Are Collateral Warranties Construction Contracts?

Thursday 21st October 2021

Our Construction law experts look at a recent decision that will impact tenants and occupiers of new build units.

The TCC has considered, for only the second time, whether warranties can be considered construction contracts, and therefore whether they grant a right to adjudicate to the parties.

It was decided collateral warranties will not be construction contracts for the purposes of the Construction Act if they are executed after practical completion (4 years later in this case) and therefore relate to construction activities already carried out.

It seems there must be some element of ongoing construction activities, though the court did recognise warranties are rarely provided at the start of the works so there is bound to be a retrospective element as well.

The important point here is that beneficiaries (end occupiers such as tenants of new build units) would not be able to bring an adjudication under the collateral warranty, potentially preventing a fast decision to support cashflow.

It means it is even more important to ensure warranties are delivered in good time by the professional team.

A copy of the judgment can be found here.

For more information, please contact one of our construction specialists.