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Negotiating repair obligations in Scottish commercial leases—checklist At common law a landlord, in comparison to a tenant, has quite onerous obligations in so far as the maintenance and repair of a let premises is concerned, see Practice Note: Repair clauses in commercial leases in Scotland—Repair under the common law. In commercial leases, it is almost universal practice for the landlord to seek to divest itself of all common law repairing obligations in relation to the premises let to the tenant (but not the common parts in multi-let buildings, see Practice Note: Service charge and outgoing provisions in commercial leases in Scotland). As such, commercial leases typically impose significant repairing obligations on the tenant. The most common form of commercial lease is a full repairing and insuring (FRI) lease where the tenant is responsible for all repairs of whatever nature with the exception of insured risk damage, see Practice Note: Repair clauses in commercial leases in Scotland—Contracting out of the common law—the full repairing and insuring (FRI) Lease and The modern...
Construction due diligence for property purchase—initial review of construction package—checklist Due diligence of construction documents is generally only relevant either for properties built within 12 years of the date of purchase or, for older properties, where construction works have been carried out during the previous 12-year period. See Practice Note: The construction due diligence process. This Checklist sets out a list of the key points which need to be considered following receipt of the construction documents in relation to the property. The documents should be initially reviewed and these key issues considered before raising any pre-contract enquiries with the seller. For an example of a list of pre-contract enquiries, see: Construction pre-contract enquiries—checklist. Documents • (1) Check that a full suite of construction documents in relation to the construction of the property and/or in respect of works carried out in the past 12 years have been provided. • (2) Check that all documents provided have been properly executed. • (3) If the works have been completed, check that...
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Commercial service charges—a practical lease negotiation guide Landlord’s service charge objectives The landlord’s main concern is to ensure that the costs of maintenance and repair in relation to the building are passed on to the tenants and are not deducted from the landlord’s income/rents. This is sometimes referred to as the ‘clear lease’ principle. If the landlord sells its asset, one of the buyer’s key questions will be whether the service charge is fully recoverable. If it is not, then the market value of the landlord’s investment is likely to be impacted. Other key aims for the landlord are: • flexibility in deciding when and how the services are provided • limiting its obligations in the lease to providing core services while retaining flexibility to recover other sums if discretionary expenditure is incurred • maintaining consistency across leases in a multi-let building, and • ensuring that there are no ‘holes’ for costs to fall through — inevitably, there may be something which is required which...
Latent defects Technically, a defect in a finished product is a breach of contract. However, it is widely accepted that defects will occur and manifest themselves on construction projects both during and after the works have been carried out, and most contracts will often provide for any such breach to be rectified during the defects liability period (also known as the rectification period). During this time it is envisaged that the contractor will rectify defects which have become apparent since practical completion (these are generally considered patent defects). For more information on both practical completion and defects liability periods please refer to the respective Practice Notes: What is practical completion? and Defects liability period and rectification of defects. For consideration of what a defect is, see Practice Note: Defects claims in construction—What is a defect? For specific guidance on fire and building safety defects, see Practice Note: Fire safety defect claims for construction lawyers. What are latent defects? In order to establish what a latent (or inherent)...
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What are the potential risks to a buyer of a new-build property if the developer does not have National House Building Council or equivalent? It is a condition of most mortgage applications that a ‘new home’ warranty is in place if you are buying a home that is less than ten years old. Such a policy is designed to cover (among other things) structural defects in the home. While most warranties typically last ten years, what is covered in that period can vary and the small print of any policy should be carefully reviewed so that the buyer understands the allocation of risk under the relevant policy. The National House Building Council (NHBC) provides a policy called 'Buildmark Cover', which is a ten year policy taken out by the ‘builder’ on behalf of a home owner. The Buildmark Policy is divided into different periods of cover: • cover before completion • cover in the first two years after completion, and • cover in years three to...
What is decennial insurance? Decennial insurance is insurance that can be taken out by those responsible for the design and construction of buildings to cover the costs associated with the total or partial collapse of a building after completion or the discovery of latent/structural defects that compromise the building's safety or stability. Decennial liability originated in France in the early 1800s and has been enshrined in the French Civil Code ever since. The name derives from the fact that it imposed a ten-year liability, after completion of a project, on contractors and designers responsible for the design and construction of a building. Decennial liability acknowledges that the costs arising out of the complete or partial collapse of a building could be huge and may not be covered by other insurances. Cover under this type of insurance can include not just reinstatement of the building but also loss of use and/or loss of profits. Decennial liability is typically a form of strict liability, ie no proof is required...
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Construction analysis: The historic causes of insolvency, the lessons to be learnt from recent case studies and the wider implications for key players in the industry, are here considered by Theresa Mohammed (partner) and William Stewart (trainee) at Watson, Farley & Williams.
The British Insurance Brokers' Association (BIBA) has launched a new latent defects (structural warranties) scheme in partnership with GBW to aid property development and house building. The new scheme offers specialist building warranty cover tailored for the property development and construction industry.
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