ᐅ How can I protect myself against the bankruptcy of a construction company?
Created on: 28 Apr 2020 16:15
H
Hauherr2020
Hello! Our preferred home builder offers a completion guarantee in the form of an insurance surety worth 5% of the net construction contract amount.
A completion guarantee is great. But why only 5%? How is it handled in your cases? How can I best protect myself against the company going bankrupt?
Background: I have looked into credit reports. From what I read, they are not very conclusive. A completion guarantee seems to be the best option. But is it available for the entire project, or are 5% typical?
Thanks in advance!
A completion guarantee is great. But why only 5%? How is it handled in your cases? How can I best protect myself against the company going bankrupt?
Background: I have looked into credit reports. From what I read, they are not very conclusive. A completion guarantee seems to be the best option. But is it available for the entire project, or are 5% typical?
Thanks in advance!
N
nordanney28 Apr 2020 21:34HilfeHilfe schrieb:
Check the home builder beforehand. Credit agencies etc.Currently, all credit agencies are failing. So, they are not helpful at the moment. Additionally, the financial statements of developers/builders are often not reliable due to their cyclical nature.K
KundF_Hof1 May 2020 14:16danixf schrieb:
There isn’t much more to add. Just avoid paying too much in advance. If something goes wrong, at worst the construction will be paused until everything is resolved. Afterwards, you can continue with other contractors.
The worst-case scenario is having overpaid and then not having enough money left to complete the house. What does a reasonable payment schedule look like for a general contractor? We have one outlined in our contract, but we would like to review it more critically.
KundF_Hof schrieb:
What does a reasonable payment plan look like with a general contractor? We have one in the construction contract but would like to review it critically.It’s difficult to generalize. It also depends on the construction method. For example, a basement is a major cost driver at the beginning.The structural shell should not exceed 50%. This is a rough guideline. Additionally, at least 3.5% should be withheld until full completion. Ideally, this would be 5%.
As a note, see § 3 of the developer and real estate agent regulation.
Here is an example of a payment plan based on construction progress. This would be quite good but also somewhat unrealistic.
1. Start of earthworks 2% of the purchase price
2. Completion of foundations with base slab 8%
3. Completion of ground floor masonry with concrete ceiling 15%
4. Completion of roof structure 15%
5. Completion of roof covering 8%
6. Rough installation of heating system 3%
7. Rough installation of plumbing system 3%
8. Rough installation of electrical system 3%
9. After window installation 10%
10. Completion of interior plastering 6%
11. Completion of screed work 3%
12. Completion of tiling work 4%
13. Ready for occupancy 12%
14. Facade work 3%
15. Full completion (handover) 5%K
KundF_Hof3 May 2020 17:05danixf schrieb:
It is difficult to give a general judgment. It also depends on the construction method. For example, a basement is a major cost driver at the beginning.
The shell construction should not exceed 50%. This is a rough guideline. Additionally, at least 3.5% should be withheld until full completion. Ideally, this would be 5%.
As a reference, § 3 of the Real Estate Developer and Broker Ordinance.
Here is an example of a payment plan based on construction progress. This would be quite good but also relatively unrealistic.Thank you very much for your detailed response. We will be building with a basement (watertight concrete structure) using solid construction. Many points are already covered in our contract, so I am glad to have this confirmation now.
K
KundF_Hof15 May 2020 11:19danixf schrieb:
It is difficult to make a general judgment. It also depends on the construction method. For example, having a basement is a significant cost factor at the beginning.
The shell construction cost should not exceed 50%. This is a rough guideline. Additionally, at least 3.5% should be withheld until full completion. Ideally, this would be 5%.
Just a note on Section 3 of the Real Estate Developer and Broker Ordinance.
Here is an example of a payment plan based on construction progress. This would be a pretty good plan, but also somewhat unrealistic.Does anyone have the optimal payment plan for homebuyers when building a solid construction with a basement?