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.
H
hauskauf19877 Oct 2022 20:29I can’t believe it, 25k more without any disclosure just like that because everything has gotten more expensive. Nice way to preserve the margin...
Is this a large well-known general contractor or a small company?
Is this a large well-known general contractor or a small company?
M
MSHausbau7 Oct 2022 20:31hauskauf1987 schrieb:
I can’t believe it, an extra 25k just like that without any explanation because everything supposedly got more expensive. Nice way to protect the profit margin...
Is this a big well-known general contractor or a small company? You misunderstood. I also explained it poorly. He’s sending me a breakdown showing where the additional costs came from and how much for each trade.
It’s a large general contractor. Sorry, I initially confused general contractor and construction manager.
X
xMisterDx7 Oct 2022 22:36hauskauf1987 schrieb:
I can’t believe it—25k more without any disclosure just because everything has gotten more expensive. Nice way to protect the profit margin...
Is this a big well-known general contractor? Or a small company? This might seem strange to you in public service or government jobs, but profit margin is essential for a private company’s continued existence. And with that, for the financial security of its employees and subcontractors.
We, in the private sector, have to earn our money on the open market, not through taxes, fines, or pointless fees 😉
X
xMisterDx7 Oct 2022 22:43MSHausbau schrieb:
You misunderstood that. I also explained it poorly. He’s sending me the summary—that is, where additional costs occurred and how much for each trade.
It’s a large main contractor. Sorry, I initially confused main contractor and general contractor. I don’t want to disappoint you, but this “disclosure” probably came about like this:
I want to claim amount x and have y line items.
x/y = z looks odd.
So I introduce a factor f = w * 0.1 (w = dice roll) and adjust some line items so that it looks realistic in the end...
Again… purchase prices, internal hourly rates, margins… these are the core of any business, strictly confidential and therefore not accessible to anyone, especially not the customer...
Go to a supermarket and ask them for these figures because you think the milk is too expensive. Or to a gas station... or anyone else...
PS:
Or to put it quite clearly:
It’s none of your or the customer’s business how much profit I make.
The customer signs a contract. And if that contract gives me the opportunity after 12 months to increase or at least secure my profit… then that’s what I do...
As a business owner, I have a responsibility to my family and my employees… NOT to my customers. They get what they signed for. No less, but also no more.
W
WilderSueden7 Oct 2022 22:46However, there is no entitlement to make a profit on every transaction. This is called business risk, and construction companies have historically earned a fairly decent margin for it. Now, we are in a period where the reserves built up over time need to be used.
I know this concept has become somewhat unpopular. At first, banks were considered too big to fail, and now short-time work is being registered for every minor disruption in operations, while dividends are paid out in parallel. I am very much in favor of a market economy, but disadvantages are naturally part of it as well.
I know this concept has become somewhat unpopular. At first, banks were considered too big to fail, and now short-time work is being registered for every minor disruption in operations, while dividends are paid out in parallel. I am very much in favor of a market economy, but disadvantages are naturally part of it as well.
X
xMisterDx7 Oct 2022 22:52WilderSueden schrieb:
There is no entitlement to make a profit on every single deal. This is known as entrepreneurial risk, and construction companies have traditionally earned a fairly decent margin for this. Now, it’s a time when the reserves built up from those margins have to be used.
I know the concept is somewhat unpopular nowadays. First, banks were considered too big to fail, and now short-time work is being registered for every minor disruption in operations while dividends are paid out in parallel. I strongly support a market economy, but that also includes accepting its downsides. No, that is simply wrong as a general statement.
For example, if the general contractor is a public limited company, they can even be legally liable if they do not exhaust all possibilities to achieve the profit that could have been legally earned. Investors can sue—and they will do so.
And I would like to see you if your boss tells you at the company Christmas party:
Dear colleagues… this year we won’t be paying Christmas bonuses because we waived profits to avoid making our clients pay more…
In this case, the office worker earning $2,500 gross is indirectly subsidizing the chief physician’s house with $9,000 gross…