collateral warranties are a key part of the package of development documents in real estate development facilities. They are typically provided by the development team (eg the building contractor, architect, engineers and other consultants, and key sub-contractors to the building contractor) to each of the lender and the borrower.

The lender will typically take security over the borrower's rights under the key development contracts including the collateral warranties that have been granted to the borrower (in addition to receiving collateral warranties that are provided directly to the lender).

This Practice Note focuses on the collateral warranties that are provided to the borrower and how a lender takes security over the borrower's rights under such collateral warranties.

This Practice Note explains:

1. •

   what a collateral warranty is

2. •

   which collateral warranties the lender should take security over

3. •

   the methods of taking security over the borrower's rights under collateral warranties:

   1. ◦

      assignment by way of security, or

   2. ◦

      charge

4. •

   how to deal with restrictions on granting assignments over collateral warranties