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WHY COLLATERAL WARRANTIES ANCILLARY TO CONSTRUCTION AGREEMENTS ARE IMPORTANT FOR
PROPERTY OWNERS AND DEVELOPERS

Home » Why Collateral Warranties Ancillary To Construction Agreements Are
Important For Property Owners and Developers

 




WHY COLLATERAL WARRANTIES ANCILLARY TO CONSTRUCTION AGREEMENTS ARE IMPORTANT FOR
PROPERTY OWNERS AND DEVELOPERS

By admin
 Posted March 13, 2019
 In Commercial, News, Real Estate
Why Collateral Warranties Ancillary To Construction Agreements Are Important For
Property Owners and
Developers2019-03-132019-03-13https://www.patrickforeilly.com/wp-content/uploads/patrick_f_o_reilly-1_dark.pngPatrick
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There will generally be multiple parties involved in any construction project,
many of whom will have no contractual link with some or all of the parties in
the design and build of the project.

Collateral Warranties are ancillary agreements to primary construction
agreements e.g. Building Contracts, Sub-Contracts or Professional Team
Appointments.

They are usually obtained by building owners or developers from Sub-Contractors
and/or Consultants to a Main Contract in a development or redevelopment of a
property. They may also be sought from the Main Contractor for the benefit of
other entities e.g. a Lender, First Purchaser or Tenant.

A building owner or developer may enter into one single contract or building
agreement with its main contractor for construction works to its property. The
main contractor may and often will sub-contract many portions or packages under
the contract to sub-contractors. However, this means that as there is no
contract between the building owner or developer and the sub-contractor, there
is no contractual nexus or link between the building owner or developer and
sub-contractor, allowing the building owner or developer to sue for a breach of
obligations of such sub-contractor.

A Collateral Warranty is a document which creates such a ‘link’ or ‘contractual
nexus’ between the building owner or developer and sub-contractor or a purchaser
or lender to the main contractor, who otherwise would have no contract with the
sub-contractor.

In the event a sub-contractor does not carry out its obligations under the
sub-contract, or breaches the terms of same, a building owner or sub-contractor
can seek to recover directly from such sub-contractor. Equally a purchaser,
lender or tenant can seek to recover against a main contractor under a
collateral warranty, notwithstanding they were not party to the original
Building Contract.

It is important, if possible, to ensure in the sub-contract or Deed of
Appointment, that the contractor, sub-contractor or consultant is obliged to
give collateral warranties to a Lender, Tenant and First Purchaser, as these
entities will also not have a contractual nexus with the sub-contractors, main
contractors or consultants.

Patrick F. O’Reilly & Co has years of experience working with development
companies and offers specialist legal advice to property owners, property
developers and building companies. Talk to Michael Crowley, Partner, Real Estate
with any queries you have or to seek legal advice for your or your company and
read more here about our Real Estate Legal Services and the projects we have
worked on.

If you have any queries please do not hesitate to Contact Michael Crowley,
Partner, Real Estate, Patrick F. O’Reilly & Co.




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