Developer-tenant scenarios are a common feature of the UK construction and property industries. Typically a developer will enter into an agreement for lease with a tenant supported by a building contract. On completion of the works, the tenant will enter into a lease, usually including a full repairing covenant making the tenant responsible for keeping the property in repair. Such covenants usually cover latent defects in the works, unless very substantial. 

A developer in such circumstances (or any subsequent owner/landlord to whom the developer’s rights are assigned) will have two avenues to pursue in respect of defective work. It may sue the contractor under the building contract or it may insist that the tenant repair the defects under the terms of the lease. These rights need not be mutually exclusive. The fact that the developer/landlord has recovered sums from the contractor in respect of the defects will not necessarily release the tenant from its obligation to repair. 

The contractor may seek to include an indemnity against claims by the tenant

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