It is not very often that you hear of problems in the design and construction in commercial buildings but when it does occur, the repercussions can be significant. Fact is, these issues can result in the costly process of rectification meaning the developer or owner has to suffer financially if adequate cover is not in place. So how do commercial developers insure themselves against these risks?
Collateral Warranties
Collateral Warranties, where a third party is named specifically as a beneficiary, were originally introduced in the late 1980s due to a number of high profile cases involving recovering damages for negligence in relation to defects in buildings. They are designed to create a contractual route for the pursuit of claims by third parties. Nowadays, they are seen as a commercial necessity where a client intends to sell or let the complete building and where the construction is being financed by a lending institution. A funder who has negotiated step-in rights to complete a development will also be interested in Collateral Warranties.
The aspect of Collateral Warranties that many are most concerned with is the issue of joint and several liability. Potentially, a warrantor could be responsible for the whole cost of rectifying a defect which it is only partially at fault. In addition, consequential and business losses that may result from damage or defects to a commercial building are incalculable and difficult, if not impossible, to insure.
There is also no guarantee that a beneficiary under collateral warranty will be able to recover the costs it incurs in relation to an inherent defect from a warrantor. The beneficiary must prove negligence and they must rely on the continuous trading of the parties involved as well as the continuing renewal of their Professional Indemnity policy. This is especially a risky strategy in times of uncertainty for the construction industry when insolvency has become a regular occurrence.
Commercial Warranties
Commercial warranties (also known as Latent Defects Insurance, Structural or Inherent Defects) provide a long-term warranty against a commercial building's defects in design, workmanship or materials. This allows property owners to reduce their risk exposure where other agreements may fall short. It does not rely on Architects Certificates, Collateral Warranties or Professional Indemnity Insurance.
This cover protects the developer, future owners, their funders and tenants against the consequences of structural defects if loss occurs any time over the 10/12 year period of cover on a no fault basis, eliminating the need for litigation, uncertainty, delay and cost. Should the owner of the property decide to sell the property within the period of the policy, it is transferable to the new owner and will be acceptable to the vast majority of mortgage lenders.
Premier Guarantee had provided Commercial Buildings Warranty for a wide range of commercial properties including retail, office and healthcare centres across the country. . The benefits of choosing Premier Guarantee for your warranty are:
By taking advantage of our Building Control services, you'll also be able to benefit from a single site surveyor for both warranty and Building Control. Not only that but by taking out these services together, we will undertake warranty inspections at no extra cost with the option to take out the warranty at any point throughout the construction of the development.
To find out more about our commercial warranty and related services, call us on 08444 120 888 or email info@premierguarantee.co.uk to speak to one of our customer services team.
