The following Property practice note provides comprehensive and up to date legal information covering:
An inherent defect may become apparent several years after the tenant has taken over the property. This may be long after:
the building contractor’s liability under the building contract to make good defects has expired, and
the developer has been released from liability under its building obligations in the agreement for lease
Inherent defects tend to be attributable to defective work on the part of:
a member of the professional team
the building contractor
a specialist sub-contractor, or
some combination of them
However, the tenant will have had no direct contractual relationship with any of them, and faces the difficult task of establishing a duty of care in tort. That difficulty is compounded by the fact that the tenant’s loss is almost certainly purely economic and subject to complex rules regarding foreseeability and whether it is fair and reasonable to impose liability.
By contrast, a collateral warranty provides an occupational tenant with a directly enforceable promise from a consultant, contractor or sub-contractor that it has complied with the terms of its original appointment or contract and has exercised reasonable skill and care in performing its obligations under that agreement.
Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999) produces an equivalent outcome by allowing the tenant to be nominated as beneficiary of the obligations undertaken by the consultant, contractor
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