Glossary
Step-in rights
Step-in rights allow a funder or other party to take over the management of a project or contract if specified events occur, such as a default or the builder failing to perform. They are set out in the finance documents or a side deed.
An example
A construction lender has a side deed with the builder allowing the lender to step into the building contract if the developer defaults, so construction can continue under the lender's control.
Why it matters
Step-in rights protect funders but can mean the developer loses control of a project. Borrowers should understand what triggers them and what happens to their interest if they are exercised.
Points to check
Read the step-in provisions in the finance documents or side deed to understand when a funder can take over and what it can do. Check how step-in interacts with the building contract and the builder's obligations. If you are the developer, ask what notice you would receive and whether you would have a chance to remedy any problem first.