ᐅ Signing a Construction Contract Before Purchasing the Land?
Created on: 9 May 2019 10:18
G
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
goalkeeper10 May 2019 13:22EDIT: I just remembered that I could also provide a notarized confirmation from the bank – this usually takes about one to two weeks and shows the bank that they can disburse the loan before it is registered in the land registry. That should be significantly faster.
The bank, the plot, and so on are not the only risks.
When we signed our contract with the shell builder, we were told that construction could start at the beginning of November. Then something came up, and we were postponed to December. After that, they said it wasn’t worth starting before Christmas. Then January and February were too cold, and eventually in March it finally got going...
This happens in two out of three cases. A commitment from a general contractor is worth just as much.
When we signed our contract with the shell builder, we were told that construction could start at the beginning of November. Then something came up, and we were postponed to December. After that, they said it wasn’t worth starting before Christmas. Then January and February were too cold, and eventually in March it finally got going...
This happens in two out of three cases. A commitment from a general contractor is worth just as much.
G
goalkeeper10 May 2019 13:45All right – we will definitely have to pay our dues.
At the moment, I simply assume that when the general contractor (GC) tells me it will work out, we plan accordingly and trust that we are not being misled. Especially since he has an excellent reputation in the region among clients, suppliers, and building authorities.
At the moment, I simply assume that when the general contractor (GC) tells me it will work out, we plan accordingly and trust that we are not being misled. Especially since he has an excellent reputation in the region among clients, suppliers, and building authorities.
I don’t want to spread fear.
I’m keeping my fingers crossed that everything goes well.
But there are also people who terminate their rental contract before the signature on the paper is even dry, and for whom double financial burdens after 12 months threaten their livelihood. If neither of these applies to you, then you can stay completely relaxed.
I’m keeping my fingers crossed that everything goes well.
But there are also people who terminate their rental contract before the signature on the paper is even dry, and for whom double financial burdens after 12 months threaten their livelihood. If neither of these applies to you, then you can stay completely relaxed.
G
goalkeeper10 May 2019 14:03Lumpi_LE schrieb:
I don’t want to spread fear.
I’m keeping my fingers crossed that everything will go well for you.
But there are people who terminate their rental contract before the signature on the paper is even dry, and for whom overlapping housing costs after 12 months threaten their livelihood. If this doesn’t apply to you, then you can stay calm. I actually appreciate the various warnings here – with all the information and deadlines, it’s easy to lose sight of what really matters.
However, we live directly with the landlords (with flexible termination terms) – so fortunately, this is not an issue for us. Overlapping housing costs still hurt, of course, whether you can afford them or not. It’s just money wasted unnecessarily.
M
Mottenhausen10 May 2019 14:32I think that, given your situation, your shell construction probably won’t be weather-tight before winter, so work on the interior trades can only continue afterward. This means you will likely have a winter break in between. Starting construction in June or July will be fine, no doubt about it! But:
The general contractor is only waiting for your signature; he would never say something like “hmm, well, it might be tight this year” because the risk of you going to a competitor while things are still delayed is too high.
A quick note from our experience:
Land purchase → land registry entry took over three months because the key person there was sick. Isn’t there a deputy for that? Apparently not! I mean, WTF?
But that’s all preliminary stuff. The actual start of construction wasn’t as straightforward as expected:
We also had a development plan with a zoning permit waiver instead of a full building permit/planning permission, but the planning went through several phases: initial design phase (which you have completed), approval planning for the building notification was a bit tougher because issues like emergency exits versus electric shutters came up, leading to additional costs and other complications. Then comes detailed design and execution planning, structural engineering, ventilation system planning, drainage plans, roof structure plans, and who knows what else. All of this happened in iterative cycles because, for example, the structural engineering required a thicker ceiling and supports, which slightly affected the floor plan, which then impacted the structural engineering again, and so on. At times, it felt like progress was quite slow. Then the surveyor has to be on call to perform rough and fine measurements, which can also take time. ...Time that, under your general contractor’s ideal schedule, might be somewhat tight.
goalkeeper schrieb:
we just met with the general contractor this week and discussed the schedule. If completion happens within the next four to six weeks, it will still fit within this year.
The general contractor is only waiting for your signature; he would never say something like “hmm, well, it might be tight this year” because the risk of you going to a competitor while things are still delayed is too high.
A quick note from our experience:
Land purchase → land registry entry took over three months because the key person there was sick. Isn’t there a deputy for that? Apparently not! I mean, WTF?
But that’s all preliminary stuff. The actual start of construction wasn’t as straightforward as expected:
We also had a development plan with a zoning permit waiver instead of a full building permit/planning permission, but the planning went through several phases: initial design phase (which you have completed), approval planning for the building notification was a bit tougher because issues like emergency exits versus electric shutters came up, leading to additional costs and other complications. Then comes detailed design and execution planning, structural engineering, ventilation system planning, drainage plans, roof structure plans, and who knows what else. All of this happened in iterative cycles because, for example, the structural engineering required a thicker ceiling and supports, which slightly affected the floor plan, which then impacted the structural engineering again, and so on. At times, it felt like progress was quite slow. Then the surveyor has to be on call to perform rough and fine measurements, which can also take time. ...Time that, under your general contractor’s ideal schedule, might be somewhat tight.
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