step in rights

step in rights
In relation to construction and property development, a collateral warranty may include a right for the beneficiary of the collateral warranty to step in and take over the developer's rights as employer of a building contractor or a professional consultant, if the developer commits a serious and unremedied breach of the building contract or the professional appointment.
Typically this means that, if the developer becomes insolvent halfway through a project and breaches the building contract and the professional appointments, the beneficiary may step in and effectively become the developer, pay any sums due to the building contractor and the professional consultants and complete the project.
USA
In a project finance transaction, this is the right of lenders to assume and perform (or to arrange for a third party to assume and perform) the project sponsor's obligations under the project agreements following a default by the sponsor. This ensures the continued operation of the project. Otherwise, the lenders may be obligated to foreclose on the security interests and terminate the project.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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