Agreements for lease for construction lawyers—collateral warranties and third party rights
Agreements for lease for construction lawyers—collateral warranties and third party rights

The following Construction guidance note provides comprehensive and up to date legal information covering:

  • Agreements for lease for construction lawyers—collateral warranties and third party rights
  • Why does the tenant require warranties?
  • Who provides warranties?
  • Checking and agreeing the documents
  • Step down of obligations
  • Sanctions for non-compliance

In an agreement for lease which provides for construction works to be carried out, an obligation for the landlord to procure collateral warranties (or third party rights) in favour of the tenant is common practice. This Practice Note looks at why tenants will request collateral warranties, which parties typically provide warranties and the considerations for construction lawyers when negotiating the terms of the warranties and related provisions in the agreement for lease.

Why does the tenant require warranties?

Defects which arise following completion are a fairly common feature of construction projects. Many defects arise during the defects liability period and the contractor will generally be obliged to rectify them in accordance with the building contract (see Practice Note: Defects liability period and rectification of defects). However, other defects (which may be more serious) can often manifest themselves later on, ie when the contractor is no longer contractually obliged under the building contract to return to site to correct them, and after the landlord/developer's liability to the tenant under the agreement for lease for building defects has expired. The tenant will therefore typically request that the landlord procures a full suite of either collateral warranties or third party rights in its favour so that it is able to commence a direct action against the defaulting party or parties and the tenant’s