ᐅ Signing a Construction Contract Before Purchasing the Land?
Created on: 9 May 2019 10:18
G
goalkeeper
Hello everyone,
We are basically in agreement with our future general contractor (GC) and are having the contract reviewed by a specialist lawyer and a friend who is an architect. After that, we would be ready to proceed.
However, our notary appointment has roughly shifted to the end of June/early July. We will be purchasing a municipal plot of land.
The GC has already informed us that the shell construction definitely cannot be completed this year, as he won’t have enough time. As a result, the entire construction project will be delayed by several months due to the winter season. However, we urgently need the space since we are expecting another child.
He would grant us a right of withdrawal in the contract if, for any reason, the land purchase falls through – any costs incurred up to that point, probably around 3.5% of the total price, would of course be our responsibility.
The question now is whether there could be any other issues with signing the construction contract before the notary appointment for the land purchase?
Our mortgage lender doesn’t see this as a problem, since we would be financing the 3.5% from our own capital, and the loan would only begin once the land purchase is complete.
What do you think?
We are basically in agreement with our future general contractor (GC) and are having the contract reviewed by a specialist lawyer and a friend who is an architect. After that, we would be ready to proceed.
However, our notary appointment has roughly shifted to the end of June/early July. We will be purchasing a municipal plot of land.
The GC has already informed us that the shell construction definitely cannot be completed this year, as he won’t have enough time. As a result, the entire construction project will be delayed by several months due to the winter season. However, we urgently need the space since we are expecting another child.
He would grant us a right of withdrawal in the contract if, for any reason, the land purchase falls through – any costs incurred up to that point, probably around 3.5% of the total price, would of course be our responsibility.
The question now is whether there could be any other issues with signing the construction contract before the notary appointment for the land purchase?
Our mortgage lender doesn’t see this as a problem, since we would be financing the 3.5% from our own capital, and the loan would only begin once the land purchase is complete.
What do you think?
montessalet10 May 2019 09:00goalkeeper schrieb:
According to the building authority, in Baden-Württemberg the land registry entry is processed online. Therefore, they assume that this will be completed within the four-week payment deadline for the land purchase price, allowing the loan disbursement to begin shortly afterward.However, the change in the land registry only takes place once the real estate transfer tax has been paid. Simply paying the purchase price is not enough for this.I would definitely account for the possibility that no excavators will be operating before March 20. If everything works out this year, great, but I consider it very unlikely. Do you even have a building permit / planning permission yet? That can take several months depending on the state and municipality.
G
goalkeeper10 May 2019 10:35Lumpi_LE schrieb:
I would definitely factor in the possibility that no excavators will be operating before March 20.
If everything works out this year, great, but I consider it very unlikely. Do you even have a building permit / planning permission yet? Depending on the state and municipality, that can also take months. We just met with the general contractor this week and discussed the schedule. If the contract is signed within the next four to six weeks, it should still fit into this year.
Since there is a development plan (new residential area), we only need to submit a building application under the simplified procedure. This is more cost-effective and faster. The building authority we visited yesterday is supporting us for a quick start, as there are no building applications yet for the new residential area.
montessalet schrieb:
The change in the land register only takes place once the property transfer tax has been paid. Simply paying the purchase price is not enough for this.Don’t take the registration of the land charge lightly. It’s not just 4 weeks. Just because the transfer to the district office works digitally doesn’t mean they work faster. Usually, it takes 2–3+ months. For me, it was more than 3 months. Without the land charge registration by the bank, the loan will not be disbursed.Of course, you can handle it via pledging the notice of conveyance, but you then have to a) visit the notary again for the land charge registration (which costs money) and b) the notice of conveyance also has fees.
You’re looking at this way too optimistically. There were exactly two things I couldn’t influence during the construction: the land register situation for the bank and the neighboring construction site that delayed the start date.
So take off your rose-colored glasses and plan according to the usual timeframe (comment from Lumpi) or go through the notice of conveyance. You can also leave it to chance, but if the general contractor starts and the loan is not ready for disbursement, it’s a stop — possibly even through the winter?!
Good luck!
It’s best to ask as many friends, acquaintances, or family members as possible who live nearby—preferably in the same municipality or at least within the same jurisdiction for the land registry and property transfer tax—how long the whole process took for them.
For example, in our case, the notice for the property transfer tax arrived faster than the payment request for the purchase price of the land. Overall, it didn’t take that long... we signed with the notary a few days before Christmas (but the notary’s office was closed after New Year’s) and the construction started in mid-April after everything had been finalized for several weeks. We had already submitted the building permit application (also a simplified process) before we were officially registered in the land registry.
For example, in our case, the notice for the property transfer tax arrived faster than the payment request for the purchase price of the land. Overall, it didn’t take that long... we signed with the notary a few days before Christmas (but the notary’s office was closed after New Year’s) and the construction started in mid-April after everything had been finalized for several weeks. We had already submitted the building permit application (also a simplified process) before we were officially registered in the land registry.