoint — the G702 payment application and G703 continuation sheet in draw packages, change orders, and lien waivers, including state-specific statutory versions. The agreements — fixed-price, cost-plus, and guaranteed maximum price variants — surface in due diligence when reviewing the borrower’s agreement with their general contractor.
Why a Standardized Baseline Matters in Due Diligence
The documents’ credibility rests on something few templates can claim: decades of litigation. They are referenced in court cases so frequently that a dedicated book — the AIA Contract Documents Legal Citator — catalogs the case law. Each 10-year revision cycle learns from litigated projects. For a lender, that history has a practical meaning: when a borrower’s agreement starts from battle-tested standard language, counsel and credit teams are reviewing a known quantity and can focus on the deviations — not deciphering paper of unknown provenance.
“Modified” Is the Norm
Diorio is candid that most executed agreements have been changed from the standard template — every project carries its own risk profile, and parties negotiate accordingly. For lenders, that’s the point of understanding the baseline: reviewing where the borrower’s owner–contractor agreement departs from the standard language is a core piece of construction loan due diligence, because those departures are the map of the negotiation — where risk was shifted and onto whom.
The Gap: The Construction Agreement Doesn’t Know About the Loan
The conversation’s most important stretch for this audience. The standard document set defines the owner–contractor relationship, but nothing in it acknowledges the construction loan: the draw process, the lien waiver process, inspections, property access, or the assignment of plans and specs on default. Lenders flag these requirements in due diligence and pass them through the owner to the general contractor, with no standardized, recognized form to carry them. We discuss the case for a lender acknowledgment — a document the project parties would recognize and trust, formalizing the loan’s requirements alongside the construction agreement.
The Bottom Line
Standardized documents give construction lending a shared language: familiar agreements and recognizable forms, refined by decades of case law. But the construction loan itself still sits outside that language. Until a standardized bridge exists between the owner–contractor agreement and the construction loan agreement, closing that gap remains the lender’s job — and this episode is a clear-eyed look at where the paper ends and the lender’s diligence begins.
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Social Links
LinkedIn: https://www.linkedin.com/in/lukediorio/
AIA Contract Documents: https://aiacontracts.com
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