Real Estate Tip of the Week - Claim Deadlines for Collateral Warranties

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Real Estate Tip of the Week - Claim Deadlines for Collateral Warranties

Published 23 julio 2019

The case of Swansea Stadium Management Co Ltd v City & County of Swansea Interserve Construction Limited [2018] EWHC 2192 (TCC) serves to remind the beneficiaries of collateral warranties to be alert to deadlines for issuing claims under these securities.

The dispute concerns the construction of the Liberty Stadium in Swansea. Practical completion was reached on 31 March 2005 and a collateral warranty was provided by the contractor, Interserve, to the management company for the stadium shortly afterwards. As a result of defects found, the management company issued proceedings against Interserve on 4 April 2017, which was 12 years and 4 days after the date of practical completion of the stadium. Interserve contended that the time for making part of the claim had lapsed.

A collateral warranty is usually executed as a deed and deeds ordinarily entitle the beneficiary to 12 years from the date that a cause of action arises to issue a claim without becoming statute barred. Collateral warranties commonly include an expiry date to provide clarity, but none was stated in this case. The management company contended that the 12 years should run from the date the collateral warranty was signed whilst Interserve contended it should run from the date of practical completion.

The relevant part of the management company’s claim failed as the collateral warranty contained a 'no greater liability' clause, the intention of this being:

  1. that the beneficiary would be in the same position as the employer under the building contract; and
  2. to provide certainty that the obligations of the warrantor under both building contract and warranty would end on the same date.

Therefore, the court held that any claim under the collateral warranty was statute-barred as the limitation period under the collateral warranty was the same as under the building contract, 12 years from practical completion. The case provides clarity to both parties to a collateral warranty on how the courts will view 'no greater liability' clauses in the context of limitation.

Landlords that are the beneficiaries of collateral warranties should therefore note whether their warranty contains a 'no greater liability' clause, or other limitation, and diarise the claim deadline to leave adequate time for an assessment to be made of whether any claim exists and for any consequent inspections, legal advice, negotiations and issue of proceedings to occur before the limitation period expires.

Authors

Emma Gonzalez

Emma Gonzalez

Bristol

0117 918 2102

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