With multi-occupancy buildings, the landlord is usually the party responsible for repair and maintenance of the building structure (including cladding, the roof and the like), all plant and machinery (including lifts, air con and the like) and all other common parts. That's a fairly standard position which most landlords and managing agents will be fully familiar with.
The managing agents will then plan and carry out the routine maintenance for the building. That may well involve replacing parts of the common parts (e.g. new roofing felt, replacement air con) by third party contractors. Again, most owners and managing agents will be fully familiar with that process. But if the replacement works result in the owners or managing agents receiving product or works guarantee documents, do they need to do anything else?
Who is guarantee addressed to?
As the product or works guarantee is for the building, then it is prudent for it to be specifically addressed to / in the name of the then building owner. That ensures that the owner can enforce during its ownership and, on sale, can be disclosed to a purchaser.
It would also be prudent – if possible, depending on the position taken by the guarantor – to ensure the guarantee states that either (a) it is automatically enforceable by all future owners of the building, or (b) it can be assigned onto a purchaser without consent. That would put the owner in the best position going forward as it would be able to either pass over or assign the guarantee to a purchaser on sale.
Any immediate notification?
The terms of the guarantee should always be checked to ascertain if the guarantor, or any other party, needs to be notified to ensure that the guarantee is 'live' and enforceable. The guarantee may be a standard document that sits with the equipment or materials but is only effective once notified to the guarantor. That may be done online or by formal written notification. The managing agent or owner should therefore check the guarantee on issue and ensure that such action points are taken. They should also keep a record of them having done so, whether a download or screenshot of a webpage, or a copy letter. That ensures that the owner can (a) verify to the guarantor that the guarantee is live, if the owner is seeking to enforce it; and (b) evidence to a purchaser or lender that the guarantee is live and enforceable.
Any ongoing action required?
Depending on what the guarantee is for the owner, and therefore the managing agent on behalf of the owner, may have to take further action. For product guarantees, the guarantee will often stipulate that the product must be subject to regular maintenance checks or servicing (and it may further state as a condition of the guarantee that it is the guarantor that requires to carry out such servicing). That may be relevant to equipment (such as boilers, lifts and the like). For materials, the obligation may be to carry out regular checks of the material to ascertain if there is any sign or it degrading or otherwise being damaged (e.g. cladding being torn in the wind).
The onus is therefore on the managing agents to ensure that they carry out such regular servicing and/or checks to ensure the guarantee remains enforceable. They should also ensure that they keep records of such regular servicing and/or checks being carried out. In addition, the terms of the guarantee should be checked to verify if the guarantor needs to be notified of such regular checks being carried out, and how that notification should be made. Again, that should then be complied with and records retained.
As with the notification provisions above, keeping those records ensures that the owner can evidence to the guarantor and any future purchaser or funder that the guarantee remains enforceable because its terms are being complied with.
Not prejudicing the guarantee
The guarantee should also be checked to understand what can, and cannot, be done with the product or materials. For example, if the guarantee relates to a boiler and requires annual servicing, who can carry that out and if a part needs replaced, where can that part be obtained from. Similar provisions apply to guarantees for materials: if there is water coming in through the roof, what repairs – emergency or more permanent fixes – can be carried out and by whom. As above, keeping records of that and notifying the guarantor where needed should also be checked and actioned.
Key takeaways
Property ownership and management will necessitate products and materials being used to keep the building running. Guarantees are regularly provided for those. Whilst it may seem simplest to just file that guarantee with the rest of the building paperwork, it is prudent to ensure that the terms of the guarantee are read and actioned at the relevant time and in the relevant manner.
Understanding those aspects and complying with them all ensures the guarantee remains effective. That then has the immediate benefit to the owner, as it can enforce a guarantee rather than have to incur cost which may – or may not – be recoverable from the tenants under the service charge or otherwise. It also has the longer term benefit of ensuring that the guarantee is available to a future owner so that they can take it on. That reduces potential complications at sale and / or price considerations if there is an identified issue with the underlying product or material.
It is also worth remembering that if one has the benefit of a contractor collateral warranty or building contract for construction works that may have included the replacement of, for example, a lift then that may be a better initial route of recourse should a defect arise. The collateral warranty or building contract is likely to have fewer limitations or exclusions than the guarantee, although a claim under the guarantee may still be possible when a claim under the building contract or collateral warranty has expired.
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