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
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
N
Neubau202224 Jun 2022 09:12Sandro177 schrieb:
The land already belongs to us and, fortunately, it was financed before the recent interest rate developments.Was it also purchased from BU? If so, it will probably be difficult not to pay property transfer tax on the house as well.
S
Sandro17724 Jun 2022 09:15Neubau2022 schrieb:
But was it also purchased from the general contractor? If so, it will probably be difficult not to pay property transfer tax on the house as well.No, from a private individual. It was only brokered. The typical tactic to keep the construction contracts within the company.The plots are supposed to be ready for construction by 10/22.
But construction won't start immediately after that, or is that already planned? Do you have the building permit / planning permission?
Is the semi-detached neighbor involved with you, or are you both building the two halves yourselves?
Your fixed-term contract expires in 10/22, and since you bought the plot yourselves, the company likely cannot be held responsible.
But construction won't start immediately after that, or is that already planned? Do you have the building permit / planning permission?
Is the semi-detached neighbor involved with you, or are you both building the two halves yourselves?
Your fixed-term contract expires in 10/22, and since you bought the plot yourselves, the company likely cannot be held responsible.
S
Sandro17724 Jun 2022 09:29Reggert schrieb:
The plots are supposed to be ready for building by October 2022.
But the construction won’t start immediately then, or is that already planned? Do you already have the building permit / planning permission?
Is the neighbor of the semi-detached house involved with you? Or are you both building your halves separately?
Your price lock expires in October 2022, and since you purchased the plot yourselves, the company probably cannot be held responsible. The neighbor is also building through the same company. Of course, we would like to start as soon as possible; whether this will be possible by October 2022 is wishful thinking, which is clear. The company has not caused any delays so far; I am not blaming anyone here. The question for me is simply how to reasonably agree on the price increases that have occurred between signing the contract and the expiration of the fixed price period, and whether it is correct that these should actually not be passed on to us. (I am aware that the current cost explosion will still have an impact on our building project.)
As previous speakers have already mentioned, seek legal advice. When communicating with the general contractor, be completely open about not being able to afford such cost increases. Has the contractor already provided concrete figures, or where do the 30% come from?
Alternatively, some large main contractors are now offering their clients compensation to exit the contract because fulfilling the contract (with fixed pricing) would become unprofitable.
To strengthen your position, you might consider offering the same. Take the stance that you have a fixed price agreement but would be willing to release the contractor from the contract in exchange for compensation. Then invest the 20,000-30,000 (currency) wisely and wait until the situation stabilizes (I don’t believe prices will drop significantly, but currently, there is the unpredictable risk of having to accept further price increases...).
Alternatively, some large main contractors are now offering their clients compensation to exit the contract because fulfilling the contract (with fixed pricing) would become unprofitable.
To strengthen your position, you might consider offering the same. Take the stance that you have a fixed price agreement but would be willing to release the contractor from the contract in exchange for compensation. Then invest the 20,000-30,000 (currency) wisely and wait until the situation stabilizes (I don’t believe prices will drop significantly, but currently, there is the unpredictable risk of having to accept further price increases...).
S
Sandro17724 Jun 2022 09:42You all know how companies like this operate. The 30% increase is initially presented as the current estimate. "That’s how much the house would cost right now; you need to plan for that," this statement, however, comes from the real estate agent. Discussions with the architect and so on haven’t even taken place yet. The selection of finishes hasn’t happened either. You can arrange a soil investigation on the plot only in coordination with the site manager who oversees the development. The company we are building with isn’t actually interested in pushing things forward quickly right now, so it takes a long time before you finally speak with someone who can make decisions.