legal instrument used to guarantee the completion of a real-estate development according to specifications. More encompassing than a performance bond, which ensures that one party will perform under a contract on condition that the other party performs. The completion bond assures production of the development without reference to any contract and without the requirement of payment to the contractor.
protection for a mortgagee guaranteeing that the mortgagor will complete construction. The mortgagee (such as a savings and loan association) lends money to the mortgagor (the owner of the project) in order to pay the contractor who is actually physically building the project. Upon completion, the project then serves to secure the loan. Should the project not be completed, the mortgagee is protected through the completion bond.
a legal instrument used to guarantee the completion of a development according to specifications. More encompassing than a performance bond, which assures that one party will perform under a contract on condition that the other party performs. The completion bond assures production of the development without reference to any contract and without the requirement of payment to the contractor.
Example: A developer proposes to build a subdivision that necessitates a rezoning. The zoning commission requires the developer to post a completion bond prior to granting a permit for the development.
