ᐅ Semi-detached house: two contracts (landowner and construction company)
Created on: 17 Jun 2021 18:55
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HubiTrubi40
Hello everyone,
it’s me again... but you advised me so well last time that I backed out of my last house purchase attempt (rightly so!). Now I have something new, and here too there seem to be one or two potential pitfalls. It is a semi-detached house (a total of 12 are being built). The seller is a real estate agency. The land belongs to an investor and is being legally divided. There will be two contracts: one with the landowner for the purchase of the land and one with the construction company (contract for work). The notarized purchase contract covers the total price package (just over 600,000 plus additional costs). Since this is a so-called initiator model (never heard of it before, but according to the marketer it is common), extras can be added afterwards—for example, an additional bathroom. These costs are then charged separately and added on, with so-called layout variants offered. The advantage is that property transfer tax and notary fees are only calculated on the base package. The savings are limited. Depending on the chosen variants, the price increases by another 15,000-20,000, depending on what you want.
I spoke with a lawyer who advised me to stay away. Why? Because you sign two contracts and could face difficulties deciding from whom to claim warranty if something goes wrong. What do you think? The company seems reputable, and my impression is that this is a common approach, but apparently it is not a developer in the usual sense. Anyway, I’m uncertain whether this is a good idea. I could reserve now. For that, I would have to pay 1,000 euros, which I would get back if I withdraw from the reservation within four weeks. These four weeks are intended for clarifying financing, further consultations and planning discussions, and the notarization appointment. Is this reasonable? Otherwise, everything looks okay so far; the house and land are fine (260 sqm (2800 sq ft)). I think building myself (I am still on the waiting list for a building plot) wouldn’t be cheaper, and existing properties are usually just as expensive if not more so. I have an appointment this Saturday to look at a smaller terraced house (125 sqm (1350 sq ft) versus 140 sqm (1500 sq ft) like in this offer). First, it is considerably older and the price is also around 600k. Oh, one thing that surprised me about this offer: the construction period from the start of building (planned from September—planning permission should already be granted) is 20 months. That seems quite long to me. So moving in would only be possible in about two years.
Best regards, Hubi
it’s me again... but you advised me so well last time that I backed out of my last house purchase attempt (rightly so!). Now I have something new, and here too there seem to be one or two potential pitfalls. It is a semi-detached house (a total of 12 are being built). The seller is a real estate agency. The land belongs to an investor and is being legally divided. There will be two contracts: one with the landowner for the purchase of the land and one with the construction company (contract for work). The notarized purchase contract covers the total price package (just over 600,000 plus additional costs). Since this is a so-called initiator model (never heard of it before, but according to the marketer it is common), extras can be added afterwards—for example, an additional bathroom. These costs are then charged separately and added on, with so-called layout variants offered. The advantage is that property transfer tax and notary fees are only calculated on the base package. The savings are limited. Depending on the chosen variants, the price increases by another 15,000-20,000, depending on what you want.
I spoke with a lawyer who advised me to stay away. Why? Because you sign two contracts and could face difficulties deciding from whom to claim warranty if something goes wrong. What do you think? The company seems reputable, and my impression is that this is a common approach, but apparently it is not a developer in the usual sense. Anyway, I’m uncertain whether this is a good idea. I could reserve now. For that, I would have to pay 1,000 euros, which I would get back if I withdraw from the reservation within four weeks. These four weeks are intended for clarifying financing, further consultations and planning discussions, and the notarization appointment. Is this reasonable? Otherwise, everything looks okay so far; the house and land are fine (260 sqm (2800 sq ft)). I think building myself (I am still on the waiting list for a building plot) wouldn’t be cheaper, and existing properties are usually just as expensive if not more so. I have an appointment this Saturday to look at a smaller terraced house (125 sqm (1350 sq ft) versus 140 sqm (1500 sq ft) like in this offer). First, it is considerably older and the price is also around 600k. Oh, one thing that surprised me about this offer: the construction period from the start of building (planned from September—planning permission should already be granted) is 20 months. That seems quite long to me. So moving in would only be possible in about two years.
Best regards, Hubi
I don’t understand the warnings. Of course, it’s frustrating to have to pay taxes because of a plus house. But that’s how it is with developer-built homes, and this type of market is becoming more common. However, linked transactions are neither dangerous, prohibited, nor illegal. A developer-built house also has advantages… but that’s a different topic. I also don’t know if it might rather be a general contractor (GC) build, where you act as the client? That would need to be clarified!
All good! Common practice. See above.
That’s quite common nowadays. It keeps away curious people who don’t actually want to buy or build but like to act interested everywhere... There are also serious buyers who reserve at multiple places and then don’t cancel. Those cause problems.
This doesn’t refer to the land contract and the contract for work. That would be pointless because there is no warranty on land at all!
Yes, you need to check who will do that. But I understand that the construction company also takes care of this and therefore also assumes the warranty. It’s different if you enter into separate contracts with individual craftsmen. In that case, only a two-year warranty applies.
