ᐅ Signing a Construction Contract Before Purchasing the Land?
Created on: 9 May 2019 10:18
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goalkeeper
Hello everyone,
We are basically in agreement with our future general contractor (GC) and are having the contract reviewed by a specialist lawyer and a friend who is an architect. After that, we would be ready to proceed.
However, our notary appointment has roughly shifted to the end of June/early July. We will be purchasing a municipal plot of land.
The GC has already informed us that the shell construction definitely cannot be completed this year, as he won’t have enough time. As a result, the entire construction project will be delayed by several months due to the winter season. However, we urgently need the space since we are expecting another child.
He would grant us a right of withdrawal in the contract if, for any reason, the land purchase falls through – any costs incurred up to that point, probably around 3.5% of the total price, would of course be our responsibility.
The question now is whether there could be any other issues with signing the construction contract before the notary appointment for the land purchase?
Our mortgage lender doesn’t see this as a problem, since we would be financing the 3.5% from our own capital, and the loan would only begin once the land purchase is complete.
What do you think?
We are basically in agreement with our future general contractor (GC) and are having the contract reviewed by a specialist lawyer and a friend who is an architect. After that, we would be ready to proceed.
However, our notary appointment has roughly shifted to the end of June/early July. We will be purchasing a municipal plot of land.
The GC has already informed us that the shell construction definitely cannot be completed this year, as he won’t have enough time. As a result, the entire construction project will be delayed by several months due to the winter season. However, we urgently need the space since we are expecting another child.
He would grant us a right of withdrawal in the contract if, for any reason, the land purchase falls through – any costs incurred up to that point, probably around 3.5% of the total price, would of course be our responsibility.
The question now is whether there could be any other issues with signing the construction contract before the notary appointment for the land purchase?
Our mortgage lender doesn’t see this as a problem, since we would be financing the 3.5% from our own capital, and the loan would only begin once the land purchase is complete.
What do you think?
G
goalkeeper9 May 2019 12:11We will visit the building authority again this afternoon to discuss these points. Thank you for the tip.
We plan to contribute 20% equity—let’s see how long that will last and how quickly the land registry office processes everything.
We plan to contribute 20% equity—let’s see how long that will last and how quickly the land registry office processes everything.
montessalet9 May 2019 13:04If the land purchase is basically approved by the municipality and the notary appointment is just a formality, I don’t see any problem with the contract with the house builder. Of course, it will still take a while until everything is entered in the land register.
This only happens once a) the land has been paid for; b) the tax office issues the property transfer tax assessment; and c) you have paid the invoice delivered with the assessment. The property transfer tax assessment alone can sometimes take “forever.” I called the office and was basically "fast-tracked." Even so, from the notary appointment to the land register entry took easily 5 months (and we always paid everything immediately).
This only happens once a) the land has been paid for; b) the tax office issues the property transfer tax assessment; and c) you have paid the invoice delivered with the assessment. The property transfer tax assessment alone can sometimes take “forever.” I called the office and was basically "fast-tracked." Even so, from the notary appointment to the land register entry took easily 5 months (and we always paid everything immediately).
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goalkeeper9 May 2019 13:48But is it really necessary for the mortgage to be registered with the bank before the loan is disbursed? Without the money from the bank, I can’t pay for my land first.
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nordanney9 May 2019 13:54Lumpi_LE schrieb:
In our case, it took another 3 months after the notary appointment before we were registered in the land register. The bank accepts a preliminary entry; the transfer of ownership is not required. The preliminary entry is completed within a few days.
goalkeeper schrieb:
But is the registration of the bank’s mortgage lien mandatory for the loan to be disbursed? Sort of. The bank needs security. This can be the registration of the mortgage lien or, if it needs to be very quick, a priority certificate from the notary. This is usually done immediately but costs a few euros.
If the purchase is just a formality at this point, I would also sign the construction contract in advance. There is no reason not to.
nordanney schrieb:
The bank accepts a provisional purchase agreement; the transfer of ownership is not required. The provisional agreement is completed within a few days. I just double-checked, and yes, that’s what I meant. The priority notice of conveyance took almost 3 months and only because we started pushing after 2 months... But as mentioned, this can vary a lot.
Edit: We were listed in the land register after 11 months, but I don’t think that was significant anymore.
edit2: About 4 months after the financing, we received the notification by mail that the bank had been registered and that we could draw down the funds.
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goalkeeper9 May 2019 17:11According to the building authority, the land registry entry in Baden-Württemberg is done online. Therefore, they assume that this will be registered within the four-week payment deadline for the purchase price of the land, allowing the loan disbursement to begin promptly.