ᐅ Semi-detached house: two contracts (landowner and construction company)
Created on: 17 Jun 2021 18:55
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HubiTrubi40
Hello everyone,
it’s me again... but you advised me so well last time that I backed out of my last house purchase attempt (rightly so!). Now I have something new, and here too there seem to be one or two potential pitfalls. It is a semi-detached house (a total of 12 are being built). The seller is a real estate agency. The land belongs to an investor and is being legally divided. There will be two contracts: one with the landowner for the purchase of the land and one with the construction company (contract for work). The notarized purchase contract covers the total price package (just over 600,000 plus additional costs). Since this is a so-called initiator model (never heard of it before, but according to the marketer it is common), extras can be added afterwards—for example, an additional bathroom. These costs are then charged separately and added on, with so-called layout variants offered. The advantage is that property transfer tax and notary fees are only calculated on the base package. The savings are limited. Depending on the chosen variants, the price increases by another 15,000-20,000, depending on what you want.
I spoke with a lawyer who advised me to stay away. Why? Because you sign two contracts and could face difficulties deciding from whom to claim warranty if something goes wrong. What do you think? The company seems reputable, and my impression is that this is a common approach, but apparently it is not a developer in the usual sense. Anyway, I’m uncertain whether this is a good idea. I could reserve now. For that, I would have to pay 1,000 euros, which I would get back if I withdraw from the reservation within four weeks. These four weeks are intended for clarifying financing, further consultations and planning discussions, and the notarization appointment. Is this reasonable? Otherwise, everything looks okay so far; the house and land are fine (260 sqm (2800 sq ft)). I think building myself (I am still on the waiting list for a building plot) wouldn’t be cheaper, and existing properties are usually just as expensive if not more so. I have an appointment this Saturday to look at a smaller terraced house (125 sqm (1350 sq ft) versus 140 sqm (1500 sq ft) like in this offer). First, it is considerably older and the price is also around 600k. Oh, one thing that surprised me about this offer: the construction period from the start of building (planned from September—planning permission should already be granted) is 20 months. That seems quite long to me. So moving in would only be possible in about two years.
Best regards, Hubi
it’s me again... but you advised me so well last time that I backed out of my last house purchase attempt (rightly so!). Now I have something new, and here too there seem to be one or two potential pitfalls. It is a semi-detached house (a total of 12 are being built). The seller is a real estate agency. The land belongs to an investor and is being legally divided. There will be two contracts: one with the landowner for the purchase of the land and one with the construction company (contract for work). The notarized purchase contract covers the total price package (just over 600,000 plus additional costs). Since this is a so-called initiator model (never heard of it before, but according to the marketer it is common), extras can be added afterwards—for example, an additional bathroom. These costs are then charged separately and added on, with so-called layout variants offered. The advantage is that property transfer tax and notary fees are only calculated on the base package. The savings are limited. Depending on the chosen variants, the price increases by another 15,000-20,000, depending on what you want.
I spoke with a lawyer who advised me to stay away. Why? Because you sign two contracts and could face difficulties deciding from whom to claim warranty if something goes wrong. What do you think? The company seems reputable, and my impression is that this is a common approach, but apparently it is not a developer in the usual sense. Anyway, I’m uncertain whether this is a good idea. I could reserve now. For that, I would have to pay 1,000 euros, which I would get back if I withdraw from the reservation within four weeks. These four weeks are intended for clarifying financing, further consultations and planning discussions, and the notarization appointment. Is this reasonable? Otherwise, everything looks okay so far; the house and land are fine (260 sqm (2800 sq ft)). I think building myself (I am still on the waiting list for a building plot) wouldn’t be cheaper, and existing properties are usually just as expensive if not more so. I have an appointment this Saturday to look at a smaller terraced house (125 sqm (1350 sq ft) versus 140 sqm (1500 sq ft) like in this offer). First, it is considerably older and the price is also around 600k. Oh, one thing that surprised me about this offer: the construction period from the start of building (planned from September—planning permission should already be granted) is 20 months. That seems quite long to me. So moving in would only be possible in about two years.
Best regards, Hubi
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HubiTrubi4018 Jun 2021 09:10@nordanney I just called about another construction project with a different provider. The process there involves two linked contracts: one is the purchase agreement with the landowner (project developer), and the other is the construction contract with the builder. However, in that case, you are the client yourself.
