Any institutional funder lending money for construction works will usually require a “security package” and will normally impose a number of conditions precedent before releasing any funds.
This package will normally consist of:
- acceptable forms of consultant appointments properly entered into
- an acceptable form of building contract properly entered into (which may need to be assigned in favour of the funder)
- charges over the site of the works
- debentures over a company’s assets
- personal guarantees
- a suite of collateral warranties (or third-party rights) in favour of the funder from the consultant team, the main contractor and key sub-contractors.
Other types of security in relation to construction works can include:
- Performance Guarantees, where a third-party surety (usually an insurer) guarantees to the developer the financial performance of the main contractor under the building contract
- Parent (or Inter) Company Guarantees, where a group company guarantees the financial performance of the main contractor (or in certain circumstances the employer) under the building contract.
