Collateral Warranties are used when there is a need for a contractual relationship between parties involved in a building project and those who are not involved within the primary contract but have an interest in the building.
They are usually executed as a deed meaning that no consideration is required (no money has to change hands) and the limitation period increases from 6 years to 12 years.
If a dispute arises between the parties the usual course is to litigate through the courts,
However due to a recent case (Parkwood Leisure Ltd v Laing O’Rourke Wales & West Ltd (2013) (TCC)) the beneficiaries of a collateral warranty may be able to refer their dispute to construction adjudication dependent on whether the collateral warranty is seen as a construction contract under the Housing, Grants, Construction and Regeneration Act 1996.
If you are a party to a Collateral Warranty and have questions or require advice, please do not hesitate to contact a member of the Dutton Gregory team.