For EB-5 investors, securing a permanent green card hinges on meeting job creation requirements. Specifically, each investor must demonstrate that their investment resulted in the creation of 10 new jobs. In regional center projects, this job creation can often be fulfilled, entirely or in large part, through the completion of construction alone.
To support this important milestone, many regional centers now require construction completion guarantees between the New Commercial Enterprise (NCE) and the Job-Creating Entity (JCE). These agreements are intended to help safeguard investors’ chances of achieving permanent residency.
What is a Construction Completion Guarantee?
A construction completion guarantee is a critical tool used in real estate development and project financing to ensure that a construction project is finished as planned, even if the developer or borrower defaults. In simple terms, it is a legally binding promise by a third party, often a financially strong affiliate of the developer or sponsor, to step in and complete the construction if the original developer fails to do so.
These guarantees are typically required by lenders or investors in a project to minimize the risk of incomplete or abandoned developments. The guarantor commits to ensuring that the project reaches “substantial completion,” meaning it is built according to the approved plans, on time, and within budget. If the borrower is unable or unwilling to finish the construction, the guarantor becomes liable to either complete the project or cover the costs required to do so.
How Are Construction Completion Guarantees Enforced?
Enforcement of a construction completion guarantee occurs when the developer fails to meet their obligations. The lender or investor can then formally notify the guarantor of the default. The guarantor must then fulfill the obligations, which may involve taking over construction operations, hiring new contractors, or providing financial compensation to the lender or project fund to ensure completion. If the guarantor refuses to comply, the guarantee can be enforced through legal action, potentially leading to court-ordered performance or monetary damages.
Construction Completion Guarantees and EB-5
These guarantees are particularly significant in the context of EB-5 projects because Job creation is often calculated using economic models that assume the project will be built in full. If the project is delayed or abandoned, the expected jobs may not be realized, putting investors’ immigration status, and their invested capital, at serious risk.
Because of this, EB-5 investors, regional centers, and their advisors often insist on a strong construction completion guarantee as part of the project’s financial structure. It serves as a layer of protection ensuring that the project will move forward to completion, even if the original developer runs into trouble. This reduces the risk that job creation targets will not be met, helping investors satisfy USCIS requirements for visa approval.
In fact, some USCIS adjudications and policy guidance have favored projects with credible completion guarantees, especially when backed by a financially capable entity. Following the EB-5 Reform and Integrity Act of 2022, there is a heightened focus on transparency, financial viability, and risk management. As a result, the presence of a well-structured completion guarantee can improve the chances of USCIS approving an investor’s petition, as it reinforces the project’s credibility and likelihood of success.
A construction completion guarantee is a vital instrument that helps ensure a real estate project reaches completion, even in the face of financial or operational setbacks. In EB-5 deals, it plays a key role in safeguarding job creation and investor capital, two pillars of the immigration benefit sought by foreign investors. Its presence in a project’s documentation often reflects a higher degree of planning, risk management, and investor protection.
