ᐅ General contractor requests price increase for the entire house
Created on: 6 Oct 2022 15:33
M
MSHausbau
Hello everyone,
I’ve read a lot and hope to get some advice...
We are building a house and are about 90% finished. The fixed price agreement expires at the end of October, and the contract doesn’t specify what happens afterward.
Now our general contractor is asking for €50,000.
His reasoning: As of today, the house is 18.66% more expensive, which is €51,250, so he is demanding €50,000 from us.
He already indicated over the phone that it probably won’t be the full 50K, but the 10K we offered was too low.
Now the question is, are we completely mistaken? I don’t see why we should pay extra for the entire house, only for the items that are still outstanding. That would be about €8,000 if you really apply the 18%.
Do you understand what I mean?
Does anyone have legal experience or some tips on how to argue this?
Our lawyer advises settling in the range of €15,000 to €20,000.
I’ve read a lot and hope to get some advice...
We are building a house and are about 90% finished. The fixed price agreement expires at the end of October, and the contract doesn’t specify what happens afterward.
Now our general contractor is asking for €50,000.
His reasoning: As of today, the house is 18.66% more expensive, which is €51,250, so he is demanding €50,000 from us.
He already indicated over the phone that it probably won’t be the full 50K, but the 10K we offered was too low.
Now the question is, are we completely mistaken? I don’t see why we should pay extra for the entire house, only for the items that are still outstanding. That would be about €8,000 if you really apply the 18%.
Do you understand what I mean?
Does anyone have legal experience or some tips on how to argue this?
Our lawyer advises settling in the range of €15,000 to €20,000.
M
MSHausbau7 Oct 2022 06:35HilfeHilfe schrieb:
I find it difficult to agree to a price adjustment for the work already installed after the fact. I wouldn’t sign anything and would let him come. How much money have you still held back? That’s exactly my problem…
So far, nothing. We have paid everything that has come through.
We have a guarantee for the final installment.
C
Christian 657 Oct 2022 07:56If I look at the construction price index for the past 12 months, it has increased by about 20%.
The main increase happened from 11/21 to 5/22, approximately 15%.
This phase also corresponds to the most significant construction progress.
So the contractor had to fully bear the price increases for their work.
The interim payments only serve to maintain liquidity and, in my opinion, do not have a final binding effect.
What if you had built your house yourself? Then you would have experienced and paid all the price increases in full as well.
The only negotiating position I see is the fact that only material and logistics costs have risen.
Wages, risk, and profit have not increased to this extent.
As a rough rule of thumb, which of course does not apply to every trade, one can generally assume the following breakdown:
1/3 material
1/3 wages
1/3 overheads, risk, and profit
That would be my approach (which is not legally enforceable) to negotiate.
The main increase happened from 11/21 to 5/22, approximately 15%.
This phase also corresponds to the most significant construction progress.
So the contractor had to fully bear the price increases for their work.
The interim payments only serve to maintain liquidity and, in my opinion, do not have a final binding effect.
What if you had built your house yourself? Then you would have experienced and paid all the price increases in full as well.
The only negotiating position I see is the fact that only material and logistics costs have risen.
Wages, risk, and profit have not increased to this extent.
As a rough rule of thumb, which of course does not apply to every trade, one can generally assume the following breakdown:
1/3 material
1/3 wages
1/3 overheads, risk, and profit
That would be my approach (which is not legally enforceable) to negotiate.
Christian 65 schrieb:
What if you had built your house yourself? Then you would have the option to choose between several providers and wouldn’t necessarily have to work with the contractor who guaranteed me a fixed price for 12 months. What if the prices had dropped? Would he have had to refund money?The vague wording in this contract is likely open to interpretation. Signing it was probably a mistake. However, I wouldn’t assume that a judge would automatically rule entirely in favor of the general contractor.
X
xMisterDx7 Oct 2022 08:50MSHausbau schrieb:
That’s exactly my problem…
So far, nothing. We have paid everything that has come up.
We have a guarantee for the final installment. Still not understood? By paying the progress payments according to the contract, you have not formally accepted individual trades.
You have a fixed total price, which the general contractor has reasonably divided into construction phases.
The fact that your roof covering is still missing, even though the screed and interior plaster are already done, proves this. Roof covering was payment 4 out of 10 for me.
You have a lump-sum price for a turnkey house. When the general contractor is hired, when you pay, or how much it costs them is not your concern.
K a t j a schrieb:
The vague wording in this contract is probably a matter of interpretation. Signing it was certainly a mistake. However, I wouldn’t assume that a judge would rule exclusively in favor of the general contractor.I wouldn’t assume that either, but betting on the judge deciding solely in the homeowner’s favor would also be naive. The problem with such legal disputes is that there is hardly any way to protect yourself in advance. I don’t know of any legal protection insurance that doesn’t explicitly exclude construction-related matters. The disputed amounts are always extremely high, which leads to significant litigation costs, and those costs often end up affecting both parties.
X
xMisterDx7 Oct 2022 08:53kati1337 schrieb:
I wouldn’t count on that either, but betting that the decision will be entirely in favor of the client would also be naïve. The problem with these kinds of legal disputes is that there’s hardly any way to protect yourself in advance. I don’t know any legal expenses insurance that doesn’t explicitly exclude construction-related matters. The claims involved are always extremely high, which means high legal costs, and these often end up being shared by both parties. Well, the main issue with such a lawsuit is that the general contractor (GC) can drag it out through multiple appeals and delay tactics.
This can take years. GCs are not stupid; they know very well that clients face a double burden they can’t sustain financially or mentally for long.
PS:
And as I said… while the lawsuit is ongoing, not a single tradesperson will set foot on the construction site. I imagine 2–3 years without a roof would be tough. The manufacturer of my roofing underlay says it must be removed after at most 3 months of UV exposure. It’s not designed for direct sunlight over several years.