set-aside letter

set-aside letter

A letter from a lender stating that funds have been “set aside”to pay for specific improvements.It is sometimes given to the contractor of a financially troubled project advising that the lender will set aside money to fund completion, even though there may be problems with the owner.It is also sometimes given to a local government authority as a condition of issuing subdivision development approval.The set-aside letter from the lender guarantees availability of funds to complete common areas of the development. The developer may obtain a commercial bond to achieve the same results,but the set-aside letter may be cheaper.