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Have your Property Development Contract reviewed: Contract Review ensures Legal Certainty

Around two thirds of all building contracts for houses are faulty. This was the result of a statistical survey by the Association of Private Builders (VPB ). Nevertheless, it is difficult for legal laypersons to discover errors in a building contract.

The safe way is to have the building contract checked before signing it. This article explains where you can have your building contract reviewed, what costs you can expect and where typical pitfalls lurk.

What is a building contract?

The definition of a building contract can be found in Section 650a (1) of the German Civil Code (BGB):

“A building contract is a contract for the construction, restoration, removal or conversion of a building, an outdoor facility or a part thereof.”

In practice, the building contract is a sub-form of the contract for work and services. It is aimed at bringing about a result – e.g. the completion of a building.

What does a building contract contain?

A building contract should contain the following contract components:

• Data and plans for the building (e.g. floor plans, sections and views)
• Description of the equipment and technical building systems (sanitary facilities, electrical installations, outdoor facilities)
• Information on the date of completion
• Information on the energy and sound insulation standard
• Price guarantees
• List of services

The bill of quantities is particularly important. All services to be provided by the contractor are specified here. These can be, for example

• the erection of the shell
• the installation of windows and doors
• the laying of floor coverings (e.g. laminate, carpet, tiles)
• bricklaying, roofing or painting work
• Work on outdoor facilities, e.g. the construction of fences or garden design

The respective services including the individual work steps as well as details about the type and quality of the building materials should be determined as precisely as possible. In this way, disputes can be avoided at a later date – for example due to deviating execution.

Building contract according to BGB or VOB: these are the differences

Building contracts can be concluded in accordance with the German Civil Code (BGB) or the German Construction Contract Procedures (VOB). A building contract under the BGB applies to the private construction sector and is concluded between private contracting parties. A VOB building contract applies to the public construction sector and is used for contracts awarded by public clients (e.g. a municipality).

BGB and VOB building contracts differ in some respects. For example, compared to the BGB building contract, a VOB building contract contains additional provisions on the award procedure and its conditions of participation.

The following applies with regard to deadlines: In a building contract according to the BGB, all deadlines or interim deadlines must be specified. In a building contract in accordance with the VOB, however, only the start of construction and the completion date are specified. Interim deadlines can be specified approximately.

There are also differences in the due date for payment. While payment is due automatically after acceptance and receipt of the final invoice for a BGB building contract, the invoice for a VOB building contract must contain additional proof of performance, which can be amended before payment is made.

Another difference: The BGB building contract grants private individuals a 5-year claim to rectification of defects, while public clients only have 4 years to make claims for defects.

Why have a building contract reviewed?

Many building contracts do not comply with the law or are at least defective. There are many reasons for this. In some cases, building contractors are not familiar with the new building contract law that has been in force since 2018. As a result, they use old contract templates that often disadvantage clients.

Occasionally, construction companies deliberately use old forms and clever wording to generate additional profits at the expense of the client.

For this reason, you should have a building contract reviewed by a lawyer. The costs for this are low compared to the potential damage. A lawyer will point out any clauses that are incorrect or disadvantageous for you and help you to adjust the relevant contract contents in your favor.

Have the building contract reviewed: typical mistakes can be avoided

Turnkey is not always ready to move in

You need to be careful with buzzwords such as “turnkey” or “ready to move in”. These terms are not legal terms and are therefore not clearly defined. In practice, this can mean that a construction company considers the property to be “turnkey” even though the entrance steps, terrace or even flooring inside the house are missing. A lawyer will help you to concretize the respective contents in a legally secure manner.

Missing clauses on contractual penalties for exceeding the construction period

Construction projects often take longer than expected or agreed. For this reason, a building contract should stipulate whether and to what amount you as the builder are entitled to a contractual penalty or compensation for delay as soon as completion is delayed. It is important that the clause is worded in a legally sound manner, which can be ensured by legal counsel.

Insufficiently defined construction and service description

The construction and service description (BLB for short) is an essential part of the building contract. It defines the services to be provided, their structural execution and the remuneration. In addition, the quality of the building materials and the technical equipment are specified. The following applies: To avoid unexpected additional costs, the BLB should be formulated in as much detail as possible with the help of a lawyer in order to avoid a later legal dispute.

Lack of price agreements

The current shortage of building materials poses major problems for builders and construction companies. Prices are difficult to calculate. It is therefore important to agree specific material quantities and costs in the building contract. This gives you as the client planning security. To avoid disputes, the calculation can also be agreed with daily prices. A lawyer will help you to include the relevant clauses in the contract in a legally secure manner.

Where can I have my building contract reviewed?

You should have a building contract reviewed by a specialist lawyer. They will ensure that the contract is complete and complies with the legal regulations. In addition, a lawyer will incorporate your individual wishes into the contract in a legally secure manner.

Consumer advice centers of the federal states, the TÜV or nationwide associations (e.g. the Bauherren-Schutzbund) also offer a corresponding check.

Have the building contract reviewed online

You can have your building contract reviewed online by many lawyers and consumer advice centers. To do this, you upload the building contract as a PDF document and, if necessary, name certain clauses about which you have questions or comments. You will usually receive an answer within a few hours.

Have the building contract reviewed by a lawyer: the costs

If you would like to have your entire building contract checked by a lawyer, you should expect costs of EUR 1,500-2,500. As a rule, these are based on the so-called object value. This means that the higher the construction sum, the more expensive it is to have the building contract checked.

Some lawyers charge a flat rate for the contract review. The flat-rate costs for a contract review, a clause check and answering any follow-up questions are usually between EUR 100 and EUR 150.