ᐅ Land Purchase – Legal Review / Penalty Clauses / Reservation?
Created on: 26 Apr 2017 21:28
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erdbaerchiE
erdbaerchi26 Apr 2017 21:28Hello!
On Friday, my husband and I have an appointment with a home builder since our favorite plot is now available for us *excited*
On the phone, the friendly gentleman said it would be an introductory meeting where everything would be calculated. We would then have the extended weekend to make our decision.
Now I’m feeling a bit pressured because I know there are other interested parties in case we don’t want to proceed. A friend advised us to have the contract reviewed by a lawyer right away and to insist on penalties for construction delays. Has anyone had experience with this? We have never dealt with a lawyer before...
What happens if we sign the contract on Tuesday but, for whatever reason, financing doesn’t come through? Does the contract simply become void?
Everything seems to be moving so quickly, and I’m not sure if the short “consideration period” is normal.
Looking forward to your answers 🙂 Best regards, Kati
On Friday, my husband and I have an appointment with a home builder since our favorite plot is now available for us *excited*
On the phone, the friendly gentleman said it would be an introductory meeting where everything would be calculated. We would then have the extended weekend to make our decision.
Now I’m feeling a bit pressured because I know there are other interested parties in case we don’t want to proceed. A friend advised us to have the contract reviewed by a lawyer right away and to insist on penalties for construction delays. Has anyone had experience with this? We have never dealt with a lawyer before...
What happens if we sign the contract on Tuesday but, for whatever reason, financing doesn’t come through? Does the contract simply become void?
Everything seems to be moving so quickly, and I’m not sure if the short “consideration period” is normal.
Looking forward to your answers 🙂 Best regards, Kati
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Marvinius26 Apr 2017 21:43Never let yourself be pressured! It’s better to cancel and look for another property.
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erdbaerchi26 Apr 2017 21:48I may have expressed myself poorly; we were not pressured by him. I am putting pressure on myself because suddenly everything is happening so quickly, and I am afraid the plot might be taken if I hesitate too long.
The developer never said there were many interested buyers, but at the moment, it is the last plot in this price range in the neighborhood. The neighboring plot was also sold quickly, and its listing hadn’t been up for long, so I strongly assume this is the case.
The developer never said there were many interested buyers, but at the moment, it is the last plot in this price range in the neighborhood. The neighboring plot was also sold quickly, and its listing hadn’t been up for long, so I strongly assume this is the case.
You shouldn’t sign anything without a financing confirmation, unless you are absolutely sure you will secure financing (for example, if you are a civil servant, work in the public sector, or have a strong equity position).
Usually, you would then have to pay a kind of penalty fee yourself to get out of the contract.
Aside from the fact that your friend’s suggestions are quite aggressive and like using a sledgehammer right away... but he is correct that a qualified expert should review the contract.
And of course, it’s the last plot of land that _everyone_ wants—if that’s not a way for the seller to apply pressure, then I don’t know what is 😉
Best regards, Yvonne
Usually, you would then have to pay a kind of penalty fee yourself to get out of the contract.
Aside from the fact that your friend’s suggestions are quite aggressive and like using a sledgehammer right away... but he is correct that a qualified expert should review the contract.
And of course, it’s the last plot of land that _everyone_ wants—if that’s not a way for the seller to apply pressure, then I don’t know what is 😉
Best regards, Yvonne
Relax. You cannot sign the contract yourself since this can only be done with a notary, who must provide you with the draft 14 days before signing. With the seller, you can sign a reservation agreement at most and then take care of financing and other matters during its duration. Otherwise, always sign the loan agreement first and then visit the notary within 14 days—never the other way around.
erdbaerchi schrieb:
A friend advised us to have the contract reviewed directly by a lawyer and to insist on penalty clauses for construction delays..That advice is generally sound.
An hour with a lawyer costs around 200–300 euros (approx. 220–330 USD) excluding tax.
The market situation, where building plots sell like hotcakes, naturally leaves little room for contract negotiations with developers and/or construction companies….
Penalty clauses sound nice, but why would the developer agree to them? Won’t they simply offer the project to the next interested party? And is it really a developer? Or a general contractor?
Some legal protection is provided for developers by the German Ordinance on Real Estate Agents and Developers (Makler- und Bauträgerverordnung), especially the payment schedule in § 3 II of that ordinance, which is not exactly easy to understand.
ALL construction contracts contain more or less ineffective clauses; so the lawyer will surely find something. The question is whether the developer will be willing to change anything. Otherwise, they could simply have agreed to the statutory provisions, which are balanced and effective.
erdbaerchi schrieb:
What happens if we sign the contract on Tuesday and afterward (for whatever reason) the financing doesn’t go through? Is the contract then simply void?Principle: a contract is a contract. You need to have the funds when entering into contracts.
Therefore: arrange a contractual right of withdrawal in case the financing fails…