Collateral Warranty

A collateral warranty is a direct contract between a contractor, consultant or subcontractor and a third party — funder, purchaser or tenant — promising that the works were performed with reasonable skill and care, giving someone with no privity a route to claim.

Where it sits: Commonly on standard forms (e.g. the British Property Federation styles); rights to claim flow from the warranty itself, typically with a 12-year liability period for deeds.

Privity of contract is the problem warranties solve: the tenant cannot sue the contractor it never contracted with, and the funder\'s security sits on a building whose builder owes it nothing. The warranty creates that duty directly — and with it, a parallel 12-year tail of liability that design teams price and insurers watch.

For commercial teams the interest is schedule discipline: warranties are completion documents in most developments, chased as urgently as the keys, and the definitions (fit for purpose versus reasonable skill and care) carry materially different liability. A warranty is not paperwork; it is the funder\'s security interest wearing a signature block.

Related: practical completion · handover