Protecting funders (2015) 26 3 Cons.Law 29 [Archived]
Protecting funders (2015) 26 3 Cons.Law 29 [Archived]

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

  • Protecting funders (2015) 26 3 Cons.Law 29 [Archived]
  • Reasons for a contract being in place
  • Collateral warranties
  • Third party rights
  • Assignment
  • Additional tips to be considered

This article appears as originally published in Construction Law on 1 April 2015 and is not maintained.

Funders seem to run the development game but often opt for an overcautious approach, argues Pippa Beesley of Mundays in this overview of the tools they can use to protect their investments.

Key points:

  1. Collateral warranties are very familiar to the construction industry and it has recently been held that a collateral warranty is a construction contract in its own right

  2. As such it is subject to adjudication and payment provisions under the Housing Grants, Construction and Regeneration Act 1996

  3. The advantage of third party rights over collateral warranties or an assignment is that the rights are automatically incorporated into the underlying documentation

  4. Parties to third party rights do not have to finalise, sign and distribute additional agreements

  5. An assignment is only the transfer of the benefit not the burden

  6. Consider where the burden lies under the contract, especially if the developer becomes insolvent

When it comes to looking after development finance there are several options funders can consider to protect their loans and often funders (and their lawyers) will go for a belt and braces approach which may not always be strictly necessary.

A construction project often involves numerous parties with many different interests and a developer will typically appoint a consultant team and a contractor to