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Entire Forests have been destroyed to create the net of contractual relationships that protects funders, purchasers and tenants on British construction projects. Collateral warranties in the UK are so institutionalised that new mechanisms, such as the Contracts (Rights of Third Parties) Act 1999, are viewed with suspicion. By contrast, the German construction industry would react with astonishment to a request for a collateral warranty. It would almost certainly refuse to sign one. So why the difference?

Except in the case of hereditary building rights, German law does not recognise the difference between freehold and leasehold commercial property. The owner or holder of the hereditary building right (usually 40 years or more) bears the risk of all damage to that building.

German tenancy law obligates the owner to provide rented property to the tenant in a condition suitable for use and to maintain this condition during the rental period. The tenant has a claim for damages if defects appear, even if they have been caused by a contractor. In addition, the tenant can refuse payment of rent for as long as any defects restrict their use of the property. The courts have limited the amounts that may be withheld to five times the costs of the remedy but, nevertheless, this is an effective means of persuading the landlord to remove the defects.

Practice is different, as well. The standard form of agreement between landlord and tenant imposes responsibility on the landlord for repairs, the maintenance of the roof and all common parts of the building. The tenant is responsible for maintenance and repair of the fit-out, furniture and so on. Sometimes attempts are made to negotiate away some of the tenants' rights, but waiving them entirely is unheard of.

It is also not uncommon in Germany for purchasers to take over any claims that the developer may have against companies involved in the design and construction of the building. This gives the purchaser remedies against the professional team and contractor under the original contracts. These are in addition to its remedies against the developer itself but they are valuable if, for example, the developer becomes insolvent.

You may expect the developer to be reluctant to agree to such an assignment, because it loses its rights against the project team and the contractor. However, this problem is circumvented under German law by means of an additional contractual provision authorising the developer to assert claims in its own name and at its own expense, notwithstanding the assignment. Prohibition of the assignment is not a common feature of German building contracts.

In Germany, rarely are subcontractors required to give collateral warranties to an employer or indeed to funders, purchasers or tenants. Again, if the employer/developer wants to have direct rights against subcontractors, it can acquire them by assignment as outlined above.

In the end, both legal systems achieve similar results but by different means. Should we not be exploring some of the routes offered by German law to lower the UK's paper mountain?