Agreements for lease with development obligations—professional indemnity insurance
Agreements for lease with development obligations—professional indemnity insurance

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

  • Agreements for lease with development obligations—professional indemnity insurance
  • Claims made
  • Aggregate or each and every claim
  • Level of cover
  • No greater loss
  • Net contribution
  • Fitness for purpose

In some respects, the only real value in any contractual duty under an appointment or obligation under a collateral warranty lies in the professional indemnity insurance (PII) cover which the consultant or contractor carries. The type and amount of PII cover varies considerably between different consultants and contractors.

Ordinarily, PII cover will be required from those consultants or contractors (including key subcontractors) who have had a significant degree of design input. Negligent performance of that design function exposes the tenant to the risk that there will be inherent or latent defects in the building. The landlord under the occupational lease is unlikely to have any responsibility for dealing with such defects, and the developer’s liability is likely to be limited in terms of time, or amount, or both. It is in the nature of an inherent or latent defect that it may only emerge years after the tenant has gone into occupation, leaving the tenant to deal with the physical manifestations of the defect both in terms of meeting its repair obligations under the occupational lease and also maintaining its ability to operate effectively from the demised premises.

The tenant needs, therefore, to have some other form of direct recourse against the consultant or contractor whose default is the operative cause of the defect, hence the use of contract assignments or collateral warranties

Related documents: