UK Law and Practice Contributed by: Colin Rodrigues and Harminder Sandhu, Hawkins Hatton Corporate Lawyers Ltd
• exclusion clauses, which, if agreed to and upheld, would negate any liability for loss or damage (liability for death or personal injury
parent company (or holding company). These are particularly helpful when a small contractor is retained who is part of a more financially viable
cannot be excluded). Collateral Warranties
parent company. Escrow Accounts
Collateral warranties are agreements that are related to another “primary” contract. They extend the duty of care by one of the contract - ing parties to a third party that is not a party to the primary contract. For example, an architect of a new development owes a duty of care to an occupier of the development despite there being no contractual relationship between the architect and the occupier. 7.4 Management of Schedule-Related Risk Schedule-related risk is the risk that construc - tion work may take longer than scheduled. Delay can lead to cost risk; hence this is usually man - aged by the contract, including a clause to pay liquidated and ascertained damages (LADs) to the client if the contract is delayed. LADs are not penalties; they are damages pre-determined at the outset of the contract based on a real calcu - lation of the actual loss the client is likely to incur if the completion date is delayed. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Performance Bonds A performance bond is used in relation to con - struction projects as a means of insuring a client against the risk of a contractor defaulting on the contract obligations. A performance bond is pro - vided by a third party up to an agreed amount. Parent Company Guarantees A parent company guarantee (PCG) is also a form of protective security in the event of default on a contract by a contractor controlled by a
Escrow accounts are also used as holding accounts for construction project funds. They are usually set up by a solicitor acting on behalf of one of the parties. The terms of the agree - ment will specify that the payments must be pro - tected, so as to provide security should a party default on payment. 7.6 Liens or Encumbrances in the Event of Non-payment No information is available on this topic. 7.7 Requirements Before Use or Inhabitation Contractors and/or designers are permitted, subject to an express agreement, to exercise a lien or otherwise encumber a property in the event of non-payment, and this can only be removed upon payment of the outstanding fees. The sale of real estate is exempt from VAT unless the seller has opted to tax the land and build - ings. Most new-build commercial properties will attract a standard-rate VAT of 20%. If, however, a property is acquired with a sit - ting tenant, the “transfer as a going concern” exception will apply, provided that both parties are VAT-registered, and hence no VAT will be payable on the purchase price. However, this exemption only applies where the buyer opts to 8. Tax 8.1 VAT and Sales Tax
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