But I’m not a lawyer. So if I were you, I would ask your legal advisor again what they think and also consult your general contractor/developer about how the warranty applies to the extras.
HubiTrubi40 schrieb:
The provider is a real estate brokerage agency. The land belongs to an investor and will be legally divided. There will be two contracts: one with the landowner for the purchase of the land, and one with the construction company (contract for work).
All good! Common practice. See above.
HubiTrubi40 schrieb:
For that, I would have to pay 1000 euros, which I would get back if I cancel the reservation within 4 weeks.
That’s quite common nowadays. It keeps away curious people who don’t actually want to buy or build but like to act interested everywhere... There are also serious buyers who reserve at multiple places and then don’t cancel. Those cause problems.
HubiTrubi40 schrieb:
Because you conclude two contracts and could end up having problems deciding from whom to enforce warranty claims if something goes wrong.
This doesn’t refer to the land contract and the contract for work. That would be pointless because there is no warranty on land at all!
HubiTrubi40 schrieb:
You can add extras later, like an additional bathroom, etc. These costs will be charged separately and added on, usually offered as variants of the basic floor plan.
Yes, you need to check who will do that. But I understand that the construction company also takes care of this and therefore also assumes the warranty. It’s different if you enter into separate contracts with individual craftsmen. In that case, only a two-year warranty applies.
But I’m not a lawyer. So if I were you, I would ask your legal advisor again what they think and also consult your general contractor/developer about how the warranty applies to the extras.
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HubiTrubi4018 Jun 2021 07:58@11ant I’ve sent it to you.
In general: should I get involved in something like this? Does it make sense to take out legal protection insurance for home builders? That's what the lawyer suggested. However, I’ve now checked with my legal insurance provider and they don’t offer that coverage. Apparently, only a few insurers provide it, and with a waiting period. So I’m probably too late anyway.
In general: should I get involved in something like this? Does it make sense to take out legal protection insurance for home builders? That's what the lawyer suggested. However, I’ve now checked with my legal insurance provider and they don’t offer that coverage. Apparently, only a few insurers provide it, and with a waiting period. So I’m probably too late anyway.
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HubiTrubi4018 Jun 2021 08:09@ypg According to the exposé and the person in charge at the construction site, the client is the construction company.
What still bothers me a bit is the planned construction period of 2 years. That means, as things currently stand, moving in would be May 2023. I wonder what the reasons are for this (buffer time due to the high raw material prices at the moment?).
What still bothers me a bit is the planned construction period of 2 years. That means, as things currently stand, moving in would be May 2023. I wonder what the reasons are for this (buffer time due to the high raw material prices at the moment?).
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Strahleman18 Jun 2021 08:13I am less critical about the basic nature of the transaction (linked deal): you buy the land from A, and then B builds a house on it. However, property transfer tax applies to the entire value, not just the original house. Otherwise, this is not a proper transaction. Otherwise, the developer could simply charge 1 euro for their service, as recorded in the notary contract…
If you are buying, I would definitely insist on having the final planned house with the total costs included in the contract before signing. Anything else is highly questionable from a tax perspective. Additionally, the developer can refer to the scope documented in the notary contract if they fail to deliver on any special requests.
The long construction period serves as protection for the developer: they will likely be working on several projects simultaneously, meaning some of the 12 semi-detached houses will be built in parallel. This takes time because the different trades have to complete the houses one after another.
If you are buying, I would definitely insist on having the final planned house with the total costs included in the contract before signing. Anything else is highly questionable from a tax perspective. Additionally, the developer can refer to the scope documented in the notary contract if they fail to deliver on any special requests.
The long construction period serves as protection for the developer: they will likely be working on several projects simultaneously, meaning some of the 12 semi-detached houses will be built in parallel. This takes time because the different trades have to complete the houses one after another.
HubiTrubi40 schrieb:
@11ant I’ve sent it to you.
In general: should I get involved in something like this? Does it make sense to take out legal protection insurance for homebuyers? That’s what the lawyer suggested. However, I asked my legal protection insurer, and they don’t offer that. Apparently, only a few insurers provide it, and with a waiting period. So I’m probably too late anyway. Make sure the coverage is at 100,000€ (about 110,000 USD). I believe Arag offers something like that.
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nordanney18 Jun 2021 08:41Strahleman schrieb:
If you are buying, I would definitely insist on having the final planned house with total costs included in the contract before signing. Anything else is highly problematic from a tax perspective. Also, the developer can ultimately refer to the scope recorded in the notarized contract if they mess up any of the custom requests. I know it as linked contracts at the notary. One document with the seller, general contractor, and buyer.
11ant schrieb:
I think @saralina87 can explain this best in this forum. But this structure is quite normal, isn’t it? Where’s the problem? If I buy from X and build with Y, it’s no different. Only here both contracts are finalized in one document.
For us as a bank, this is actually more or less standard procedure.
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