Build House Despite Bankruptcy

2023 Author: Hannah Pearcy | [email protected]. Last modified: 2023-11-26 11:39

But "these risks can be reduced by properly drafting a contract and reacting quickly in the event of bankruptcy," says Gabriele Heinrich, managing director of the consumer protection association living at the property association, for everyone who wants to build a house.

Contract: no advance payments

The payment schedule in the contract must ensure that the builder never pays more than the work actually performed. An estimated 80 percent of contracts do not meet this requirement. Consequence: The advance payments are practically lost in the bankruptcy. They are no longer repaid, but the construction work paid for is not provided. Therefore: Have the payment plan checked by experts for balance. The customer is better protected with the property developer model. The payment plan must be balanced according to the broker and property developer ordinance, otherwise it is ineffective and the builder only has to pay at the very end. In addition, the contract should contain a clause that gives the building customer the right to terminate in the event of bankruptcy, even if a bankruptcy application has been made.

The protection against bankruptcy damage

Since 2009, private builders have been legally entitled to security in the amount of five percent of the contract sum for punctual and defect-free completion, even if the contract does not provide for this. Security is due at the first installment. The building customer must ensure that it is actually provided, for example through a bank guarantee or withholding of the installment payments. This protection also helps in the event of bankruptcy. However, "in our experience, the legal five percent is too little," says Gabriele Heinrich, "we recommend negotiating ten percent."

In addition, a good contract includes security for the removal of defects during the warranty period after completion, either a guarantee for defects or a retention of three to five percent of the construction sum. This guarantees that the defects are rectified free of charge even in the event of bankruptcy. The entrepreneur bears the costs of legal security, otherwise it is a matter of negotiation.

House building

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Check the construction contract carefully to avoid disputes with the developer

Pay attention to crisis signals

The earlier the builder notices that something is wrong with the construction company, the better his chances of saving the project and money. This includes a credit check through a request from Creditreform, for example. A first symptom of the crisis can often already be seen in the contract negotiations: The red light should come on when the construction company is very reluctant to meet the customer's security requirements, because a healthy company can easily get a guarantee from its house bank. During the construction phase, there are alarm signals: delays or interruptions in construction, work stoppages by subcontractors, delays in rectifying defects, demands by the entrepreneur for non-agreed advance payments without corresponding additional services. You can find out whether an application for bankruptcy has already been made on the Internet at www. Insolvenzbekanntmachungen.de to learn. Then: immediately go to the lawyer.

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React correctly

The basic rule for building a house - in a crisis and even more so after filing for bankruptcy: Never pay directly to subcontractors as long as the construction contract is running, neither if they otherwise threaten to stop construction, or if the contract partner recommends it. In the event of bankruptcy, it is usually important for the builder to get out of the contract quickly so that he can continue with other companies. The right termination clauses help here. It is different with the developer model. When the contract is terminated, the building customer also risks the right to transfer the property.

Build house despite bankruptcy

Before continuing with another company after the termination, an expert should record the current construction status and determine defects, otherwise there will be unforeseeable disputes among all those involved. It often makes sense to continue building with the previous subcontractors. They know the property, but they will often try to get higher prices. Conclusion: With a good contract and the right reaction, the building customer will save his project on bankruptcy if he has the necessary leeway. Gabriele Heinrich: "It is dangerous to knit the schedule too tight and to exhaust the financing options to the last cent."

Text: living in property eV Photos: BSB