Review Property Development Contract

Published On: 05.January.2023Categories: LegalTags: 5 min read
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Christina Schröder writes about legal topics for the Love & Law Blog at Recht 24/7.

In order to realize your self-built home, you need a plot of land and a corresponding construction project. With a property development contract, you acquire both from a single source. We tell you what this term means and what a developer contract must contain. Plus: Why is it worth hiring a lawyer for a cross-check? And how much does a contract check cost?

What is a developer contract and how does it differ from a construction contract?

A property development contract is concluded between a property developer and a buyer. It obliges the developer to hand over a plot of land to the buyer, including a turnkey property built on it. In contrast to a traditional building contract, you are not a builder, but a buyer. The developer acts as the builder and sells you the plot of land together with a building obligation. The special feature: Although you only become the owner at a later date, you have to make payments in advance.

The legal definition of the developer contract can be found in Section 650u of the German Civil Code (BGB). It states:

“A property development contract is a contract which has as its object the construction or conversion of a house or comparable structure and which at the same time contains the obligation of the contractor to transfer ownership of the property to the purchaser or to create or transfer a heritable building right.”

In practice, a property development contract is a mixed contract consisting of a purchase contract and a contract for work and services. While the purchase contract regulates the purchase of the property, the contract for work and services contains regulations for the construction project on the property.

What does a property development contract contain?

A developer contract is a very comprehensive contract. It contains detailed regulations on the purchase of the property and the associated construction project. A property development contract specifies

  • the objects of the contract, i.e. the property and the construction project
  • a specific completion date
  • the purchase price and its due date
  • provisions on liability and powers of attorney
  • building permits already issued

Other important parts of the contract are

The building specification

This is the heart of the developer contract, as it specifies exactly which construction services the developer must provide and in what form. By law, the following contents of a building specification are mandatory:

  • General description of the building
  • Plans and floor plans of the building
  • Details of the building structures
  • Information on the interior fittings
  • Technical information on energy, sound insulation and fire protection standards
  • technical building systems
  • Information on sanitary objects, electrical installations and information technologies
  • outdoor facilities
  • Quality features of the building

The priority notice of conveyance

A priority notice of conveyance secures the buyer’s right to transfer ownership of the land and the property built on it. It:

  • is entered in the land register
  • designates you as the future owner of the land and the property and
  • is deleted as soon as the land and property are transferred to you after all construction work has been completed.

As soon as the priority notice of conveyance has been deleted, you will be entered in the land register as the owner.

Not to be forgotten: The release promise. It stipulates that the developer’s encumbrances on the property will not be transferred to you upon transfer of ownership.

Why have a developer contract reviewed?

As the buyer, you will receive the developer contract from your developer. According to § 17 of the Notarization Act, the draft must be made available to you at least 2 weeks before notarization.

In practice, many property developers take advantage of the inexperience of their contractual partner when drafting the contract. So check the contract carefully before signing it. Despite a review, the finished document may have gaps or errors in content that are difficult to recognize as a legal layperson. The wording of individual provisions is also important. Seemingly harmless text passages such as “comparable” regularly lead to legal disputes.

The recommendation: Have a property development contract checked by a lawyer before signing it. They will point out any incorrect or disadvantageous clauses and help you to adjust the passages in your favor.

This applies in particular to clauses relating to acceptance and payment. Many property developers focus on “readiness for occupancy”, but not on “completion”. As a result, you already have to pay for the shell of the building – even though the property has not yet been completed.

How much does a property developer contract review by a lawyer cost?

The exact amount charged by most lawyers depends on the amount of the business fee. It is calculated on the basis of the value of the matter in question and then multiplied by a factor of 0.5 to 2.5 – depending on the scope and difficulty of the review. A flat rate for postal expenses (20 euros) and statutory VAT are added.

At Recht 24/7, we take a transparent approach and offer to check your property development contract for a fair fixed price of EUR 219. It’s easy to do online and within 24 hours! All you have to do is upload your contract document and enter your personal details.

The most important things in a nutshell

  • A property development contract is a mixed contract consisting of a purchase contract and a contract for work and services. It includes the purchase of a plot of land and the construction of a property.
  • When drawing up a developer contract, pay attention to the minimum legal requirements. Your individual wishes as the client are also important. Have these been sufficiently taken into account and formulated precisely enough?
  • A detailed building specification helps to avoid legal disputes with the developer. In addition to the developer’s tasks, this must also include the price and information on acceptance.
  • Check the developer contract carefully before signing it. Pay particular attention to agreed clauses that are disadvantageous to you.
  • Have the contract checked by a lawyer before signing. They will check the contract for errors and optimize individual clauses according to your wishes.
  • It is possible to amend developer contracts at a later date. Either in consultation with your contractual partner or by means of a written order. The latter must be submitted after 30 days.

Fixed Fee EURO 219.00 – Processing within 24h