How does financing work for projects like this? (Of course, you would need to discuss this with the bank.) But if you sign the purchase agreement and have to pay in installments based on construction progress, will the bank agree to that if the build takes more than two years? I once spoke to a bank, and they said the funds would need to be drawn within one year.
How does financing work for projects like this? (Of course, you would need to discuss this with the bank.) But if you sign the purchase agreement and have to pay in installments based on construction progress, will the bank agree to that if the build takes more than two years? I once spoke to a bank, and they said the funds would need to be drawn within one year.
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nordanney18 Jun 2021 10:01HubiTrubi40 schrieb:
How does financing work for projects like these? (Well, you would have to talk to the bank anyway.) But if you sign the purchase contract and have to pay in installments (based on construction progress), will the bank accept this if the construction takes up to two years? Yes.
HubiTrubi40 schrieb:
I once talked to a bank and they said the money must be drawn within one year. They probably mean that after 12 months, commitment fees (or facility fees) apply. It is also quite normal not to have the construction finished one year after the financing agreement is signed.
HubiTrubi40 schrieb:
Does it make sense to take out construction legal protection insurance? In my opinion, it doesn’t make much sense, but I’ve already had several debates here with supporters of the Arag insurance.
In my view, this insurance clearly only makes sense if a lawsuit is actually filed. However, before it gets to that point, other measures are usually taken. Insurance companies typically include fine print to avoid paying out for every minor dispute a builder might have.
Based on experience, the people who have legal protection insurance are often those who like to insist on “their” rights in everyday situations as well.
HubiTrubi40 schrieb:
According to the listing and the person in charge at the construction site, the client is the construction company. Ah, okay… developer.
HubiTrubi40 schrieb:
What annoys me a bit is the planned construction period of two years. That means, as it stands now, move-in would be May 2023. I wonder what the reasons are for this (a buffer due to the current high raw material prices perhaps)? I’d be annoyed too. I think they’ll be building all the houses at the same time.
HubiTrubi40 schrieb:
Will the bank agree if the construction takes almost two years? They charge you preparatory interest for that.
HubiTrubi40 schrieb:
Does it then make sense to take out construction legal protection insurance? That’s what the lawyer suggested.As I said, ask another lawyer about construction law matters. With a developer, you wouldn’t actually be the builder.https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
HubiTrubi40 schrieb:
The provider is a real estate agency. The plot belongs to an investor and will be legally subdivided. There will be two contracts: one with the landowner for the purchase of the land and one with the construction company (construction contract). The notarized purchase agreement covers the total purchase price of the entire package (just over 600,000 plus additional costs). I haven’t seen the investor yet, but there are a total of three brochures: the one you emailed me, a second from the builder, and a third from the marketer. In all of them, I could not find where the key point of my biggest doubt, the exemption from property transfer tax on the extras,
HubiTrubi40 schrieb:
These costs will then be charged separately and thus added on, whereby so-called variants of the floor plan are offered here. is supposed to be guaranteed (?).
[A] single[/A] purchase contract for the entire developer product made the most sense to me here. For the overall price guarantee, the developer would first have to offer the complete package, meaning the land would already have to be purchased before construction. As soon as you become the buyer directly from the landowner investor, two separate contracts make sense — but secondly, in that case, the developer would effectively be the general contractor and could only very conditionally guarantee you the total price including the land; and first, this wouldn’t change the fiscal linkage of the entire arrangement. The specific tax exemption on the selected extras is in any case nonsense — at least not without fraudulent tax evasion.
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
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HubiTrubi4020 Jun 2021 18:03@11ant That’s why there are two contracts. The investor sells you the land, and then a construction contract (contractor agreement) is signed with the builder (principal). I assume the agency marketing the project is included in the price. If I were to go ahead with it, I would definitely have the contract reviewed by a construction law attorney to rule out any hidden pitfalls. What do you generally think of the building brochure? Does the quality look okay? I’m not sure if the building material is mainly concrete. I’m not quite sure how to feel about that.
In terms of price, you probably won’t find anything newly built cheaper elsewhere, and existing properties are similarly priced, if not more expensive. I guess building it yourself would be in a similar range (assuming you estimate the land at about 500 euros per square meter (5,215 sq ft)).
In terms of price, you probably won’t find anything newly built cheaper elsewhere, and existing properties are similarly priced, if not more expensive. I guess building it yourself would be in a similar range (assuming you estimate the land at about 500 euros per square meter (5,215 sq ft)).