Completion Guaranties In Ground Leases, Part II

Ground leases are considered to be secure source of passive income for land owners. What makes that income stream so secure is the fact that the tenant's obligation to pay rent is backed by an income producing property. For this reason, landlords in development ground leases care a lot about the quality of the building that will be constructed on their land, how it will be operated and perhaps most significantly, that it will actually get built. Until the building is completed, all the landlord can hope to recover in the event of a tenant default is the land, which may include a partially constructed building, with mechanic's liens, tax liens and other problems. In order to avoid this scenario, before committing their land to a particular developer, landlords need assurance that the construction will be completed. In development ground leases, that assurance usually takes the form of a completion guaranty from a credit worthy entity—often an equity partner in the