ᐅ Additional Costs After the Fixed Price Period Ends

Hello dear forum members,

I have read a lot here but still haven’t made much progress.
We have the following situation. In October 2020, we signed a contract to build a semi-detached house with a fixed price guarantee for 24 months. The associated company also helped us find a plot of land, which, according to their statement, would be developed shortly. However, that was not the case—we were a bit naive, but that can’t be changed now.
The land development will be completed in October 2022.
We want to continue building and come to a reasonable agreement with the builder, but the financial burden due to increased interest rates and general inflation is obviously quite high.
Now a few questions:

Does the fixed price guarantee generally refer to the start of construction or to project completion?
Is it correct that price increases may only be passed on to us if they occur after the fixed price period expires?

The latter was assured to us in a conversation in 2021, which took place when it became clear that land development would take significantly longer than planned.
Meanwhile, the builder no longer feels bound to this statement since the situation has changed so much.
The company would like us to sign a new contract. Am I right in thinking that we should absolutely not do this because it would only bring disadvantages for us? We are already building with very basic specifications, but we have calcium silicate blocks instead of aerated concrete; this would be the only point where costs could still be saved. How should such a side agreement be designed so that the original contract is not suddenly affected? To give some numbers, a current calculation would be over 30% more expensive than in 2020. An increase of 10% would still be manageable; somewhere around 20% would be the limit beyond which the project would really become difficult for us.

Thank you very much for any advice and best regards

Sandro177 schrieb:

Hello dear forum,
I have read a lot here but still haven’t made much progress.
Here is our situation: In October 2020, we signed a contract to build a semi-detached house with a fixed price agreement for 24 months. The associated company also helped us secure a plot of land, which they said would be developed shortly. That was not the case; we were somewhat naïve, but that can’t be changed now.
The plots will reach buildable condition in October 2022.
We want to continue building and reach a reasonable agreement with the builder, but the burden from increased interest rates and general inflation is very high.
A few questions:

Does the fixed price agreement usually refer to the start of construction or the completion?
Is it correct that price increases can only be passed on to us if they arise after the fixed price period expires?

We were assured of the latter in a discussion in 2021, which took place when it became clear that the development would take much longer than planned.
Meanwhile, the builder feels no longer bound by this statement, as the situation has changed significantly.
The company wants us to sign a new contract. Am I right to believe that we absolutely should not do this, since it would almost only bring disadvantages for us? We have already chosen a very basic specification, but use sand-lime brick instead of aerated concrete, which would be the only area to save costs. How should such a side agreement be structured to ensure that the old contract is not suddenly impacted? To give you some figures, a current estimate would be about 30% more expensive than in 2020. 10% would be manageable; somewhere around 20% would be a limit beyond which the project would really become difficult for us.
Thanks for any advice and best regards

That depends on what the contract states. Sometimes the fixed price period starts from the groundbreaking. In that case, it’s sufficient if work begins by then. If the fixed price period is affected by delays caused by the builder, you should document this carefully, as the fixed price period should then be extended. We also signed our contract at the end of 2020. Construction only started in November 2021 because the building permit process alone took nearly 10 months. During that time, however, the builder already ordered or reserved materials at certain prices and has not charged us any additional costs so far.

Are you aware of the property transfer tax involved in purchasing the plot and house from the builder?

Take your case and contract to a specialized lawyer and have it clarified. There is too much money at stake to make decisions based on lay opinions in a forum. Of course, the lawyer will cost some money, but I consider it a good investment.

At first, it’s not about immediately confronting your builder with legal letters. It’s about getting a professional assessment of the legal situation as a basis for your next steps.

filosof schrieb:

Take your contract and the issue to a specialized construction lawyer and have it clarified. There is too much money at stake to make decisions based on lay opinions in a forum. Of course, a lawyer will cost some money, but I see that as a good investment.
The goal is not to immediately confront your builder with legal letters. It is about getting a professional assessment of the legal situation as a basis for your next steps.

Or contact a builders’ protection association or home builders’ support service if you are a member.

filosof schrieb:

Consult a specialized lawyer with your contract and the details of the situation to clarify this. There is too much money at stake to make decisions based on lay opinions in a forum. Of course, the lawyer will cost a bit, but I see that as a good investment.
Initially, it is not about confronting your builder with legal letters. It is about getting a professional assessment of the legal situation to serve as a basis for your further actions.

Of course, we will seek professional advice. I mainly want to start understanding what to expect. The contract only mentions a fixed price agreement, with no reference to dependencies on the building permit / planning permission or the start of construction.
Online, I’ve read that in case of price increases, the cost breakdown must be disclosed to clearly show what applied before and after the fixed price period. In reality, this sounds quite unrealistic to me. Do you have any experience with this?

Neubau2022 schrieb:

You’re aware of the property transfer tax issue when buying the land and house from the builder, right?

The land already belongs to us and, fortunately, it was financed before the recent interest rate changes.